5 ms·

I agree that there is lots of data that shows your version has some merit, but that doesn't mean it's 100% correct. I know of at least one instance where your v

by zie 4y ago

I agree that there is lots of data that shows your version has some merit, but that doesn't mean it's 100% correct. I know of at least one instance where your version was incorrect(2008/2009). Again, I'm not arguing my version is correct, and I'm not even arguing that your version is completely wrong, because we literally do not know. Read some John Cochrane[0] if you want a more academic defence of my version(which is where I got it from, I'm certainly not smart enough to have come up with it myself). 0: https://www.justicenewsflash.com/2022/01/03/the-grumpy-economist-fiscal-inflation_20220103164604.html https://www.justicenewsflash.com/2022/01/03/the-grumpy-econo...

WalterBright 4y ago
> I know of at least one instance where your version was incorrect(2008/2009). One one hand, we have thousands of years of history with what causes inflation. On the other hand, we have one instance. I'd say one has to examine the one counterexample for something missed. (Your cite makes no mention of 2008/2009.) Extraordinary claims require extraordinary evidence. Recall my other post here about how making loans creates money, and paying the loans back destroys it. Bankruptcy destroys money. I wonder if all the bankruptcies, defaults, haircuts and writedowns removed a vast amount of money from circulation, and the deficit spending simply filled that hole rather than creating more inflation.
- zie 4y ago
  > (Your cite makes no mention of 2008/2009.) Incorrect: "One may look to politicians’ statements. Even in the Obama-era “stimulus” spending, the administration emphasized promises of eventual debt reduction. " And I have more to say on it later. My cite is from a world-class economist, not from some random person on the Internet. > One one hand, we have thousands of years of history with what causes inflation. > On the other hand, we have one instance. Again, you are assuming facts not in evidence, you assume your version of reality is correct, likely because that is what economics text books taught you, because they also assumed it to be the case, these assumptions do not make it true. Perhaps those thousands of years of history actually agree with my version also. We don't know what people were thinking across those thousands of years of inflation history, it's possible they were thinking our governments(such as they were) were not trusted to pay it back, as generally speaking, governments that go on large spending sprees tend to not pay it back very well. It's hard to be disciplined with money when there is very little incentive to politicians while in office. There is no rigorous proof of what causes inflation. There are many well-educated guesses and your perspective was the common wisdom for a long time. That doesn't make it true, no matter how much you want it to be. I'm pretty sure my version is also wrong, but it's at least an interesting perspective rather than "money printers go brrr inflation then always happens". > Recall my other post here about how making loans creates money, and paying the loans back destroys it. I don't agree with the second part of this sentence. I completely agree that the banks create money out of thin air when they decide to loan you $100k. But if you pay it back, more money is created as part of the interest payments on that $100k. If you don't pay it back: > Bankruptcy destroys money. True. > I wonder if all the bankruptcies, defaults, haircuts and writedowns removed a vast amount of money from circulation, and the deficit spending simply filled that hole rather than creating more inflation. The US government made money on it[0]. I'm almost positive there is essentially a zero percent chance of making any of the trillions we spent in 2020 back. We have to pay all that borrowing off somehow, either we raise taxes or we inflate it away. It seems like we are on the inflation train version for now at least. Though perhaps your comment is also partially true, there was some bankruptcies(one might argue not enough). A quick web search didn't turn up any good data on the amount(s) though and I'm to lazy to do more research on it, but if you have done some, I'd be interested. 0: https://money.usnews.com/investing/articles/2017-01-19/financial-crisis-bailouts-have-earned-taxpayers-billions https://money.usnews.com/investing/articles/2017-01-19/finan...
