6 ms·

What's the motive behind wanting deflationary currency? Just a few minutes' reflection should convince you that's a very bad idea for any free market, capitali

What's the motive behind wanting deflationary currency? Just a few minutes' reflection should convince you that's a very bad idea for any free market, capitalist economy.

Finnucane 4y ago
Goldbugs like deflation. Goldbugs like gold. Practical economic usefulness is not a consideration.
- quantified 4y ago
  This is Texas. Why gold and not barrels of oil?
  - JumpCrisscross 4y ago
    > Why gold and not barrels of oil? Oil is perishable.
- bediger4000 4y ago
  So just a strong belief in some superstitions? Seems really odd.
  - JohnFen 4y ago
    Texas is a pretty odd place.
- hakfoo 4y ago
  I suspect there are three flavours of gold bugs: 1) Wealthy + Paranoid + Stupid. They'd rather keep their money in sovereigns under their mattress, than put it into any sort of productive economic activity. On a long term, especially in the US, you could pretty much throw darts and build a portfolio that competes with, or beats, inflation. 2) Conspirational: "fiat currency is a grand scheme to undermine our savings for (insert nefarious bugaboo of the day)" 3) Arguably a subset of 2) but Apocalypse Enthusiast. "When civilization crumbles, the obvious trade unit won't be something like grain, alcohol, or bullets, but my bags full of low-grade silver dimes! I'll be King of the Wasteland!"
  - brnaftr361 4y ago
    Couldn't we bifurcate it, though? I mean, I'm fucked. I've effectively lost between 10-20% of my purchasing power out of what ultimately equates to a relatively small sum in the first place because my time horizon was pretty small, I put a trust fund together for myself. Whole I was doing this bond yields were negative, and had been for a long while, and I'd posit they still are (last I looked the $1 pound loaves at Walmart were $1.50). I just did not and do not have the buffer money for investing, not to mention a need for liquidity and possible penalties. It would be nice to have something more stable. Of course, Au and Ag haven't yet reared their imaginary powers yet in any case, though many portend they will. Ideally though, an ounce of gold is an ounce. But a dollar can be anything. The question is one of making gold, silver, or some other fixed-quantity, portable, arbitrarily valuable substance into legal tender, right?
  - zoklet-enjoyer 4y ago
    Gold coins are beautiful liquid assets. Why not keep part of your retirement or emergency fund in gold and silver? I can just go down to one of many local coin stores and sell them if I need the cash.
  - bheadmaster 4y ago
    > fiat currency is a grand scheme to undermine our savings How exactly is it not? Inflation = stealing value from people, that they have already created, time-limiting their spending power so that there's no way to actually save money in the long-term. Money printing is theft, indirect taxation without consent.
    - qwytw 4y ago
      > no way to actually save money in the long-term The idea is that you'd save by investing into productive enterprises (and or government bonds) obviously that doesn't necessarily function as well as one would hope for but it's an better solution than hoarding cash/gold/bitcoin/etc.
    - throw0101b 4y ago
      > so that there's no way to actually save money in the long-term. Besides equities? Besides TIPS? * https://www.investopedia.com/terms/t/tips.asp https://www.investopedia.com/terms/t/tips.asp Do you literally keep bills under your mattress or buried in your backyard? There's your problem.
- lamp987 4y ago
  whats practical about your wealth being stolen from you?
  - throw0101b 4y ago
    > whats practical about your wealth being stolen from you? It forces you to invest it productive assets. What social value is there in locking away wealth in non-productive forms? Buffett in 2011: > Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A. > Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B? > Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices. > A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond. * https://www.berkshirehathaway.com/letters/2011ltr.pdf https://www.berkshirehathaway.com/letters/2011ltr.pdf What social good does encouraging hoarding attain?
api 4y ago
