3 ms·
Why?
by netbioserror 2y ago
Why?
- School-Cotton 2y agoI'd guess because it makes hording cash a good investment and thus disincentivizes economic activity. Edit: corrected misspelling (cache -> cash)
- netbioserror 2y agoIf saving is a better investment than stocks or business, isn't that a healthy way to counter speculation, risk, malinvestment, and scammy exuberance cycles? Seems like a direct answer to the whole-market financialization that people complain inflation incentivizes.
- mjhay 2y agoIt incentives holding cash and letting it sit, not putting it into productive investments. Deflation was a big part of Japan's economic woes for years. It's hard to climb out of.
- School-Cotton 2y agoWell it doesn't only counter the bad kinds of economic activity, it also counters the good kinds. If a mom-and-pop store with low margins can make more profit by hoarding cash than by expanding their business and employing more people, it can't be good.
- netbioserror 2y agoIf everybody is hoarding cash, then, if we assume markets control interest rates and not a central bank, would banks not lower their interest rates as the supply of deposits increases? Loaning money would become cheaper, and at the same time withdrawing to invest in other things would become incentivized. In sum, high savings would signal that it's safe to start lending and investing.
- bryanlarsen 2y agoPeriods of deflation have been very bad historically. Economists debate whether it was cause or effect.
- ProjectArcturis 2y agoBecause it makes debts grow in real terms. https://en.wikipedia.org/wiki/Debt_deflation https://en.wikipedia.org/wiki/Debt_deflation