  - WalterBright 4y ago
    > There is no rigorous proof of what causes inflation. There's no rigorous proof that smoking causes cancer, either. All we have is a lot of correlation. The historical evidence of printing non-collateralized money corresponding with inflation is overwhelming. It corresponds with gold rushes, and silver rushes. It corresponds with debasing coins by mixing in cheap metals. Me, I'm going where the evidence leads. > I completely agree that the banks create money out of thin air when they decide to loan you $100k. But if you pay it back, It is the inverse operation - destroying it. But of course, the bank creates it again for the next loan. > more money is created as part of the interest payments on that $100k. No, it does not. I wish I could create money to pay the interest on my loans, but I can't (at least not legally!). I use existing money to pay them.
    - chubs 4y ago
      Always fantastic to see someone standing up for basic economics here! My favourite tech-communicable way to consider it is this: Money is like 'points' for prioritising the way people/resources are allocated in the world, somewhat like agile/scrum planning poker. If you give everyone cards with larger points values, you'll still get the same amount of work done in a given sprint, it's just that you'll get an inflated 'sprint velocity' (eg story points implemented in a fortnight). Apologies if i've explained this poorly!
    - zie 4y ago
      > No, it does not. I wish I could create money to pay the interest on my loans, but I can't (at least not legally!). I use existing money to pay them. LOL, wrong perspective, think of it from the banks point of view. They make money from you for creating money and letting you use some of it. Again, this whole "creating money" thing is very simplistic perspective, they have limits on how much of this they can do, etc.
- imtringued 4y ago
  >One one hand, we have thousands of years of history with what causes inflation. Yeah we know that inflation is caused by an insufficient internalisation of liquidity costs on the beneficiaries of liquidity. This makes them destroy the supply of money that is available for transactions which then forces people to create new transaction available money to replace the loss.
- colinmhayes 4y ago
  Thousands of years of pre Adam smith history where the concept of macroeconomics did not exist. Obviously a naive implementation of monetary expansion causes price inflation, that doesn’t mean a well implemented monetary expansion does though.
  - WalterBright 4y ago
    The Law of Supply & Demand is there whether it is recognized or not. > that doesn’t mean a well implemented monetary expansion does though Then none of them are well implemented, because all examples of fiat money exhibit endemic inflation. The reason is straightforward - the whole point of a fiat money system is to inflate it.
    - colinmhayes 4y ago
      The decade following 08 had exactly the goal inflation even though there was unprecedented monetary expansion.
Izkata 4y ago
Looks like 2008 was a deflationary recession [0], so sounds like that money printing caused enough inflation to counter it and hold ~steady. [0] https://www.investopedia.com/ask/answers/040715/were-there-any-periods-major-deflation-us-history.asp https://www.investopedia.com/ask/answers/040715/were-there-a...