That's one of the crazier political rabbit holes to go down. There are reasonable and/or reasonable-sounding arguments for pretty much every position and those arguments have been rehashed in every imaginable way for decades and decades. Online there's probably tens of gigabytes of debate between "hard money" advocates and "fiat" or inflationary currency advocates. After seeing endless debates between various schools of economics for decades, in the end I've come to the conclusion that nobody really knows what they're talking about. A big problem is that history is an experiment with no replications, no controls, and no good way to tie complex causes to complex effects. "What would the past 100 years have looked like had we kept the dollar pegged to gold?" We don't know and we'll never know. All you can do is tell just-so stories. Did having an inflationary currency help us achieve the remarkable growth of the past hundred years? We can't know that either. For all we know all that growth was due to demographics and technology and would have happened regardless of the monetary system. I wonder if maybe it doesn't matter that much, and so in that sense both sides are wrong. Maybe the real basis of the economy is the real economy (people, capital, resources, technology) and what you use to price it is secondary. So as long as your monetary system avoids extreme failure modes like hyperinflation or extreme deflationary collapse, the system will just adapt to whatever monetary base it's given and price signals will do their job.
- TheOtherHobbes 4y ago
  All money is fiat money, in the sense that value is based entirely on social negotiation and agreement, not inherent use value. Anyone who doesn't understand this should try eating gold. Or an ETF. Or a dollar bill. Of course gold does have some use value, but so do plenty of other metals. The only special thing about it is that it has a history of being valuable - already a social agreement - and it gives a very clear agreed social signal when used in jewellery.
- qwytw 4y ago
  > We don't know and we'll never know. All you can do is tell just-so stories You can compare the permanent boom and bust cycle the global economy was in prior to the Great Depression to the relatively stable inflationary environment of the last several decades. Just look at: https://www.officialdata.org/us/inflation/1800?amount=1#:~:text=Value%20of%20%241%20from%201800,cumulative%20price%20increase%20of%202%2C295.52%25 https://www.officialdata.org/us/inflation/1800?amount=1#:~:t.... Specie based money (with not meaningful monetary policy) is not stable, in fact it's less stable than Fiat money it's just that periods of high inflation are followed by periods of very high deflation. And unpredictability is clearly an obvious downside... (to be fair I almost thoroughly disagree with your reasoning).
qgin 4y ago
People want to get rich even if that means killing every incentive for productive use of capital in the process.
Geee 4y ago
Gold is not deflationary from monetary perspective. More gold is mined constantly. Due to its high stock-to-flow ratio, the monetary inflation is very low. From the perspective of CPI (consumer price index), gold would be "deflationary", because prices would get cheaper. However, this is not a property of gold; it's the property of a capitalist economy, where companies compete to offer better products at cheaper prices. There's no good reason for diluting the currency to keep prices increasing, other than corruption and greed of those who control the money supply. Inflationary currency means that someone is profiting by creating money, and that profit is paid in the increasing price of products.
- zpeti 4y ago
  I don’t understand the entire first principles these anti deflationists stand on. Like every single electronics product in the last 50 years has been deflating in price (either literally or increasing in core value). Does that stop people buying them? No! But perhaps someone here who’s anti deflationist could explain to me why I’m wrong.
  - jfengel 4y ago
    Deflation mostly matters with currency. Deflation of products is a good thing. The problem with deflating currency is that it encourages you to sit on it. Economists don't want you sitting on a hoard like a dragon. In the extreme case, GDP goes to zero today because everybody is expecting prices to be cheaper tomorrow. Then all the workers get fired because there's nothing to produce. Now they have no money, and buy nothing, so it gets even worse. Obviously the extreme case doesn't happen, but the thought experiment illustrates the problem. A tiny bit of inflation encourages purchasing and investment, which keeps money moving. You may want to stop working as an individual once you've acquired enough money, but the nation as a whole never retires, and relies on consumption to give everybody work. Prices of goods coming down is OK, because goods are consumed. You have to buy new goods tomorrow. Durable goods wear out; real estate is maintained; intellectual goods get boring. The economy rolls along, and people continue to make investments to get a bigger share of it for themselves. So economists aim for low but steady inflation. It benefits the economy as a whole, at a cost to those who want to accumulate cash and not spend or invest it. tl,dr: Sitting on cash removes it from the economy, and deflation encourages people to spend money tomorrow rather than today.
ur-whale 4y ago
> Just a few minutes' reflection I believe the person who has to spend - likely more than - a few minutes reflection isn't who you think. IOW, burden of proof is on you.

