5 ms·

> One isn’t automatically worse or better. Is that really true? Deflation sounds conclusively worse. Everyone starts to hoard money instead of spend it, and

> One isn’t automatically worse or better. Is that really true? Deflation sounds conclusively worse. Everyone starts to hoard money instead of spend it, and the economy goes into a tailspin. Any debt you pay back is with dollars that are worth less. Most anyone in debt, which is a lot of people, should prefer inflation.

ysavir 2y ago
We probably shouldn't be basing our economy on debts then, as we tend to do.
- cyberax 2y ago
  Why? Debts are like levers, they multiply both growth potential, and failure potential.
  - TimeBearingDown 2y ago
    Very true. My impression of the US over the past two decades at least though, is that financial services are bleeding many Americans dry even while they believe it’s all to their preferences - that they’re using the levers correctly, while any outside observer would say they’re being taken advantage of, even if it is their choice. Total credit card interest and fees paid by Americans are up 47% from the high of 2019 • Overall economic output continues to increase, but it drains so quickly, and increasingly to depreciating assets. Of the young adults I know, I ask if they do even have a rough budget. Only two couples said yes, none of the singles or other couples. I know many are paying large sums to interest on consumer debt, with student loans looming for later. I don’t have any other statistics, and now will seek them. It raises the question at least, how might we assess the benefit achieved thanks in part to loans to the majority of households over the past 50-100 years? • https://wallethub.com/edu/how-much-americans-pay-in-credit-card-interest-and-fees/129964 https://wallethub.com/edu/how-much-americans-pay-in-credit-c...
- randomdata 2y ago
  No, we probably should. Barter may work okay for when you have chickens to trade for boots, but you'll soon run into limitations. The vast majority of trades people make depend on some kind of future delivery. I don't want supper to show up when I get to work in the morning. It is much more practical to, instead, accept a token of debt (money) from my employer and then see that the debt gets repaid by my employer later when I go to the grocery store. A debtless economy would be an absolute nightmare.
readyman 2y ago
It always depends on where one's wealth and/or income comes from. The interests of a working person who rents is different from a working person who owns their own home, whose interests are different from a residential real estate investor's, whose interests are different from a business owner's, whose interests are different from a venture capitalist's, whose interests are different from a stock broker's.
chasd00 2y ago
also, it's easier to fight inflation because you can always increase the interest rate. With deflation once you reach zero there isn't anywhere realistically else to go. Negative interest rate have happened momentarily but it's not like the US fed can realistically set the rate to -1% In the depths of the financial crisis in 2008/9 I remember Bernanke saying he would fly helicopters and drop bags of money if it came to that in order to fight deflation taking hold.
- Glacia 2y ago
  >With deflation once you reach zero there isn't anywhere realistically else to go. Huh? just literally print more money.
  - imtringued 2y ago
    Universal basic income or helicopter money is deeply unpopular. That money will not end up in the hands of those who need it.
    - tharga8616 2y ago
      Lol, UBI is precisely money directly onto the people's hands. Haven't you heard of GiveDirecly NGO?
    - Glacia 2y ago
      You dont need "helicopter money". Just create money and spend it on something. Build roads, rails, tanks, whatever. >That money will not end up in the hands of those who need it. Yes, but it's irrelevant for this discussion.
  - chasd00 2y ago
    That’s what a zero interest rate is, money for free.
Glacia 2y ago
>Everyone starts to hoard money instead of spend it, and the economy goes into a tailspin Ok, imagine people start hoarding money, where are they going to store money? In Banks. Which would use that money to invest in things, like always. Modern economics are nothing like economics in 1930, but somehow we still base our science on that era.
- imtringued 2y ago
  >Which would use that money to invest in things, like always. No, people only invest if they see a return. If the return is too low they will simply hold onto the money since interest rates can't go negative too deeply. Your idea only works in a fantasy land with mandated equilibrium. In the real world people don't care if there is an equilibrium or not.
  - Glacia 2y ago
    >No, people only invest if they see a return. I'm talking about banks. That's literally their business. You know, to lend money. > If the return is too low they will simply hold onto the money since interest rates can't go negative too deeply. Who talked about interest rate? Why banks cant use THE MONEY THEY HAVE to lend/invest?
    - throw0101b 2y ago
      > I'm talking about banks. That's literally their business. You know, to lend money. Their business is to make money. If the economy is in the toilet, it is usually because there is no demand, and if there is no demand businesses and individuals do not need loans to expand and operate, so no one is asking for credit, so banks have no one to lend to. The banks don't want the/your money: while a savings account is an asset to you, the other side of the ledger is a liability for the bank. And if they are to provide x% to the saver, they have to earn >x% to break even (adding overhead), never mind make money. Just a little while ago in Europe, there was all sorts of excess savings (especially in Germany) with no places to invest the piles of cash piling up, so you get negative interest rates on savings accounts: * https://www.bnnbloomberg.ca/eu-says-danish-banks-probably-can-impose-negative-deposit-rates-1.1708745 https://www.bnnbloomberg.ca/eu-says-danish-banks-probably-ca... * https://archive.ph/U8Ds6 https://archive.ph/U8Ds6 / https://www.wsj.com/articles/banks-in-germany-tell-customers-to-take-deposits-elsewhere-11614594601 https://www.wsj.com/articles/banks-in-germany-tell-customers... > Why banks cant use THE MONEY THEY HAVE to lend/invest? This is not how the banking system works, and has not been for decades. Tobin called the lend-savings model the "Old View" in 1963: * https://elischolar.library.yale.edu/cowles-discussion-paper-series/388/ https://elischolar.library.yale.edu/cowles-discussion-paper-... Please stop using and talking about the money multiplier, as it just muddles up people's understanding about reality: * https://www.pragcap.com/r-i-p-the-money-multiplier/ https://www.pragcap.com/r-i-p-the-money-multiplier/ * https://research.stlouisfed.org/publications/page1-econ/2021/09/17/teaching-the-linkage-between-banks-and-the-fed-r-i-p-money-multiplier https://research.stlouisfed.org/publications/page1-econ/2021... The way that the bank system works is that banks first create a loan and second look for reserves: * https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m... * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625 * https://rationalreminder.ca/podcast/132 https://rationalreminder.ca/podcast/132 The amount of savings that a bank holds has nothing to do with anything. There are entire countries without reserve requirements: * https://en.wikipedia.org/wiki/Reserve_requirement#Countries_and_districts_without_reserve_requirements https://en.wikipedia.org/wiki/Reserve_requirement#Countries_...

