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Exactly. If more economists acknowledged this obvious truth, it would be much easier to have saner policies in this area. One thing to add is that, in addition
by pdonis 5y ago
Exactly. If more economists acknowledged this obvious truth, it would be much easier to have saner policies in this area.
One thing to add is that, in addition to being a tax on savings, inflation also leads to misallocation of resources, because the newly printed money is not distributed equally. (If it were, it would actually have little economic effect, because all prices, including wages, would rise by exactly the same fraction and everybody's behavior would be unchanged, other than the unavaoidable tax on savings.) So the money that is being taxed away from those with savings is being given to whoever is favored by the authority that is printing the money. That allows those favored parties to bid away resources from others even if those resources would be more productively employed elsewhere. And so we get, for example, huge swaths of commercial real estate built (because one of the favored parties is financial institutions who give loans on real estate) and sitting empty for years, while our infrastructure crumbles because there aren't enough construction resources available to fix it.
- imtringued 5y agoEnjoy your tax on savings. You will bark at the wrong tree for the rest of your life. Permanent money causes inflation because the physical world isn't permanent. It needs a constant energy input to keep running. This energy input is simply ignored. So it has to be modeled after the fact via inflation. A negative interest rate on cash makes money no longer permanent meaning money no longer has to be replicated endlessly to model energy losses or liquidity costs. Yes, nature is stealing your youth, it's clearly a tax on youth. Imagine if you could just simulate your age being 18 on your id and everyone thinking that you are 18 forever by legal decree. At some point people will notice your grey hair and the ruse is over. They get the silly idea of adjusting your age back to your real age. Money should age via negative interest rates to be consistent with the laws of thermodynamics.
- pdonis 5y ago> Money should age via negative interest rates to be consistent with the laws of thermodynamics. This is nonsense on so many levels that I don't even know where to begin.
- samvega_ 5y agoThat's not true in general, because import prices go up during inflation, and foreign investments go down, which might lead to foreign investors pulling out, and other effects. The US is in a unique position due to them keeping the USD stable internationally by being the world reserve currency, a status the US government abuse by printing an excess of dollars. US inflation is in practice a taxation of the international community who must mostly purchase oil in USD, and are otherwise financially tied to the US.