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Here, the "doing nothing" is referring to investments, not consumption. People consume cars, computers, and phones; the primary intent is to use the product. Y

by bloppe 4y ago

Here, the "doing nothing" is referring to investments, not consumption. People consume cars, computers, and phones; the primary intent is to use the product. You might sell it used at some point, but that's not the primary intent, and you're almost certainly going to take a loss on resale. People invest in companies, governments, and individuals; the primary intent is to provide a loan that will be repaid with interest. A physical object could be considered an investment, but only if that object is rare or somehow naturally limited (e.g. real estate). So with inflation, you're rewarded for making investments, because otherwise your money will lose value sitting in fat stacks under your mattress. With deflation, you're rewarded for keeping those stacks hidden away, because it's a risk-free way for it to gain value.

fogzen 4y ago
The profit incentive still functions to drive investment under deflation, because you can make more money from investment than letting money sit there. US economy experienced massive growth through periods of deflation 1815 and 1860, and 1865 to 1900, as a result of industrialization and increased international trade. I think people greatly overestimate the impact of monetary policy. Consumer demand and technological improvement drive growth more than anything. Climate change and rising oil prices drive investment in renewables for example. Consumer demand for computing drove technological improvements, which drove investment and falling prices. In my view, this would happen regardless of monetary policy.