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Inflation severely disincentivizes savings and rewards consumption. This affects the behaviors of entire generations of people. If you really want an example, l

Inflation severely disincentivizes savings and rewards consumption. This affects the behaviors of entire generations of people. If you really want an example, look at the USA post ‘71 (up to this very day) and its ever-increasing rate of consumption.

helen___keller 5y ago
Just to make sure I’m understanding, is the suggestion that people who lived through that high inflation period became more inclined to spend and less inclined to save, culturally, to this day? Do you have any links discussing this further?
- BirAdam 5y ago
  That is precisely what I am saying. Generally, this is my observed understanding by study of both history and of economics. However, there are some academics starting to look at it: https://www.amazon.com/Ethics-Money-Production-Guido-Hulsmann/dp/1610166817/ref=sr_1_1?keywords=The+Ethics+of+Money+Production&qid=1646926592&sr=8-1 https://www.amazon.com/Ethics-Money-Production-Guido-Hulsman...
- frostwarrior 5y ago
  I don't have links but it does make sense. If you have the money to buy, e.g., an Xbox, saving it will not neccesarily return you the same amount of money to buy an Xbox in the future, because inflation raised the console's price more than the extra money you got in return of your investments. If you buy the console right away, you can be sure that your asset is "One Xbox" in value, no matter the amount of inflation.
  - helen___keller 5y ago
    the assertion, as I understand it, is that if you lived through a period of inflation your generation will be spending more, and not saving as much, for _the rest of life_, meaning even in low inflation periods like the 2010s
    - frostwarrior 5y ago
      If the period of inflation is long enough, that statement is true. I'm from Argentina. Inflation is deeply rooted in our local economics and most people treat it as a lifelong "companion".
      - helen___keller 5y ago
        Interesting. I’ve lived in the opposite (my entire adult life has been in the low inflation period following the 2008 recession) so I can’t personally relate
CyanBird 5y ago
This is an horrible example given that since 71 the este of inflation in the US has gone down, not up, while at the same time during the post warn, and during the strong keynesian period it is considered to be a golden age where anyone could buy a house, while at the same time the inflation rates where the highest What op doesn't mention is that high inflation doesn't per se desincentivize saving, rather it encourages to invest in high returns endeavors, or in assets which don't strongly devaluate, as for example housing, of which most people on the planet being able to own their own small home is their biggest investment of their lifetimes, and again, part of what made "the American dream" what it was, sadly all of that is dead now, so we have millions living in tents in Cali
- imtringued 5y ago
  The problem with Keynes is that he dismissed Silvio Gesell's idea of having expiring bank notes. Yes, a modern implementation will probably look very different, no stupid stamps but the principle is much better than attempting to eliminate liquidity preference with inflation.
- BirAdam 5y ago
  You’re missing the long term. The inflation went down after having changed buying patterns, and that inflation didn’t disappear. Hence, it is (in general) always better to operate on debt than on cash as long as your interest rate is low (which has been the case for 30 years now). This drives up consumption patterns over-all. Next, while this does drive the purchasing of investment class assets, those are not necessarily high-return. The reason the stock market keeps going up is not that everyone is suddenly making double the revenue. The stock market has turned into a ponzy-esque scheme where the higher and higher valuations are driven only by people seeing the numbers go up. The actual returns per share are not rising as quickly as the share prices. Funny you should mention housing, as the housing market predictably crashed in 2008 (Ron Paul called it quite well, as did those who bet against the market). It will happen again as many of the same mistakes have been made. Even without derivatives on property, or even the easy lending, people have been taking massive loans due to interest rates, and this has driven a dramatic rise in housing costs. As more and more people are priced out, and rents continue to increase the potential buying/renting pool shrinks which will eventually cause another crash even if nothing else does.
eli_gottlieb 5y ago
>Inflation severely disincentivizes savings and rewards consumption. Good. We've been suffering from deflationary policies that led to demand shortages and low productivity growth since the 1980s. There's a healthy balance, but ultimately there's no moral virtue in economic austerity.

helen___keller 5y ago

Just to make sure I’m understanding, is the suggestion that people who lived through that high inflation period became more inclined to spend and less inclined to save, culturally, to this day? Do you have any links discussing this further?

BirAdam 5y ago
That is precisely what I am saying. Generally, this is my observed understanding by study of both history and of economics. However, there are some academics starting to look at it: https://www.amazon.com/Ethics-Money-Production-Guido-Hulsmann/dp/1610166817/ref=sr_1_1?keywords=The+Ethics+of+Money+Production&qid=1646926592&sr=8-1 https://www.amazon.com/Ethics-Money-Production-Guido-Hulsman...
frostwarrior 5y ago
I don't have links but it does make sense. If you have the money to buy, e.g., an Xbox, saving it will not neccesarily return you the same amount of money to buy an Xbox in the future, because inflation raised the console's price more than the extra money you got in return of your investments. If you buy the console right away, you can be sure that your asset is "One Xbox" in value, no matter the amount of inflation.
- helen___keller 5y ago
  the assertion, as I understand it, is that if you lived through a period of inflation your generation will be spending more, and not saving as much, for _the rest of life_, meaning even in low inflation periods like the 2010s
  - frostwarrior 5y ago
    If the period of inflation is long enough, that statement is true. I'm from Argentina. Inflation is deeply rooted in our local economics and most people treat it as a lifelong "companion".
    - helen___keller 5y ago
      Interesting. I’ve lived in the opposite (my entire adult life has been in the low inflation period following the 2008 recession) so I can’t personally relate

CyanBird 5y ago

This is an horrible example given that since 71 the este of inflation in the US has gone down, not up, while at the same time during the post warn, and during the strong keynesian period it is considered to be a golden age where anyone could buy a house, while at the same time the inflation rates where the highest What op doesn't mention is that high inflation doesn't per se desincentivize saving, rather it encourages to invest in high returns endeavors, or in assets which don't strongly devaluate, as for example housing, of which most people on the planet being able to own their own small home is their biggest investment of their lifetimes, and again, part of what made "the American dream" what it was, sadly all of that is dead now, so we have millions living in tents in Cali

imtringued 5y ago
The problem with Keynes is that he dismissed Silvio Gesell's idea of having expiring bank notes. Yes, a modern implementation will probably look very different, no stupid stamps but the principle is much better than attempting to eliminate liquidity preference with inflation.
BirAdam 5y ago
You’re missing the long term. The inflation went down after having changed buying patterns, and that inflation didn’t disappear. Hence, it is (in general) always better to operate on debt than on cash as long as your interest rate is low (which has been the case for 30 years now). This drives up consumption patterns over-all. Next, while this does drive the purchasing of investment class assets, those are not necessarily high-return. The reason the stock market keeps going up is not that everyone is suddenly making double the revenue. The stock market has turned into a ponzy-esque scheme where the higher and higher valuations are driven only by people seeing the numbers go up. The actual returns per share are not rising as quickly as the share prices. Funny you should mention housing, as the housing market predictably crashed in 2008 (Ron Paul called it quite well, as did those who bet against the market). It will happen again as many of the same mistakes have been made. Even without derivatives on property, or even the easy lending, people have been taking massive loans due to interest rates, and this has driven a dramatic rise in housing costs. As more and more people are priced out, and rents continue to increase the potential buying/renting pool shrinks which will eventually cause another crash even if nothing else does.

eli_gottlieb 5y ago

>Inflation severely disincentivizes savings and rewards consumption. Good. We've been suffering from deflationary policies that led to demand shortages and low productivity growth since the 1980s. There's a healthy balance, but ultimately there's no moral virtue in economic austerity.