by zie 4y ago

WalterBright 4y ago

> I know of at least one instance where your version was incorrect(2008/2009). One one hand, we have thousands of years of history with what causes inflation. On the other hand, we have one instance. I'd say one has to examine the one counterexample for something missed. (Your cite makes no mention of 2008/2009.) Extraordinary claims require extraordinary evidence. Recall my other post here about how making loans creates money, and paying the loans back destroys it. Bankruptcy destroys money. I wonder if all the bankruptcies, defaults, haircuts and writedowns removed a vast amount of money from circulation, and the deficit spending simply filled that hole rather than creating more inflation.

zie 4y ago
> (Your cite makes no mention of 2008/2009.) Incorrect: "One may look to politicians’ statements. Even in the Obama-era “stimulus” spending, the administration emphasized promises of eventual debt reduction. " And I have more to say on it later. My cite is from a world-class economist, not from some random person on the Internet. > One one hand, we have thousands of years of history with what causes inflation. > On the other hand, we have one instance. Again, you are assuming facts not in evidence, you assume your version of reality is correct, likely because that is what economics text books taught you, because they also assumed it to be the case, these assumptions do not make it true. Perhaps those thousands of years of history actually agree with my version also. We don't know what people were thinking across those thousands of years of inflation history, it's possible they were thinking our governments(such as they were) were not trusted to pay it back, as generally speaking, governments that go on large spending sprees tend to not pay it back very well. It's hard to be disciplined with money when there is very little incentive to politicians while in office. There is no rigorous proof of what causes inflation. There are many well-educated guesses and your perspective was the common wisdom for a long time. That doesn't make it true, no matter how much you want it to be. I'm pretty sure my version is also wrong, but it's at least an interesting perspective rather than "money printers go brrr inflation then always happens". > Recall my other post here about how making loans creates money, and paying the loans back destroys it. I don't agree with the second part of this sentence. I completely agree that the banks create money out of thin air when they decide to loan you $100k. But if you pay it back, more money is created as part of the interest payments on that $100k. If you don't pay it back: > Bankruptcy destroys money. True. > I wonder if all the bankruptcies, defaults, haircuts and writedowns removed a vast amount of money from circulation, and the deficit spending simply filled that hole rather than creating more inflation. The US government made money on it[0]. I'm almost positive there is essentially a zero percent chance of making any of the trillions we spent in 2020 back. We have to pay all that borrowing off somehow, either we raise taxes or we inflate it away. It seems like we are on the inflation train version for now at least. Though perhaps your comment is also partially true, there was some bankruptcies(one might argue not enough). A quick web search didn't turn up any good data on the amount(s) though and I'm to lazy to do more research on it, but if you have done some, I'd be interested. 0: https://money.usnews.com/investing/articles/2017-01-19/financial-crisis-bailouts-have-earned-taxpayers-billions https://money.usnews.com/investing/articles/2017-01-19/finan...
- WalterBright 4y ago
  > There is no rigorous proof of what causes inflation. There's no rigorous proof that smoking causes cancer, either. All we have is a lot of correlation. The historical evidence of printing non-collateralized money corresponding with inflation is overwhelming. It corresponds with gold rushes, and silver rushes. It corresponds with debasing coins by mixing in cheap metals. Me, I'm going where the evidence leads. > I completely agree that the banks create money out of thin air when they decide to loan you $100k. But if you pay it back, It is the inverse operation - destroying it. But of course, the bank creates it again for the next loan. > more money is created as part of the interest payments on that $100k. No, it does not. I wish I could create money to pay the interest on my loans, but I can't (at least not legally!). I use existing money to pay them.
  - chubs 4y ago
    Always fantastic to see someone standing up for basic economics here! My favourite tech-communicable way to consider it is this: Money is like 'points' for prioritising the way people/resources are allocated in the world, somewhat like agile/scrum planning poker. If you give everyone cards with larger points values, you'll still get the same amount of work done in a given sprint, it's just that you'll get an inflated 'sprint velocity' (eg story points implemented in a fortnight). Apologies if i've explained this poorly!
  - zie 4y ago
    > No, it does not. I wish I could create money to pay the interest on my loans, but I can't (at least not legally!). I use existing money to pay them. LOL, wrong perspective, think of it from the banks point of view. They make money from you for creating money and letting you use some of it. Again, this whole "creating money" thing is very simplistic perspective, they have limits on how much of this they can do, etc.
imtringued 4y ago
>One one hand, we have thousands of years of history with what causes inflation. Yeah we know that inflation is caused by an insufficient internalisation of liquidity costs on the beneficiaries of liquidity. This makes them destroy the supply of money that is available for transactions which then forces people to create new transaction available money to replace the loss.
colinmhayes 4y ago
Thousands of years of pre Adam smith history where the concept of macroeconomics did not exist. Obviously a naive implementation of monetary expansion causes price inflation, that doesn’t mean a well implemented monetary expansion does though.
- WalterBright 4y ago
  The Law of Supply & Demand is there whether it is recognized or not. > that doesn’t mean a well implemented monetary expansion does though Then none of them are well implemented, because all examples of fiat money exhibit endemic inflation. The reason is straightforward - the whole point of a fiat money system is to inflate it.
  - colinmhayes 4y ago
    The decade following 08 had exactly the goal inflation even though there was unprecedented monetary expansion.

Izkata 4y ago

Looks like 2008 was a deflationary recession [0], so sounds like that money printing caused enough inflation to counter it and hold ~steady. [0] https://www.investopedia.com/ask/answers/040715/were-there-any-periods-major-deflation-us-history.asp https://www.investopedia.com/ask/answers/040715/were-there-a...