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> If inflation increases effective demand by consumers (that is, increases effective income and wealth of the poorest sector of society) Monetary inflation doe

> If inflation increases effective demand by consumers (that is, increases effective income and wealth of the poorest sector of society) Monetary inflation does not do that. In fact it does the opposite: it reduces effective income and wealth of the poorest sectors of society (and the middle class as well). A sudden unexpected increase in the rate of inflation does temporarily increase quantity demanded because more money is around, and this can create a little additional additional economic activity. But this is a very temporary effect, and when the rate of inflation comes back down, the reverse happens. I think I mostly agree with your take on debt. Something has to give. > Seigniorage is gain on minting money, not inflation. Minting money (ie monetary inflation) leads to price inflation. So they go hand in hand. You can't have one without the other. The seigniorage gained by banks is worth a lot more than the devaluation of their bonds.

dredmorbius 5y ago
Monetary inflation where distributed to the poorest: - Increases income and wealth relative to debt. - Decreases the real value of debt, and the costs of payments (both interest and principle) on it. - Increases net spending power relative to the rest of the economy. (I'm presuming a net wealth transfer effect here.) Even in the absence of a net wealth transfer, that is, where money is injected generally to the economy rather than specifically to the poorest, the net reduction in cost of debt is a benefit. You are still useing the word seigniorage incorrectly.
- billytetrud 5y ago
  > Increases income and wealth relative to debt. Sure. > Decreases the real value of debt Yes. A consequence of the above. > Increases net spending power relative to the rest of the economy. This isn't correct. What do you mean by "spending power"? Monetary inflation doesn't change the amount of physical resources in the world, therefore spending power cannot increase. Unless you mean for the segment of people that receive the money. Then sure, but what's your point? This is all moot tho because monetary inflation is not distributed to the poorest people. > the net reduction in cost of debt is a benefit It is not, because lenders take inflation into account and raise rates to match. Only unexpected inflation is a benefit to lenders. > You are still useing the word seigniorage incorrectly. Simply asserting that is not convincing.
  - dredmorbius 5y ago
    Net spending power == spending on real goods + spending on debt. If the relative proportion paid to debt service decreases, the relative proportion paid to real goods and services increases. Debt-dominated economies have regressive wealth allocations. Debt instruments are not generally inflation-indexed. If there's a belief that there will be inflation, the interest rate may be increased, however that's not always the case. Regardless, creditors even if they have already priced in inflation will lobby for low-inflation policies as this increases the return on their assets (that is, debt). How monetary policy allocates funds is in fact a policy question, and is determined by policy. There is no Divine Law of Economics which dictates one allocation over another. You've been asserting without citation as well, just for the record. The my claim is trivially verified: seignorage. 1. Something claimed or taken by virtue of sovereign prerogative; specifically, a charge or toll deducted from bullion brought to a mint to be coined; the difference between the cost of a mass of bullion and the value as money of the pieces coined from it. (1913 Webster) http://dict.org/bin/Dict?Form=Dict2&Database=gcide&Query=Seignorage http://dict.org/bin/Dict?Form=Dict2&Database=gcide&Query=Sei... Seigniorage is the difference between the face value of money, such as a $10 bill or a quarter coin, and the cost to produce it. In other words, the economic cost of producing a currency within a given economy or country is lower than the actual exchange value, which generally accrues to governments who mint the money. https://www.investopedia.com/search/?search-terms=seigniorage https://www.investopedia.com/search/?search-terms=seigniorag... Again: the words you're using don't mean what you're asserting they mean.
    - billytetrud 5y ago
      > Net spending power == spending on real goods + spending on debt. I still don't know what this means. What is "spending on debt"? Interest payments? Why are you calling amount spent "spending power"? Spending power evokes the idea of potential, not actual spending. Your terminology is confusing. > the interest rate may be increased, however that's not always the case. When the price inflation rate is relatively stable, it will automatically be accounted for via the normal price system (ie not by conscious up pricing). > Regardless, creditors even if they have already priced in inflation will lobby for low-inflation policies as this increases the return on their assets (that is, debt). Ok. Well this isn't true when the creditors are primarily banks reciving seigniorge benefits. > The my claim is trivially verified Your claim that I'm using seigniorage wrong? The definitions you're quoting about seigniorage agree with the way I'm using the word. I don't know why you think I'm using it wrong.

