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I would argue the root cause of this phenomenon is inflation and the first step we should take is to make the dollar a stable unit of measure not to consciously

I would argue the root cause of this phenomenon is inflation and the first step we should take is to make the dollar a stable unit of measure not to consciously allow its value to fall.

kuchenbecker 3y ago
Deflation is worse than inflation, and it's hard to hit a single number, so central banks aim for low, stable inflation. 1-2% inflation isn't very perceptible vs 0 but avoids deflation.
- tastyfreeze 3y ago
  Please explain why deflation is worse.
  - kuchenbecker 3y ago
    Cash becomes an appreciating asset. It leads people to hoard cash rather than invest in stocks and bonds, and delay purchases stagnating the economy. Japan mid 1990s to mid 2010s is a real-world example: https://en.m.wikipedia.org/wiki/Lost_Decades https://en.m.wikipedia.org/wiki/Lost_Decades In the worst cases, deflation causes demand to drop causing a recession, which further depresses demand. https://en.m.wikipedia.org/wiki/Deflation https://en.m.wikipedia.org/wiki/Deflation
    - tastyfreeze 3y ago
      So people would save more?Savings is how the wealth of a nation is built. Capital breeds investment. The more people with capital the better. The only reason that people invest in the stock market is to maintain wealth. What would you do if you could count on your dollars buying 2% more next year? Would you shove all your dollars in a mattress and forgo buying food so you could save a few more? Or would you keep buying everything you do now and worry a little less about investing to maintain value? Less dollars in the stockmarket enriching others and more dollars in savings building personal wealth is what deflation brings. The only people this is a problem for are stockbrokers.
      - kuchenbecker 3y ago
        Economies are built on the movement of money not the sum of money. It's truly positive sum where the act of spending money allows someone else to spend money. Highly suggest picking up some econ primers, as its almost universally agreed even mild deflation is destructive.
        tastyfreeze 3y ago
        Economy is the movement of money. That is not a measure of wealth. There can be a lot of money moving around with nearly everybody living pay check to paycheck. People are better off if they can build wealth. It is more stable for society to make it easy to build wealth. It would take a lot of evidence to convince me that deflation is worse in the long run for human flourishing than inflation. I don't care about the economy as conceived by bankers and economists. If ever more people are flourishing the economy is working. If a few are getting exorbitantly wealthy, at the expense of everybody else, by being close to the flow of new money, the economy is not working. We have been at inflation so long there is no painless way out.

I would argue the root cause of this phenomenon is inflation and the first step we should take is to make the dollar a stable unit of measure not to consciously allow its value to fall.

kuchenbecker 3y ago

Deflation is worse than inflation, and it's hard to hit a single number, so central banks aim for low, stable inflation. 1-2% inflation isn't very perceptible vs 0 but avoids deflation.

tastyfreeze 3y ago
Please explain why deflation is worse.
- kuchenbecker 3y ago
  Cash becomes an appreciating asset. It leads people to hoard cash rather than invest in stocks and bonds, and delay purchases stagnating the economy. Japan mid 1990s to mid 2010s is a real-world example: https://en.m.wikipedia.org/wiki/Lost_Decades https://en.m.wikipedia.org/wiki/Lost_Decades In the worst cases, deflation causes demand to drop causing a recession, which further depresses demand. https://en.m.wikipedia.org/wiki/Deflation https://en.m.wikipedia.org/wiki/Deflation
  - tastyfreeze 3y ago
    So people would save more?Savings is how the wealth of a nation is built. Capital breeds investment. The more people with capital the better. The only reason that people invest in the stock market is to maintain wealth. What would you do if you could count on your dollars buying 2% more next year? Would you shove all your dollars in a mattress and forgo buying food so you could save a few more? Or would you keep buying everything you do now and worry a little less about investing to maintain value? Less dollars in the stockmarket enriching others and more dollars in savings building personal wealth is what deflation brings. The only people this is a problem for are stockbrokers.
    - kuchenbecker 3y ago
      Economies are built on the movement of money not the sum of money. It's truly positive sum where the act of spending money allows someone else to spend money. Highly suggest picking up some econ primers, as its almost universally agreed even mild deflation is destructive.
      - tastyfreeze 3y ago
        Economy is the movement of money. That is not a measure of wealth. There can be a lot of money moving around with nearly everybody living pay check to paycheck. People are better off if they can build wealth. It is more stable for society to make it easy to build wealth. It would take a lot of evidence to convince me that deflation is worse in the long run for human flourishing than inflation. I don't care about the economy as conceived by bankers and economists. If ever more people are flourishing the economy is working. If a few are getting exorbitantly wealthy, at the expense of everybody else, by being close to the flow of new money, the economy is not working. We have been at inflation so long there is no painless way out.