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>People buying the bare minimum also means there's little investment going on, which needless to say is bad for economic growth. Not spending money indirectly

>People buying the bare minimum also means there's little investment going on, which needless to say is bad for economic growth. Not spending money indirectly contributes to investment. If you imagine 50% of the population suddenly decided to not spend any money for 10 years, and they hold 50% of all the money in circulation, in the short term this is essentially equivalent to burning 50% of the money supply, in that the reduction of the supply of money in the market leads to an increase in the value of money, which allows the people spending money at that time (including people making investments) to obtain more goods and services for their money.

gruez 3y ago
But if the economy is going to shit, who are the people that are sticking their necks out by borrowing money to invest, rather than accumulating savings to weather the downturn?
- logicchains 3y ago
  >who are the people that are sticking their necks out by borrowing money to invest, rather than accumulating savings to weather the downturn Normal people aren't, but rich people (who don't face any real risk to their standard of living from a crash) are incentivised to "buy the low" while everything is cheap. And they can buy more thanks to the purchasing power that other currency holders temporarily forfeited by pulling their money out of circulation.
  - gruez 3y ago
    You claimed a few comments up that printing money would cause people "to spend or invest in often unproductive ventures", but based on what you're saying now, it would have the same effect? ie. more savings = more investments are needed to balance them out = more questionable ventures being funded as savers chase ever more questionable ventures for yields.
    - logicchains 3y ago
      >more questionable ventures being funded as savers chase ever more questionable ventures for yields The difference is that for private investment there's a process of natural selection: bad investors lose money to good investors, and over time the people with a record of better investment end up with more money, and overall better investments are made. Whereas the US government can keep spending money on economically unproductive things like the war in Afghanistan indefinitely without any feedback loop to stop it.
      - gruez 3y ago
        I agree that if government was somehow involved in the lending (ie. choosing which companies to bail out), there would be a risk of picking winners/losers and creating zombie firms, but it's unclear how it's an issue exclusive to fiat currency. After all, governments can still take on debt even while on the gold standard, and can still engage in bailouts.
        logicchains 3y ago
        Yes, the lending during bailouts could still pick winners/losers, but overall during normal times the government would be spending relatively less compared to the private market (as it'd be constrained to what level of taxation voters were willing to tolerate), and there'd also be potentially more oversight over its spending (as it'd have to justify spending increases in order to receive public support for increasing taxes to pay for it).
- Geisterde 3y ago
  People wkll invest in the ventures that have a profit, because those can weather the storm. Eventually the growth of those companies creates the economic surplus that allows greater specialization to return, only built on a foundation of profitable companies. When you bail companies out, you create zombies that dont need to compete for the business, they will weather the storm and come out the other side monopolizing the market. The specialization that flows from that is the spread of a cancer, doubling down on a failed foundation.

gruez 3y ago

But if the economy is going to shit, who are the people that are sticking their necks out by borrowing money to invest, rather than accumulating savings to weather the downturn?

logicchains 3y ago
>who are the people that are sticking their necks out by borrowing money to invest, rather than accumulating savings to weather the downturn Normal people aren't, but rich people (who don't face any real risk to their standard of living from a crash) are incentivised to "buy the low" while everything is cheap. And they can buy more thanks to the purchasing power that other currency holders temporarily forfeited by pulling their money out of circulation.
- gruez 3y ago
  You claimed a few comments up that printing money would cause people "to spend or invest in often unproductive ventures", but based on what you're saying now, it would have the same effect? ie. more savings = more investments are needed to balance them out = more questionable ventures being funded as savers chase ever more questionable ventures for yields.
  - logicchains 3y ago
    >more questionable ventures being funded as savers chase ever more questionable ventures for yields The difference is that for private investment there's a process of natural selection: bad investors lose money to good investors, and over time the people with a record of better investment end up with more money, and overall better investments are made. Whereas the US government can keep spending money on economically unproductive things like the war in Afghanistan indefinitely without any feedback loop to stop it.
    - gruez 3y ago
      I agree that if government was somehow involved in the lending (ie. choosing which companies to bail out), there would be a risk of picking winners/losers and creating zombie firms, but it's unclear how it's an issue exclusive to fiat currency. After all, governments can still take on debt even while on the gold standard, and can still engage in bailouts.
      - logicchains 3y ago
        Yes, the lending during bailouts could still pick winners/losers, but overall during normal times the government would be spending relatively less compared to the private market (as it'd be constrained to what level of taxation voters were willing to tolerate), and there'd also be potentially more oversight over its spending (as it'd have to justify spending increases in order to receive public support for increasing taxes to pay for it).
Geisterde 3y ago
People wkll invest in the ventures that have a profit, because those can weather the storm. Eventually the growth of those companies creates the economic surplus that allows greater specialization to return, only built on a foundation of profitable companies. When you bail companies out, you create zombies that dont need to compete for the business, they will weather the storm and come out the other side monopolizing the market. The specialization that flows from that is the spread of a cancer, doubling down on a failed foundation.