ysavir 2y ago

We probably shouldn't be basing our economy on debts then, as we tend to do.

cyberax 2y ago
Why? Debts are like levers, they multiply both growth potential, and failure potential.
- TimeBearingDown 2y ago
  Very true. My impression of the US over the past two decades at least though, is that financial services are bleeding many Americans dry even while they believe it’s all to their preferences - that they’re using the levers correctly, while any outside observer would say they’re being taken advantage of, even if it is their choice. Total credit card interest and fees paid by Americans are up 47% from the high of 2019 • Overall economic output continues to increase, but it drains so quickly, and increasingly to depreciating assets. Of the young adults I know, I ask if they do even have a rough budget. Only two couples said yes, none of the singles or other couples. I know many are paying large sums to interest on consumer debt, with student loans looming for later. I don’t have any other statistics, and now will seek them. It raises the question at least, how might we assess the benefit achieved thanks in part to loans to the majority of households over the past 50-100 years? • https://wallethub.com/edu/how-much-americans-pay-in-credit-card-interest-and-fees/129964 https://wallethub.com/edu/how-much-americans-pay-in-credit-c...
randomdata 2y ago
No, we probably should. Barter may work okay for when you have chickens to trade for boots, but you'll soon run into limitations. The vast majority of trades people make depend on some kind of future delivery. I don't want supper to show up when I get to work in the morning. It is much more practical to, instead, accept a token of debt (money) from my employer and then see that the debt gets repaid by my employer later when I go to the grocery store. A debtless economy would be an absolute nightmare.

readyman 2y ago

It always depends on where one's wealth and/or income comes from. The interests of a working person who rents is different from a working person who owns their own home, whose interests are different from a residential real estate investor's, whose interests are different from a business owner's, whose interests are different from a venture capitalist's, whose interests are different from a stock broker's.

chasd00 2y ago

also, it's easier to fight inflation because you can always increase the interest rate. With deflation once you reach zero there isn't anywhere realistically else to go. Negative interest rate have happened momentarily but it's not like the US fed can realistically set the rate to -1% In the depths of the financial crisis in 2008/9 I remember Bernanke saying he would fly helicopters and drop bags of money if it came to that in order to fight deflation taking hold.

