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You seem to take it as a given that a better way exists. Why are you so sure of that? Plenty of inflationary currencies never came even close to hyperinflation,
by usrusr 5y ago
You seem to take it as a given that a better way exists. Why are you so sure of that? Plenty of inflationary currencies never came even close to hyperinflation, and an additional zero or two within the span of a lifetime is not a problem waiting to be solved.
You seem to imply that all inflation is inevitably a buildup for hyperinflation, but there is no mechanism for that.
- matheusmoreira 5y ago> You seem to take it as a given that a better way exists. Why not deflation? Can't be worse than governments that mint trillions out of nowhere. > Why are you so sure of that? I'm not. Is anyone? These governments don't seem to be sure either. We wouldn't have these problems if they were. > an additional zero or two within the span of a lifetime is not a problem waiting to be solved The loss of purchasing power implied by those extra zeroes is a huge problem. Inflation is basically a constant unconditional tax on everyone holding the currency. This is absolutely a problem that needs to be solved. People solve it by spending or investing their money. Anything's better than holding the inflationary currency. > You seem to imply that all inflation is inevitably a buildup for hyperinflation Not really. All government currencies inflate. There's absolutely no doubt their value will approach zero given enough time. The only question is how quickly it will happen. Hyperinflation just means the government screwed up so bad the inflation started accelerating out of control.
- imtringued 5y ago>Why not deflation? Can't be worse than governments that mint trillions out of nowhere. It would require negative interest rates and it would also require people to acknowledge that we need a more flexible labor market rather than one where full time jobs pile up on fewer people. Let's consider an extreme example. Everyone adopts Bitcoin and everyone has the bare minimum expenses. They pay rent and bake their own bread. The amount of work hours needed to support this lifestyle is 8 hours per week. Let's say that everyone wants this lifestyle but everyone still wants to work full time. That would imply that there is one full time job for every 5 people with 1 person being employed and 4 unemployed and you would now have to engage in income sharing (you know, welfare, unemployment benefits, universal basic income). If people worked according to how much they demand themselves (everyone works 8 hours), then everyone would be employed and everyone would be getting their fair share of work. Before you say that some of them will demand more than 8 hours of work. These people should work more than 8 hours. >The loss of purchasing power implied by those extra zeroes is a huge problem. Inflation is basically a constant unconditional tax on everyone holding the currency. This is absolutely a problem that needs to be solved. People solve it by spending or investing their money. Anything's better than holding the inflationary currency. What function does holding onto the currency serve other than decreasing demand for labor? Why should we compensate anyone for their reduction in the demand for labor? The logic behind interest is that someone wants to invest and the lack of labor requires prioritization according the yield of the investment. If people decrease demand for labor without a corresponding desire to invest by borrowers they simply get nothing. It's actually worse, if demand for labor is lower than supply of labor then the excess labor simply decays through unemployment (labor cannot be stored) which implies a negative yield on your money which is why inflation is an approximation of negative interest rates. So, perfect money would have 0% inflation or deflation but it would probably have negative interest to encourage people to avoid the economic loss of unemployment. If labor decayed at a rate of -2% then people would invest more into durable goods by anticipating future demand. It would be better to build solar panels and wind farms today that may only be profitable in the future. Of course the problem is that some goods are artificially durable like land. Ownership doesn't decay.
- matheusmoreira 5y ago> What function does holding onto the currency serve other than decreasing demand for labor? Wealth accumulation. > Why should we compensate anyone for their reduction in the demand for labor? Why should we not reward people for being responsible with their money? People should be saving it, not spending it all on pointless consumerism. If our money will be more valuable tomorrow than it is today, we would need damn good reasons to part with it. Hopefully industry practices like planned obsolescence would disappear.
- usrusr 5y ago> The loss of purchasing power implied by those extra zeroes is a huge problem. Inflation is basically a constant unconditional tax on everyone holding the currency. This is absolutely a problem that needs to be solved. No it's not. It's perfectly fine if universal "you owe me"s cannot be held back indefinitely only strike with even more force when unleashed. And I say that as someone who is hit harder by inflation than most because I enjoy liquidity far more than I should, I'm very bad at converting into assets (or even taking up a loan)