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Dismissing a contrary position as "propaganda" only stifles debate, and you haven't presented an argument against "sweet spots". It's a good mental model for ma

Dismissing a contrary position as "propaganda" only stifles debate, and you haven't presented an argument against "sweet spots". It's a good mental model for many situations. What makes you think there doesn't exist an optimal inflation rate? 0% inflation is generally not a safe target. In an economy you want to avoid deflation at all costs. If consumers expect future price drops, demand can dip significantly and induce further drops in price (deflationary spiral). Businesses need consistent, predictable demand, else they enact shortsighted, over-reactive responses (e.g. layoffs) which can further exacerbate an economic downturn. See the Japanese financial crisis. Even a small fluctuation into deflationary territory can have long-lasting effects on consumer perception. It's safer (read: insurance policy) to maintain a slightly positive inflation rate so that consumers are encouraged to make purchase decisions promptly when needs arise versus indefinite speculative postponement. Of course, the "optimal" inflation rate is context-dependent. Your unique economic situation will dictate which inflation trade-offs you end up selecting.

rightbyte 4y ago
> If consumers expect future price drops, demand can dip significantly and induce further drops in price Sounds awesome? Saves resources. People save money for a rainy day. Lending goes down.
- stopping 4y ago
  Not at all. The issue of rampant consumerism is mostly orthogonal to issues of overall economic stability. Deflation will certainly reduce consumption, but at the cost of massive societal upheaval by way of extreme unemployment and all of its ill effects.
- imtringued 4y ago
  Money is necessary to conduct transactions. If people are incapable of transacting because some people play a hoarding game like with Bitcoin then real people's real basic needs like food or housing won't be met. You will get wholly pointless homelessness. How do we make sure that money cannot be abused to doom the rest of the economy into an inability to transact? You make people pay for the benefits they receive by holding onto money. People hate free markets, they are against paying for the costs they cause.
  - randomdata 4y ago
    > Money is necessary to conduct transactions. Not necessarily. Money is little more than a distributed IOU held from providing past benefit to someone else to be used in exchange for future benefit from someone else. Money records that I did work for you now and in return you will do work for me later, except given that the IOU is recognized in a distributed fashion the work later can also come from other people. IOUs bring a lot of benefit, but aren't strictly necessary to conduct a transaction. I could work for you now and at the same time you could work for me to provide equal value. Since there is no delay between services rendered there is no need to record that the other party promises to provide a future benefit. The transaction is already complete in the moment.
- KptMarchewa 4y ago
  And you get fired from your job because demand for it disappears. Amazing.
  - autoexec 4y ago
    Demand doesn't disappear. People still want the things they want. They just might not be wiling to pay as much as others would like them to. Lower the prices, and suddenly those people can justify (or even simply afford) satisfing the demand that never went away. People spending leads to more jobs.
    - KptMarchewa 4y ago
      >Lower the prices, and suddenly those people can justify (or even simply afford) satisfing the demand that never went away. Or they can wait more to buy cheaper. Sure, they won't do that if you sell carrots, but they will do if you sell cars.
      - autoexec 4y ago
        As if prices are going to come down. If the companies who have been making record profits refuse to accept making a little less profit and won't lower prices how long will you have to wait to buy something cheaper.
randomdata 4y ago
> If consumers expect future price drops Which they do. The only time in US history where a significant inflationary spike was not followed by deflation was in the long run up (already making it an outlier) in the 1970s through 1980s, and inflation in that period transpired primarily due to wage inflation. As wages are the stickiest of all, you don't get downward movement on price when the tide shifts, you simply see unemployment shoot through the roof. When fertilizer availability is no longer the most pressing concern facing humanity, something we are unlikely to not be able to resolve in due time, there won't be much reason for prices to persist. There is little to no stickiness here and it tumbles from there.
WalterBright 4y ago
This is all unsupported by any evidence. The "deflationary spiral" theory is as wrong as its sister, the "inflationary spiral". Inflation benefits borrowers, hurts lenders. Deflation hurts borrowers, benefits lenders. The sweet spot is 0. The reason everybody believes that inflation is good for you is because of persistent government propaganda to sell that idea, because what inflation really is is a tax on your money. That's right, a tax. Now, if you want to argue that the inflation tax is a reasonable way for the government to raise revenue, ok, but be realistic as to what it is. Inflation isn't good for you any more than taxing you is good for you.
- stopping 4y ago
  Nothing of what you said is an argument against the points I made. Where is the error in my reasoning? I literally gave an example of my argument applying to a real life, well studied scenario.
- AnimalMuppet 4y ago
  The "deflationary spiral" has empirical evidence from a fair number of financial crises in the 19th and early 20th centuries. It happened. A lot. And it was really destructive when it did.
  - AnimalMuppet 4y ago
    Too late to edit, so replying to myself: There also is plenty of evidence for the "inflationary spiral". See Zimbabwe for a recent example.

