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> Imagine a bank approving a loan and the collateral falls in value? And asset the loan acquired falls in value. Boom! The whole system is under water. Not rea

by NikkiA 2y ago

> Imagine a bank approving a loan and the collateral falls in value? And asset the loan acquired falls in value. Boom! The whole system is under water. Not really, you just have to use different collateral. After all personal loans are already based on taking a loan against a different collateral.

chiefalchemist 2y ago
Yes, really. Those assets are falling in value as well. Banks can't write down everything. Banks don't like such ugliness on their balance sheets. The Feds target is 2% because it's a CYA for the entire system. Note: 2% inflation - if they are lucky enough to stay on target - will cut your spending power in *half* in ~35 yrs. Let that sink in. The Fed's stated goal is to cut you in half every 35 yrs. Why? Because in the context of the current system 0 or less would be a disaster.
- AnimalMuppet 2y ago
  As someone who lived through both 1979 (14% inflation) and 2008 (fear of a deflationary collapse), I'll take 2% inflation any day. If you can't see that that's the least-bad option, I don't know what to tell you. Yeah, if I don't invest my money that grows in value, it will lose half its value in 35 years. Yes, that's not ideal. No, it's not the catastrophe that you're making it sound.
  - chiefalchemist 2y ago
    You'll take it? You / we have no choice. But that's not what's being discussed. The discussion is about the financial / economic system and a shrinking / deflationary run. It would be a disaster. How could it be otherwise? If the system's fuel is up, not down. Another way to look at it is this: we've gotten all kinds of technology. We've seen efficiency and productivity improve. And yet, prices keep increasing. Efficiency and productivity should mean dropping prices, at best break even. And yet no? There's a reason for that. That is, assets losing value will lead to the house of cards collapsing. Groupthink to the contrary is just head in the sand naivete.

by NikkiA 2y ago

chiefalchemist 2y ago

Yes, really. Those assets are falling in value as well. Banks can't write down everything. Banks don't like such ugliness on their balance sheets. The Feds target is 2% because it's a CYA for the entire system. Note: 2% inflation - if they are lucky enough to stay on target - will cut your spending power in *half* in ~35 yrs. Let that sink in. The Fed's stated goal is to cut you in half every 35 yrs. Why? Because in the context of the current system 0 or less would be a disaster.

AnimalMuppet 2y ago
As someone who lived through both 1979 (14% inflation) and 2008 (fear of a deflationary collapse), I'll take 2% inflation any day. If you can't see that that's the least-bad option, I don't know what to tell you. Yeah, if I don't invest my money that grows in value, it will lose half its value in 35 years. Yes, that's not ideal. No, it's not the catastrophe that you're making it sound.
- chiefalchemist 2y ago
  You'll take it? You / we have no choice. But that's not what's being discussed. The discussion is about the financial / economic system and a shrinking / deflationary run. It would be a disaster. How could it be otherwise? If the system's fuel is up, not down. Another way to look at it is this: we've gotten all kinds of technology. We've seen efficiency and productivity improve. And yet, prices keep increasing. Efficiency and productivity should mean dropping prices, at best break even. And yet no? There's a reason for that. That is, assets losing value will lead to the house of cards collapsing. Groupthink to the contrary is just head in the sand naivete.