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Wait, that doesn't make sense now, does it? Deflation means precisely that money will be worth more in the future than it is now, so a future payment stream wil

Wait, that doesn't make sense now, does it? Deflation means precisely that money will be worth more in the future than it is now, so a future payment stream will correspondingly also be more valuable than cashing out right now. (Which is also why economists often regard it as a bad thing, because it entices people to hold off on spending/investing, thereby slowing down the economy). Now I agree that as such money now is somewhat more valuable than money later in nominal terms simply due to the uncertainty of the future, and it's probably unwise to bet on everlasting strong deflation, but at least in the short or medium term I'd say strong deflation could certainly overcome even these built-in inflationary tendencies.

clairity 6y ago
in a perfect world, we'd have neither inflation or deflation, as we'd be able to perfectly predict what friction is needed with every transaction to keep the world in balance. but because that's practically impossible and because we have only one or two coarse knobs on the economy, we've settled on a relatively high inflationary policy being better than any deflationary one. i'd conjecture that we could increase the number of economic friction knobs appropriately to easily get the real inflation rate under 1%, but we don't because that would lessen the advantage the already moneyed and their political appendages have with the current system.
thaumasiotes 6y ago
> Wait, that doesn't make sense now, does it? Yes, it does. > Deflation means precisely that money will be worth more in the future than it is now Deflation means that $X in the future will have more purchasing power in the future than $X has now. It does not mean that the money will be worth more in the future than it is worth now; these are different concepts. You'll note that my comment says "the same amount of purchasing power is worth less in the future than it is right now". By the same token, more purchasing power in the future may still be worth less than less purchasing power right now. People like to slam the intrinsic value of gold by saying "you can't eat gold". But even in the sense in which you can eat gold, you can't eat gold you don't have. The uncertainty of the future is one reason why money in the future is worth less than money in the present, but the bigger reason is option value. You can hold present money and spend it in the future. You cannot pre-realize future money and spend it in the present.

clairity 6y ago

in a perfect world, we'd have neither inflation or deflation, as we'd be able to perfectly predict what friction is needed with every transaction to keep the world in balance. but because that's practically impossible and because we have only one or two coarse knobs on the economy, we've settled on a relatively high inflationary policy being better than any deflationary one. i'd conjecture that we could increase the number of economic friction knobs appropriately to easily get the real inflation rate under 1%, but we don't because that would lessen the advantage the already moneyed and their political appendages have with the current system.

thaumasiotes 6y ago

> Wait, that doesn't make sense now, does it? Yes, it does. > Deflation means precisely that money will be worth more in the future than it is now Deflation means that $X in the future will have more purchasing power in the future than $X has now. It does not mean that the money will be worth more in the future than it is worth now; these are different concepts. You'll note that my comment says "the same amount of purchasing power is worth less in the future than it is right now". By the same token, more purchasing power in the future may still be worth less than less purchasing power right now. People like to slam the intrinsic value of gold by saying "you can't eat gold". But even in the sense in which you can eat gold, you can't eat gold you don't have. The uncertainty of the future is one reason why money in the future is worth less than money in the present, but the bigger reason is option value. You can hold present money and spend it in the future. You cannot pre-realize future money and spend it in the present.