5 ms·

While you wrote this, your country's Central Bank printed a few billions (or trillions, if you are american) in your currency, so that your money now is worth a

by haolez 6y ago

While you wrote this, your country's Central Bank printed a few billions (or trillions, if you are american) in your currency, so that your money now is worth a lot less than before.

arcticbull 6y ago
This is a dramatic misunderstanding of economics. Inflation is a function of both supply and velocity. Velocity is low because US savings are at an all-time high. The central bank has a number of tools to contract the supply once velocity increases. [1] Your statement that an increase in supply leads to a commensurate reduction in the value of each unit is strictly false. And something you can measure by going to the grocery store and checking if your bill is 100% higher this year than last. [1] https://www.stlouisfed.org/on-the-economy/2014/september/what-does-money-velocity-tell-us-about-low-inflation-in-the-us https://www.stlouisfed.org/on-the-economy/2014/september/wha...
- o_p 6y ago
  You are obfuscating with technical terms the fact that the central bank haves the power to devaluate your cash savings.
  - arcticbull 6y ago
    No, that's not what I'm doing. What I'm telling you is that supply is simply half the picture, and you're neglecting the other half of the picture. If you print a $10 trillion dollar coin, then give it to me and I throw it into a vault, has that increased the price of goods? No. Supply went up, velocity went down commensurately. This is what you're seeing in a macro scale. Yes the central bank actively manages the money supply, and maintains a consistent 2% inflation rate. Inflation is good for debtors (i.e. most people) as debts are denominated in the currency of the year of issue and repaid with inflated money. So long as wages keep pace (they do [1]) it's generally a benefit. Money isn't long-term savings. It's a short-term store of value that only needs to be fungible, cheap to transact, and retain the bulk of its value for as long as you hold it. Above all, it just needs to be predictable. Anything else is honestly a non-goal. Your job as a participant in the economy is to spend that money on basic needs or invest it productively. [1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
    - o_p 6y ago
      But the central bank doesnt print money to throw it into a vault. The commercial banks borrow that money to lend it themselves to the people for consumption and investing, so printing money definitely haves an effect on your buying power even if its not 1 to 1. Maybe you live in a country with a independent central bank but many countries are far more corrupt and the goverments make their central bank print money for themselves and have huge inflation rates. Cryptocurrency gives them a way to protect their savings from that.
      - arcticbull 6y ago
        > But the central bank doesnt print money to throw it into a vault. Correct, however US personal savings rates are at all-time highs. [1] So, you are correct, the banks aren't taking the money and locking it into vaults. However, people are taking their money and locking it up in savings accounts and investment accounts. This is reducing velocity. The "printing" was to offset this reduction in velocity and avoid a deflationary spiral. Through lending, so they can be used for productive things. This also explains how asset prices spiked without actually causing inflation. > Cryptocurrency gives them a way to protect their savings from that. I don't want to get too far down this rabbit hole, but literally everything that isn't currency is inflation-proof. Inflation only affects currency. So, if you buy real estate, or stocks, or even un-productive assets like gold, silver or cryptocurrencies, you're equally protected from inflation. It may underperform, but now we're talking about rate of return in constant-dollar terms. Cryptocurrencies do protect you from inflation, yes, but they have massive deficiencies that make them a poor choice relative to their peer investments, in my opinion. Such as the rampant fraud in the space. This hinders price discovery, and makes it impossible to determine a real value. It also causes massive swings of 27% week-to-date. That's an annualized inflation rate of 25,000,000% when measuring the value of a bitcoin against CPI. [1] https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/PSAVERT
        seibelj 6y ago
        Out of all the things you can argue in defense of, central banks printing money and handing it straight to the richest people on earth has got to be one of the weakest. “Just throw out the Venezuelan government!” If only that were so easy. Meanwhile millions of people starve to death! There really isn’t a use for a monetary unit decoupled from the government?
- haolez 6y ago
  Time will tell. Let's come back here in five years.
  - deleted 6y ago
    [deleted]
anyfoo 6y ago
https://en.wikipedia.org/wiki/Deflation#Effects https://en.wikipedia.org/wiki/Deflation#Effects
deleted 6y ago
[deleted]
Yizahi 6y ago
Government printing press can be abused and often is. But it can be used responsibly (for economy long term). On the other hand crypto apologists propose us currencies which are uncontrollably printed by some anonymous guys in the non extradition offshore. Just last year 75% of all Tethers were printed out of thin air, since USDT trading amount is 14 times bigger than USD (not even counting tricks like Bitfinex listing USD while actually trading tethers behind the scenes) we can assume that whole crypto community is propped up by a lot of hot air and cut paper. tl;dr - Look, USD currency management looks bad (or suboptimal). - Let's replace it with even worse scheme! HODL!

