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I suppose the textbook Keynesian argument would be that everybody would have an incentive to save as much of their money for as long as possible because it goes
by logicalmonster 5y ago
I suppose the textbook Keynesian argument would be that everybody would have an incentive to save as much of their money for as long as possible because it goes up in value over time, leading to incentivizing less short-term economic consumption, which would be harmful.
Is it harmful though? Whether this is a good or bad thing might come down to how much importance you place on random consumption vs capital investment as the real engine of society. The Keynesian viewpoint is more favorable towards the importance of random consumption, the Austrian mentality would put a lot more weight on the value of saving for future investment and building.
- verdverm 5y agoIf people don't spend on goods and services, where do wages come from?
- logicalmonster 5y agoAs a defense of deflation, I'd say that "being incentivized to spend less doesn't mean that you're spending zero". Humans still need to eat and stay warm and fulfill their daily needs in a deflationary environment. You'll be very-well incentivized to work in a deflationary environment, you just might think a lot harder about buying something like a movie ticket if that money might be worth more in the future.
- verdverm 5y agoRight, so discretionary spending goes way down. I may be incentivized to work, but who can afford to employ me?
- logicalmonster 5y ago"Humans still need to eat and stay warm and fulfill their daily needs in a deflationary environment." EDIT: to add onto that answer, I'd say that just as there are still savers in an inflationary environment, there will still be consumers in a deflationary environment. Incentives matter, but are not absolute drivers.
- verdverm 5y agoI'm not convinced this logic holds up. It is counter intuitive with economic theory and history
- logicalmonster 5y ago> "It is counter intuitive with economic theory" If you said "It is counter intuitive with Keynesian economic theory", I'd see your point a bit more. But different schools of thought like the Austrians view the importance of short-term consumption differently than what is a sort of textbook model of the world.
- MrMan 5y agosharecropping - feudalism
- verdverm 5y agoYou mean https://youtu.be/ZtYU87QNjPw https://youtu.be/ZtYU87QNjPw ?
- ClumsyPilot 5y ago"how much importance you place on random consumption vs capital investment as the real engine of society" Deflationary currency competes with investment, not with consumption. For example investing in infrastructure, is a safe, low return investment. in single percentage digits. If the deflation of the currency is faster than that rate of return, then nobody will ever invest in infrastructure. People will never install solar panels on their house, etc.