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> punishes hoarding Or put another way, punishes saving. Forcing people to "save" by loaning the money to businesses and governments bonds and equities is good

> punishes hoarding Or put another way, punishes saving. Forcing people to "save" by loaning the money to businesses and governments bonds and equities is good for politicians who like to be measured by economic metrics. But it's bad for being able to actually save for the future, and reducing dependencies on banks, leading to the moral hazard (with 0% inflation you could have narrow banking without problems).

SubjectToChange 3y ago
Or put another way, punishes saving. Yes, savings should have a cost and/or risk associated with them. Furthermore, it’s insane to expect otherwise.
- mike_hearn 3y ago
  Even with 0% inflation savings do have inherent costs and risks: you might die before you get to spend them, they might be confiscated by some future dystopian state, or society might just get poorer and the money buys less in the future than it does now. Most obviously there is the time value of money. Money by itself isn't useful, only the things you can buy with it are. Something today is more useful than the same thing in a year. Economists often act like none of the above is true. They argue that given an improving world people would just do nothing, hoarding money in the expectation of it being worth more in a year. For as long as I've been alive the 2% target has been justified with this sort of nonsensical circular pop psychology, in which supposedly devaluing savings was required to manipulate the people out of their naturally zombie-like state (which if true would obviously mean the economy wouldn't grow, acting as a negative feedback loop that would then make it immediately untrue again). The existence of counter-examples like Switzerland did not bother any of them. Now we read that this wasn't even the actual source of the number, it was just plucked out of the air and justified retroactively! Not really a surprise given the weakness of the original argument.
vel0city 3y ago
It's not good for a society to save by holding on to worthless pieces of paper or shiny objects. It's good for society to save by investing in productive assets.
- bsdpufferfish 3y ago
  It's not good for society that ordinary people have to speculate their hard earned money just to keep it for retirement.
  - vel0city 3y ago
    Holding on to currency or shiny objects is just another form of speculation. Maybe the bank fails. Maybe your house burns down and melts the contents of your safe. Maybe you're robbed. Maybe trade wars massively reduce your purchasing power. Maybe a new source of the shiny objects gets found and it's not are rare as you think. Maybe less people care about that shiny object in the future. Maybe that gold certificate was really just a fraud. Your argument isn't really related to whether we should incentivize people to bury paper in their backyard or if they should hold bonds or other investments. The answer to your problem is to have better social safety nets.
    - bsdpufferfish 3y ago
      Of course there is always risk. But one of the supposed goals of fiat money and property rights is to reduce that risk, ensuring the ability to save into the future. There are countless examples of countries where that trust was broken.
      - vel0city 3y ago
        Your argument of governments are supposed to protect property rights still applies for bonds and stocks and other investments, so once again still not exactly an argument for incentivizing speculation on pieces of paper or shiny objects instead of productive assets. The point of fiat isn't to give returns to those who worked hard by burying paper in their backyard, the point of fiat is to be an easy medium of exchange which does involve a certain level of value stability. A currency having a slow, predictable rate of inflation can still be considered having a certain level of stability, at least when concerning being a useful medium of exchange. I know that a loaf of bread isn't going to be $50 or $0.05 tomorrow, it'll likely be roughly the same as today. Over a long time scale sure that loaf will probably be more than today, but I'll be buying that bread in 2044 dollars not 2024 dollars, because in the end I shouldn't be incentivized to hold dollars. And once again the only way to address "it's not good for society that ordinary people have to speculate" is by having strong social safety nets. Hoarding paper or shiny objects is still speculation with risks, as you just agreed.

SubjectToChange 3y ago

Or put another way, punishes saving. Yes, savings should have a cost and/or risk associated with them. Furthermore, it’s insane to expect otherwise.

mike_hearn 3y ago
Even with 0% inflation savings do have inherent costs and risks: you might die before you get to spend them, they might be confiscated by some future dystopian state, or society might just get poorer and the money buys less in the future than it does now. Most obviously there is the time value of money. Money by itself isn't useful, only the things you can buy with it are. Something today is more useful than the same thing in a year. Economists often act like none of the above is true. They argue that given an improving world people would just do nothing, hoarding money in the expectation of it being worth more in a year. For as long as I've been alive the 2% target has been justified with this sort of nonsensical circular pop psychology, in which supposedly devaluing savings was required to manipulate the people out of their naturally zombie-like state (which if true would obviously mean the economy wouldn't grow, acting as a negative feedback loop that would then make it immediately untrue again). The existence of counter-examples like Switzerland did not bother any of them. Now we read that this wasn't even the actual source of the number, it was just plucked out of the air and justified retroactively! Not really a surprise given the weakness of the original argument.

vel0city 3y ago

It's not good for a society to save by holding on to worthless pieces of paper or shiny objects. It's good for society to save by investing in productive assets.

bsdpufferfish 3y ago
It's not good for society that ordinary people have to speculate their hard earned money just to keep it for retirement.
- vel0city 3y ago
  Holding on to currency or shiny objects is just another form of speculation. Maybe the bank fails. Maybe your house burns down and melts the contents of your safe. Maybe you're robbed. Maybe trade wars massively reduce your purchasing power. Maybe a new source of the shiny objects gets found and it's not are rare as you think. Maybe less people care about that shiny object in the future. Maybe that gold certificate was really just a fraud. Your argument isn't really related to whether we should incentivize people to bury paper in their backyard or if they should hold bonds or other investments. The answer to your problem is to have better social safety nets.
  - bsdpufferfish 3y ago
    Of course there is always risk. But one of the supposed goals of fiat money and property rights is to reduce that risk, ensuring the ability to save into the future. There are countless examples of countries where that trust was broken.
    - vel0city 3y ago
      Your argument of governments are supposed to protect property rights still applies for bonds and stocks and other investments, so once again still not exactly an argument for incentivizing speculation on pieces of paper or shiny objects instead of productive assets. The point of fiat isn't to give returns to those who worked hard by burying paper in their backyard, the point of fiat is to be an easy medium of exchange which does involve a certain level of value stability. A currency having a slow, predictable rate of inflation can still be considered having a certain level of stability, at least when concerning being a useful medium of exchange. I know that a loaf of bread isn't going to be $50 or $0.05 tomorrow, it'll likely be roughly the same as today. Over a long time scale sure that loaf will probably be more than today, but I'll be buying that bread in 2044 dollars not 2024 dollars, because in the end I shouldn't be incentivized to hold dollars. And once again the only way to address "it's not good for society that ordinary people have to speculate" is by having strong social safety nets. Hoarding paper or shiny objects is still speculation with risks, as you just agreed.