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The whole point of inflation is to keep people from storing money under the mattress. Savings are to be invested. If investments can’t beat inflation then you

The whole point of inflation is to keep people from storing money under the mattress. Savings are to be invested. If investments can’t beat inflation then you have a shrinking economy and no amount of deflation is going to get the wheels turning again. It’s not that Keynesian economists don’t understand that inflation is a tax on money, it’s that they see the purpose and reason for inflation from a completely different angle than, say, Austrian economists.

kkoncevicius 5y ago
Say we trade and I give you an apple. In return you give me a note saying "this note is a proof wodenokoto owns me one apple and can be exchange for one apple at any time". What good does making this note depreciate over time serve, except as a pressure for me to demand you return the apple as soon as possible? It acts as a mechanism which nudges me to lend less apples overall. If inflation is good, why not ramp it up to 200%? At that level it's clear that nobody would accept money and barter would take place instead. And my thinking goes that it is also bad at those lower percentages, except to a lesser degree. I don't see how it can suddenly turn to positive at, say 10%.
- ska 5y ago
  > except as a pressure for me to demand you return the apple as soon as possible? What you describe is something like a promissory note, and doesn't really capture it. If you can trade that note to someone else for a box of framing nails, then you get to the crux of the issue. It's not pressure for you to ask for the the apple back soon, but to use it for something soon not just sit on it. The economists will tell you this pressure keeps the economy trucking along nicely. Of course, if it goes too far, you ruin peoples lives. Going to far in the other direction, also ruins lives.
- imtringued 5y ago
  The apple spoils, you selfishly demand another apple. The apple orchard must keep growing forever to compensate for the spoiled apples. If the coupon spoiled via negative interest rates then the person who holds the coupon and is responsible for the storage costs is paying for the privilege of not worrying how to store an apple that is spoiling. Barter says you buy you sell. Money says you buy and buy or you sell and sell. Quite absurd isn't it? Replace apples with workers and the orchard with the economy.
- kristov 5y ago
  It encourages you grow more apples I guess.
- wodenokoto 5y ago
  Such a note has nothing to do with fiat currency.
int_19h 5y ago
Invested into what? The stocks, which are valued in ways completely divorced from anything approaching reality? Because that's where the majority of present investment seems to be in practice.

kkoncevicius 5y ago

Say we trade and I give you an apple. In return you give me a note saying "this note is a proof wodenokoto owns me one apple and can be exchange for one apple at any time". What good does making this note depreciate over time serve, except as a pressure for me to demand you return the apple as soon as possible? It acts as a mechanism which nudges me to lend less apples overall. If inflation is good, why not ramp it up to 200%? At that level it's clear that nobody would accept money and barter would take place instead. And my thinking goes that it is also bad at those lower percentages, except to a lesser degree. I don't see how it can suddenly turn to positive at, say 10%.

ska 5y ago
> except as a pressure for me to demand you return the apple as soon as possible? What you describe is something like a promissory note, and doesn't really capture it. If you can trade that note to someone else for a box of framing nails, then you get to the crux of the issue. It's not pressure for you to ask for the the apple back soon, but to use it for something soon not just sit on it. The economists will tell you this pressure keeps the economy trucking along nicely. Of course, if it goes too far, you ruin peoples lives. Going to far in the other direction, also ruins lives.
imtringued 5y ago
The apple spoils, you selfishly demand another apple. The apple orchard must keep growing forever to compensate for the spoiled apples. If the coupon spoiled via negative interest rates then the person who holds the coupon and is responsible for the storage costs is paying for the privilege of not worrying how to store an apple that is spoiling. Barter says you buy you sell. Money says you buy and buy or you sell and sell. Quite absurd isn't it? Replace apples with workers and the orchard with the economy.
kristov 5y ago
It encourages you grow more apples I guess.
wodenokoto 5y ago
Such a note has nothing to do with fiat currency.

int_19h 5y ago

Invested into what? The stocks, which are valued in ways completely divorced from anything approaching reality? Because that's where the majority of present investment seems to be in practice.