Glacia 2y ago
>With deflation once you reach zero there isn't anywhere realistically else to go. Huh? just literally print more money.
- imtringued 2y ago
  Universal basic income or helicopter money is deeply unpopular. That money will not end up in the hands of those who need it.
  - tharga8616 2y ago
    Lol, UBI is precisely money directly onto the people's hands. Haven't you heard of GiveDirecly NGO?
  - Glacia 2y ago
    You dont need "helicopter money". Just create money and spend it on something. Build roads, rails, tanks, whatever. >That money will not end up in the hands of those who need it. Yes, but it's irrelevant for this discussion.
- chasd00 2y ago
  That’s what a zero interest rate is, money for free.

Glacia 2y ago

>Everyone starts to hoard money instead of spend it, and the economy goes into a tailspin Ok, imagine people start hoarding money, where are they going to store money? In Banks. Which would use that money to invest in things, like always. Modern economics are nothing like economics in 1930, but somehow we still base our science on that era.

imtringued 2y ago
>Which would use that money to invest in things, like always. No, people only invest if they see a return. If the return is too low they will simply hold onto the money since interest rates can't go negative too deeply. Your idea only works in a fantasy land with mandated equilibrium. In the real world people don't care if there is an equilibrium or not.
- Glacia 2y ago
  >No, people only invest if they see a return. I'm talking about banks. That's literally their business. You know, to lend money. > If the return is too low they will simply hold onto the money since interest rates can't go negative too deeply. Who talked about interest rate? Why banks cant use THE MONEY THEY HAVE to lend/invest?
  - throw0101b 2y ago
    > I'm talking about banks. That's literally their business. You know, to lend money. Their business is to make money. If the economy is in the toilet, it is usually because there is no demand, and if there is no demand businesses and individuals do not need loans to expand and operate, so no one is asking for credit, so banks have no one to lend to. The banks don't want the/your money: while a savings account is an asset to you, the other side of the ledger is a liability for the bank. And if they are to provide x% to the saver, they have to earn >x% to break even (adding overhead), never mind make money. Just a little while ago in Europe, there was all sorts of excess savings (especially in Germany) with no places to invest the piles of cash piling up, so you get negative interest rates on savings accounts: * https://www.bnnbloomberg.ca/eu-says-danish-banks-probably-can-impose-negative-deposit-rates-1.1708745 https://www.bnnbloomberg.ca/eu-says-danish-banks-probably-ca... * https://archive.ph/U8Ds6 https://archive.ph/U8Ds6 / https://www.wsj.com/articles/banks-in-germany-tell-customers-to-take-deposits-elsewhere-11614594601 https://www.wsj.com/articles/banks-in-germany-tell-customers... > Why banks cant use THE MONEY THEY HAVE to lend/invest? This is not how the banking system works, and has not been for decades. Tobin called the lend-savings model the "Old View" in 1963: * https://elischolar.library.yale.edu/cowles-discussion-paper-series/388/ https://elischolar.library.yale.edu/cowles-discussion-paper-... Please stop using and talking about the money multiplier, as it just muddles up people's understanding about reality: * https://www.pragcap.com/r-i-p-the-money-multiplier/ https://www.pragcap.com/r-i-p-the-money-multiplier/ * https://research.stlouisfed.org/publications/page1-econ/2021/09/17/teaching-the-linkage-between-banks-and-the-fed-r-i-p-money-multiplier https://research.stlouisfed.org/publications/page1-econ/2021... The way that the bank system works is that banks first create a loan and second look for reserves: * https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m... * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625 * https://rationalreminder.ca/podcast/132 https://rationalreminder.ca/podcast/132 The amount of savings that a bank holds has nothing to do with anything. There are entire countries without reserve requirements: * https://en.wikipedia.org/wiki/Reserve_requirement#Countries_and_districts_without_reserve_requirements https://en.wikipedia.org/wiki/Reserve_requirement#Countries_...