dredmorbius 5y ago

Monetary inflation where distributed to the poorest: - Increases income and wealth relative to debt. - Decreases the real value of debt, and the costs of payments (both interest and principle) on it. - Increases net spending power relative to the rest of the economy. (I'm presuming a net wealth transfer effect here.) Even in the absence of a net wealth transfer, that is, where money is injected generally to the economy rather than specifically to the poorest, the net reduction in cost of debt is a benefit. You are still useing the word seigniorage incorrectly.

billytetrud 5y ago
> Increases income and wealth relative to debt. Sure. > Decreases the real value of debt Yes. A consequence of the above. > Increases net spending power relative to the rest of the economy. This isn't correct. What do you mean by "spending power"? Monetary inflation doesn't change the amount of physical resources in the world, therefore spending power cannot increase. Unless you mean for the segment of people that receive the money. Then sure, but what's your point? This is all moot tho because monetary inflation is not distributed to the poorest people. > the net reduction in cost of debt is a benefit It is not, because lenders take inflation into account and raise rates to match. Only unexpected inflation is a benefit to lenders. > You are still useing the word seigniorage incorrectly. Simply asserting that is not convincing.
- dredmorbius 5y ago
  Net spending power == spending on real goods + spending on debt. If the relative proportion paid to debt service decreases, the relative proportion paid to real goods and services increases. Debt-dominated economies have regressive wealth allocations. Debt instruments are not generally inflation-indexed. If there's a belief that there will be inflation, the interest rate may be increased, however that's not always the case. Regardless, creditors even if they have already priced in inflation will lobby for low-inflation policies as this increases the return on their assets (that is, debt). How monetary policy allocates funds is in fact a policy question, and is determined by policy. There is no Divine Law of Economics which dictates one allocation over another. You've been asserting without citation as well, just for the record. The my claim is trivially verified: seignorage. 1. Something claimed or taken by virtue of sovereign prerogative; specifically, a charge or toll deducted from bullion brought to a mint to be coined; the difference between the cost of a mass of bullion and the value as money of the pieces coined from it. (1913 Webster) http://dict.org/bin/Dict?Form=Dict2&Database=gcide&Query=Seignorage http://dict.org/bin/Dict?Form=Dict2&Database=gcide&Query=Sei... Seigniorage is the difference between the face value of money, such as a $10 bill or a quarter coin, and the cost to produce it. In other words, the economic cost of producing a currency within a given economy or country is lower than the actual exchange value, which generally accrues to governments who mint the money. https://www.investopedia.com/search/?search-terms=seigniorage https://www.investopedia.com/search/?search-terms=seigniorag... Again: the words you're using don't mean what you're asserting they mean.
  - billytetrud 5y ago
    > Net spending power == spending on real goods + spending on debt. I still don't know what this means. What is "spending on debt"? Interest payments? Why are you calling amount spent "spending power"? Spending power evokes the idea of potential, not actual spending. Your terminology is confusing. > the interest rate may be increased, however that's not always the case. When the price inflation rate is relatively stable, it will automatically be accounted for via the normal price system (ie not by conscious up pricing). > Regardless, creditors even if they have already priced in inflation will lobby for low-inflation policies as this increases the return on their assets (that is, debt). Ok. Well this isn't true when the creditors are primarily banks reciving seigniorge benefits. > The my claim is trivially verified Your claim that I'm using seigniorage wrong? The definitions you're quoting about seigniorage agree with the way I'm using the word. I don't know why you think I'm using it wrong.