What's the motive behind wanting deflationary currency? Just a few minutes' reflection should convince you that's a very bad idea for any free market, capitalist economy.

Finnucane 4y ago

Goldbugs like deflation. Goldbugs like gold. Practical economic usefulness is not a consideration.

quantified 4y ago
This is Texas. Why gold and not barrels of oil?
- JumpCrisscross 4y ago
  > Why gold and not barrels of oil? Oil is perishable.
bediger4000 4y ago
So just a strong belief in some superstitions? Seems really odd.
- JohnFen 4y ago
  Texas is a pretty odd place.
hakfoo 4y ago
I suspect there are three flavours of gold bugs: 1) Wealthy + Paranoid + Stupid. They'd rather keep their money in sovereigns under their mattress, than put it into any sort of productive economic activity. On a long term, especially in the US, you could pretty much throw darts and build a portfolio that competes with, or beats, inflation. 2) Conspirational: "fiat currency is a grand scheme to undermine our savings for (insert nefarious bugaboo of the day)" 3) Arguably a subset of 2) but Apocalypse Enthusiast. "When civilization crumbles, the obvious trade unit won't be something like grain, alcohol, or bullets, but my bags full of low-grade silver dimes! I'll be King of the Wasteland!"
- brnaftr361 4y ago
  Couldn't we bifurcate it, though? I mean, I'm fucked. I've effectively lost between 10-20% of my purchasing power out of what ultimately equates to a relatively small sum in the first place because my time horizon was pretty small, I put a trust fund together for myself. Whole I was doing this bond yields were negative, and had been for a long while, and I'd posit they still are (last I looked the $1 pound loaves at Walmart were $1.50). I just did not and do not have the buffer money for investing, not to mention a need for liquidity and possible penalties. It would be nice to have something more stable. Of course, Au and Ag haven't yet reared their imaginary powers yet in any case, though many portend they will. Ideally though, an ounce of gold is an ounce. But a dollar can be anything. The question is one of making gold, silver, or some other fixed-quantity, portable, arbitrarily valuable substance into legal tender, right?
- zoklet-enjoyer 4y ago
  Gold coins are beautiful liquid assets. Why not keep part of your retirement or emergency fund in gold and silver? I can just go down to one of many local coin stores and sell them if I need the cash.
- bheadmaster 4y ago
  > fiat currency is a grand scheme to undermine our savings How exactly is it not? Inflation = stealing value from people, that they have already created, time-limiting their spending power so that there's no way to actually save money in the long-term. Money printing is theft, indirect taxation without consent.
  - qwytw 4y ago
    > no way to actually save money in the long-term The idea is that you'd save by investing into productive enterprises (and or government bonds) obviously that doesn't necessarily function as well as one would hope for but it's an better solution than hoarding cash/gold/bitcoin/etc.
  - throw0101b 4y ago
    > so that there's no way to actually save money in the long-term. Besides equities? Besides TIPS? * https://www.investopedia.com/terms/t/tips.asp https://www.investopedia.com/terms/t/tips.asp Do you literally keep bills under your mattress or buried in your backyard? There's your problem.
lamp987 4y ago
whats practical about your wealth being stolen from you?
- throw0101b 4y ago
  > whats practical about your wealth being stolen from you? It forces you to invest it productive assets. What social value is there in locking away wealth in non-productive forms? Buffett in 2011: > Today the world’s gold stock is about 170,000 metric tons. If all of this gold were melded together, it would form a cube of about 68 feet per side. (Picture it fitting comfortably within a baseball infield.) At $1,750 per ounce – gold’s price as I write this – its value would be $9.6 trillion. Call this cube pile A. > Let’s now create a pile B costing an equal amount. For that, we could buy all U.S. cropland (400 million acres with output of about $200 billion annually), plus 16 Exxon Mobils (the world’s most profitable company, one earning more than $40 billion annually). After these purchases, we would have about $1 trillion left over for walking-around money (no sense feeling strapped after this buying binge). Can you imagine an investor with $9.6 trillion selecting pile A over pile B? > Beyond the staggering valuation given the existing stock of gold, current prices make today’s annual production of gold command about $160 billion. Buyers – whether jewelry and industrial users, frightened individuals, or speculators – must continually absorb this additional supply to merely maintain an equilibrium at present prices. > A century from now the 400 million acres of farmland will have produced staggering amounts of corn, wheat, cotton, and other crops – and will continue to produce that valuable bounty, whatever the currency may be. Exxon Mobil will probably have delivered trillions of dollars in dividends to its owners and will also hold assets worth many more trillions (and, remember, you get 16 Exxons). The 170,000 tons of gold will be unchanged in size and still incapable of producing anything. You can fondle the cube, but it will not respond. * https://www.berkshirehathaway.com/letters/2011ltr.pdf https://www.berkshirehathaway.com/letters/2011ltr.pdf What social good does encouraging hoarding attain?

