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You are obfuscating with technical terms the fact that the central bank haves the power to devaluate your cash savings.

by o_p 5y ago

arcticbull 5y 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 5y 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 5y 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 5y 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?
      - arcticbull 5y ago
        New money doesn’t go to “the rich” per se it’s the product of loan origination. Whoever borrows money. In America that’s a national pass time for everyone. I wager the lower income borrow more as a fraction of net worth than anyone else. I’m curious how an inflation free money might stop people starving in a country unable to provide even the most basic services? Decoupled from government maybe - though to a degree all the major central banks are. But it’s the passive management by an unelected group who made completely arbitrary decisions accountable to nobody with no consideration for what makes a good currency.

You are obfuscating with technical terms the fact that the central bank haves the power to devaluate your cash savings.

by o_p 5y ago

You are obfuscating with technical terms the fact that the central bank haves the power to devaluate your cash savings.

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 5y 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 5y 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 5y 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?
    - arcticbull 5y ago
      New money doesn’t go to “the rich” per se it’s the product of loan origination. Whoever borrows money. In America that’s a national pass time for everyone. I wager the lower income borrow more as a fraction of net worth than anyone else. I’m curious how an inflation free money might stop people starving in a country unable to provide even the most basic services? Decoupled from government maybe - though to a degree all the major central banks are. But it’s the passive management by an unelected group who made completely arbitrary decisions accountable to nobody with no consideration for what makes a good currency.