by haolez 6y ago

While you wrote this, your country's Central Bank printed a few billions (or trillions, if you are american) in your currency, so that your money now is worth a lot less than before.

arcticbull 6y ago

This is a dramatic misunderstanding of economics. Inflation is a function of both supply and velocity. Velocity is low because US savings are at an all-time high. The central bank has a number of tools to contract the supply once velocity increases. [1] Your statement that an increase in supply leads to a commensurate reduction in the value of each unit is strictly false. And something you can measure by going to the grocery store and checking if your bill is 100% higher this year than last. [1] https://www.stlouisfed.org/on-the-economy/2014/september/what-does-money-velocity-tell-us-about-low-inflation-in-the-us https://www.stlouisfed.org/on-the-economy/2014/september/wha...

o_p 6y ago
You are obfuscating with technical terms the fact that the central bank haves the power to devaluate your cash savings.
- arcticbull 6y ago
  No, that's not what I'm doing. What I'm telling you is that supply is simply half the picture, and you're neglecting the other half of the picture. If you print a $10 trillion dollar coin, then give it to me and I throw it into a vault, has that increased the price of goods? No. Supply went up, velocity went down commensurately. This is what you're seeing in a macro scale. Yes the central bank actively manages the money supply, and maintains a consistent 2% inflation rate. Inflation is good for debtors (i.e. most people) as debts are denominated in the currency of the year of issue and repaid with inflated money. So long as wages keep pace (they do [1]) it's generally a benefit. Money isn't long-term savings. It's a short-term store of value that only needs to be fungible, cheap to transact, and retain the bulk of its value for as long as you hold it. Above all, it just needs to be predictable. Anything else is honestly a non-goal. Your job as a participant in the economy is to spend that money on basic needs or invest it productively. [1] https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us-workers-real-wages-have-barely-budged-for-decades/ https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...
  - o_p 6y ago
    But the central bank doesnt print money to throw it into a vault. The commercial banks borrow that money to lend it themselves to the people for consumption and investing, so printing money definitely haves an effect on your buying power even if its not 1 to 1. Maybe you live in a country with a independent central bank but many countries are far more corrupt and the goverments make their central bank print money for themselves and have huge inflation rates. Cryptocurrency gives them a way to protect their savings from that.
    - arcticbull 6y ago
      > But the central bank doesnt print money to throw it into a vault. Correct, however US personal savings rates are at all-time highs. [1] So, you are correct, the banks aren't taking the money and locking it into vaults. However, people are taking their money and locking it up in savings accounts and investment accounts. This is reducing velocity. The "printing" was to offset this reduction in velocity and avoid a deflationary spiral. Through lending, so they can be used for productive things. This also explains how asset prices spiked without actually causing inflation. > Cryptocurrency gives them a way to protect their savings from that. I don't want to get too far down this rabbit hole, but literally everything that isn't currency is inflation-proof. Inflation only affects currency. So, if you buy real estate, or stocks, or even un-productive assets like gold, silver or cryptocurrencies, you're equally protected from inflation. It may underperform, but now we're talking about rate of return in constant-dollar terms. Cryptocurrencies do protect you from inflation, yes, but they have massive deficiencies that make them a poor choice relative to their peer investments, in my opinion. Such as the rampant fraud in the space. This hinders price discovery, and makes it impossible to determine a real value. It also causes massive swings of 27% week-to-date. That's an annualized inflation rate of 25,000,000% when measuring the value of a bitcoin against CPI. [1] https://fred.stlouisfed.org/series/PSAVERT https://fred.stlouisfed.org/series/PSAVERT
      - seibelj 6y ago
        Out of all the things you can argue in defense of, central banks printing money and handing it straight to the richest people on earth has got to be one of the weakest. “Just throw out the Venezuelan government!” If only that were so easy. Meanwhile millions of people starve to death! There really isn’t a use for a monetary unit decoupled from the government?
haolez 6y ago
Time will tell. Let's come back here in five years.
- deleted 6y ago
  [deleted]

anyfoo 6y ago

https://en.wikipedia.org/wiki/Deflation#Effects https://en.wikipedia.org/wiki/Deflation#Effects

deleted 6y ago

[deleted]

Yizahi 6y ago

Government printing press can be abused and often is. But it can be used responsibly (for economy long term). On the other hand crypto apologists propose us currencies which are uncontrollably printed by some anonymous guys in the non extradition offshore. Just last year 75% of all Tethers were printed out of thin air, since USDT trading amount is 14 times bigger than USD (not even counting tricks like Bitfinex listing USD while actually trading tethers behind the scenes) we can assume that whole crypto community is propped up by a lot of hot air and cut paper. tl;dr - Look, USD currency management looks bad (or suboptimal). - Let's replace it with even worse scheme! HODL!