api 4y ago

That's one of the crazier political rabbit holes to go down. There are reasonable and/or reasonable-sounding arguments for pretty much every position and those arguments have been rehashed in every imaginable way for decades and decades. Online there's probably tens of gigabytes of debate between "hard money" advocates and "fiat" or inflationary currency advocates. After seeing endless debates between various schools of economics for decades, in the end I've come to the conclusion that nobody really knows what they're talking about. A big problem is that history is an experiment with no replications, no controls, and no good way to tie complex causes to complex effects. "What would the past 100 years have looked like had we kept the dollar pegged to gold?" We don't know and we'll never know. All you can do is tell just-so stories. Did having an inflationary currency help us achieve the remarkable growth of the past hundred years? We can't know that either. For all we know all that growth was due to demographics and technology and would have happened regardless of the monetary system. I wonder if maybe it doesn't matter that much, and so in that sense both sides are wrong. Maybe the real basis of the economy is the real economy (people, capital, resources, technology) and what you use to price it is secondary. So as long as your monetary system avoids extreme failure modes like hyperinflation or extreme deflationary collapse, the system will just adapt to whatever monetary base it's given and price signals will do their job.

TheOtherHobbes 4y ago
All money is fiat money, in the sense that value is based entirely on social negotiation and agreement, not inherent use value. Anyone who doesn't understand this should try eating gold. Or an ETF. Or a dollar bill. Of course gold does have some use value, but so do plenty of other metals. The only special thing about it is that it has a history of being valuable - already a social agreement - and it gives a very clear agreed social signal when used in jewellery.
qwytw 4y ago
> We don't know and we'll never know. All you can do is tell just-so stories You can compare the permanent boom and bust cycle the global economy was in prior to the Great Depression to the relatively stable inflationary environment of the last several decades. Just look at: https://www.officialdata.org/us/inflation/1800?amount=1#:~:text=Value%20of%20%241%20from%201800,cumulative%20price%20increase%20of%202%2C295.52%25 https://www.officialdata.org/us/inflation/1800?amount=1#:~:t.... Specie based money (with not meaningful monetary policy) is not stable, in fact it's less stable than Fiat money it's just that periods of high inflation are followed by periods of very high deflation. And unpredictability is clearly an obvious downside... (to be fair I almost thoroughly disagree with your reasoning).

qgin 4y ago

People want to get rich even if that means killing every incentive for productive use of capital in the process.

Geee 4y ago

Gold is not deflationary from monetary perspective. More gold is mined constantly. Due to its high stock-to-flow ratio, the monetary inflation is very low. From the perspective of CPI (consumer price index), gold would be "deflationary", because prices would get cheaper. However, this is not a property of gold; it's the property of a capitalist economy, where companies compete to offer better products at cheaper prices. There's no good reason for diluting the currency to keep prices increasing, other than corruption and greed of those who control the money supply. Inflationary currency means that someone is profiting by creating money, and that profit is paid in the increasing price of products.

zpeti 4y ago
I don’t understand the entire first principles these anti deflationists stand on. Like every single electronics product in the last 50 years has been deflating in price (either literally or increasing in core value). Does that stop people buying them? No! But perhaps someone here who’s anti deflationist could explain to me why I’m wrong.
- jfengel 4y ago
  Deflation mostly matters with currency. Deflation of products is a good thing. The problem with deflating currency is that it encourages you to sit on it. Economists don't want you sitting on a hoard like a dragon. In the extreme case, GDP goes to zero today because everybody is expecting prices to be cheaper tomorrow. Then all the workers get fired because there's nothing to produce. Now they have no money, and buy nothing, so it gets even worse. Obviously the extreme case doesn't happen, but the thought experiment illustrates the problem. A tiny bit of inflation encourages purchasing and investment, which keeps money moving. You may want to stop working as an individual once you've acquired enough money, but the nation as a whole never retires, and relies on consumption to give everybody work. Prices of goods coming down is OK, because goods are consumed. You have to buy new goods tomorrow. Durable goods wear out; real estate is maintained; intellectual goods get boring. The economy rolls along, and people continue to make investments to get a bigger share of it for themselves. So economists aim for low but steady inflation. It benefits the economy as a whole, at a cost to those who want to accumulate cash and not spend or invest it. tl,dr: Sitting on cash removes it from the economy, and deflation encourages people to spend money tomorrow rather than today.

ur-whale 4y ago

> Just a few minutes' reflection I believe the person who has to spend - likely more than - a few minutes reflection isn't who you think. IOW, burden of proof is on you.