rightbyte 4y ago

> If consumers expect future price drops, demand can dip significantly and induce further drops in price Sounds awesome? Saves resources. People save money for a rainy day. Lending goes down.

stopping 4y ago
Not at all. The issue of rampant consumerism is mostly orthogonal to issues of overall economic stability. Deflation will certainly reduce consumption, but at the cost of massive societal upheaval by way of extreme unemployment and all of its ill effects.
imtringued 4y ago
Money is necessary to conduct transactions. If people are incapable of transacting because some people play a hoarding game like with Bitcoin then real people's real basic needs like food or housing won't be met. You will get wholly pointless homelessness. How do we make sure that money cannot be abused to doom the rest of the economy into an inability to transact? You make people pay for the benefits they receive by holding onto money. People hate free markets, they are against paying for the costs they cause.
- randomdata 4y ago
  > Money is necessary to conduct transactions. Not necessarily. Money is little more than a distributed IOU held from providing past benefit to someone else to be used in exchange for future benefit from someone else. Money records that I did work for you now and in return you will do work for me later, except given that the IOU is recognized in a distributed fashion the work later can also come from other people. IOUs bring a lot of benefit, but aren't strictly necessary to conduct a transaction. I could work for you now and at the same time you could work for me to provide equal value. Since there is no delay between services rendered there is no need to record that the other party promises to provide a future benefit. The transaction is already complete in the moment.
KptMarchewa 4y ago
And you get fired from your job because demand for it disappears. Amazing.
- autoexec 4y ago
  Demand doesn't disappear. People still want the things they want. They just might not be wiling to pay as much as others would like them to. Lower the prices, and suddenly those people can justify (or even simply afford) satisfing the demand that never went away. People spending leads to more jobs.
  - KptMarchewa 4y ago
    >Lower the prices, and suddenly those people can justify (or even simply afford) satisfing the demand that never went away. Or they can wait more to buy cheaper. Sure, they won't do that if you sell carrots, but they will do if you sell cars.
    - autoexec 4y ago
      As if prices are going to come down. If the companies who have been making record profits refuse to accept making a little less profit and won't lower prices how long will you have to wait to buy something cheaper.

randomdata 4y ago

> If consumers expect future price drops Which they do. The only time in US history where a significant inflationary spike was not followed by deflation was in the long run up (already making it an outlier) in the 1970s through 1980s, and inflation in that period transpired primarily due to wage inflation. As wages are the stickiest of all, you don't get downward movement on price when the tide shifts, you simply see unemployment shoot through the roof. When fertilizer availability is no longer the most pressing concern facing humanity, something we are unlikely to not be able to resolve in due time, there won't be much reason for prices to persist. There is little to no stickiness here and it tumbles from there.

WalterBright 4y ago

This is all unsupported by any evidence. The "deflationary spiral" theory is as wrong as its sister, the "inflationary spiral". Inflation benefits borrowers, hurts lenders. Deflation hurts borrowers, benefits lenders. The sweet spot is 0. The reason everybody believes that inflation is good for you is because of persistent government propaganda to sell that idea, because what inflation really is is a tax on your money. That's right, a tax. Now, if you want to argue that the inflation tax is a reasonable way for the government to raise revenue, ok, but be realistic as to what it is. Inflation isn't good for you any more than taxing you is good for you.

stopping 4y ago
Nothing of what you said is an argument against the points I made. Where is the error in my reasoning? I literally gave an example of my argument applying to a real life, well studied scenario.
AnimalMuppet 4y ago
The "deflationary spiral" has empirical evidence from a fair number of financial crises in the 19th and early 20th centuries. It happened. A lot. And it was really destructive when it did.
- AnimalMuppet 4y ago
  Too late to edit, so replying to myself: There also is plenty of evidence for the "inflationary spiral". See Zimbabwe for a recent example.