4 ms·

1. I don't think you have a theory for how it works. > means you get deflation which is even worse than inflation 2. People regularly come up with this theory

by roenxi 2y ago

1. I don't think you have a theory for how it works. > means you get deflation which is even worse than inflation 2. People regularly come up with this theory that prices dropping is a terrible thing. An extraordinary claim for which I've never seen an argument I accepted and the evidence is as thin as a rake. Typically the countries that experience the horrors of deflation go on to be unusually wealthy and prosperous - I'd like to see more of it. But it is easy to see why the governments would believe deflation is bad that since they are typically enormous debtors and inflation favours debtors. Frankly I suspect that if prices go down all else equal most people will be better off and able to afford more stuff. Wild take, I know.

chr1 2y ago
People who bring up this theory, bring the great depression as evidence, forgetting that the problem there was caused by the law forbidding to reduce salaries, which made prices going down equivalent to minimal wage going up, which of course leads to unemployment.
- roenxi 2y ago
  Given the confusion around, eg, the 2008 financial crisis I just flat out reject that there was 1 lesson in the 1930s that was so unambiguous that the debate is settled. It is a ridiculous claim. There was so much going on and so many people always pop up in a crisis trying to muddy the waters to get their preferred policy through. Look at the minimum wage debate - still unsettled despite what I would consider overwhelming evidence in theory and practice. And whatever anyone's personal beliefs, if that can't be settled there is no way at all that the inflation/deflation question has a firm answer from one event in the 1930s. Especially given that "prices always up"="good" is counter-intuitive and I can't find anyone with a clear argument in favour of inflation. There is lots of gobbledegook and occasionally people who make arguments equivalent to holidays being bad because they reduce economic output. Which is an argument but not very persuasive, I'd prefer to optimise towards an end state where I get to live out a permanent comfortable holiday; even if the economic metrics go down. I like comfort.
kristianbrigman 2y ago
What countries did you have in mind? (Haven’t heard that before, would like to investigate)
- roenxi 2y ago
  Well if I want to talk about inflation we have things like the Nazis, Zimbabwe, a long list of collapses that countries never really recover from. But if we look up deflation... https://en.wikipedia.org/wiki/Deflation#Historical_examples https://en.wikipedia.org/wiki/Deflation#Historical_examples EU - Still to see the long term consequences, but it isn't obvious the deflation was the bad thing in the story. Hong Kong - Jewel of Asia. Ireland - Very high HDI and GDP ppp per capita. Japan - Economic success story. UK - Can't argue that they're a success! But their problems after WWI wasn't the deflation. US - Some good some bad, lots to debate, but the latest episode (Great depression in the 1930s) set them up to conquer the world and establish the Not-An-Empire they have now. If that is a bad outcome I fear the good ones. I'm not seeing the Zimbabwe equivalent. In fact it looks a lot like deflation is associated with - if not a precursor to - long term economic success and prosperity.
  - kristianbrigman 2y ago
    Is there an example where you can explain how the deflation actually led to economic success? The above feel like very distant correlations more than a result. 'prices dropping' often includes labor as well, since currency is primarily a medium of exchange.
    - roenxi 2y ago
      I'm not arguing that deflation leads to economic success. I'm arguing the evidence that it is bad is nonexistent. Although it has some interesting interactions with the tax system and government policies. If you go through the arguments, inflation/deflation are both mostly neutral because people just adjust their expectations by whatever they think the rate will be. In practice though inflation policy is typically masking money printing projects or policies that destroy wealth. And by reversing that, deflation is usually positive but only because it suggests that the political leadership at the time was interested in honest market signals rather than seizing an opportunity to conduct handouts. > 'prices dropping' often includes labor as well, since currency is primarily a medium of exchange. Inflation or deflation, by definition, doesn't impact how much someone can buy in real terms. Because wages and goods are theoretically changing at the same rate.

by roenxi 2y ago

chr1 2y ago

People who bring up this theory, bring the great depression as evidence, forgetting that the problem there was caused by the law forbidding to reduce salaries, which made prices going down equivalent to minimal wage going up, which of course leads to unemployment.

roenxi 2y ago
Given the confusion around, eg, the 2008 financial crisis I just flat out reject that there was 1 lesson in the 1930s that was so unambiguous that the debate is settled. It is a ridiculous claim. There was so much going on and so many people always pop up in a crisis trying to muddy the waters to get their preferred policy through. Look at the minimum wage debate - still unsettled despite what I would consider overwhelming evidence in theory and practice. And whatever anyone's personal beliefs, if that can't be settled there is no way at all that the inflation/deflation question has a firm answer from one event in the 1930s. Especially given that "prices always up"="good" is counter-intuitive and I can't find anyone with a clear argument in favour of inflation. There is lots of gobbledegook and occasionally people who make arguments equivalent to holidays being bad because they reduce economic output. Which is an argument but not very persuasive, I'd prefer to optimise towards an end state where I get to live out a permanent comfortable holiday; even if the economic metrics go down. I like comfort.

kristianbrigman 2y ago

What countries did you have in mind? (Haven’t heard that before, would like to investigate)

roenxi 2y ago
Well if I want to talk about inflation we have things like the Nazis, Zimbabwe, a long list of collapses that countries never really recover from. But if we look up deflation... https://en.wikipedia.org/wiki/Deflation#Historical_examples https://en.wikipedia.org/wiki/Deflation#Historical_examples EU - Still to see the long term consequences, but it isn't obvious the deflation was the bad thing in the story. Hong Kong - Jewel of Asia. Ireland - Very high HDI and GDP ppp per capita. Japan - Economic success story. UK - Can't argue that they're a success! But their problems after WWI wasn't the deflation. US - Some good some bad, lots to debate, but the latest episode (Great depression in the 1930s) set them up to conquer the world and establish the Not-An-Empire they have now. If that is a bad outcome I fear the good ones. I'm not seeing the Zimbabwe equivalent. In fact it looks a lot like deflation is associated with - if not a precursor to - long term economic success and prosperity.
- kristianbrigman 2y ago
  Is there an example where you can explain how the deflation actually led to economic success? The above feel like very distant correlations more than a result. 'prices dropping' often includes labor as well, since currency is primarily a medium of exchange.
  - roenxi 2y ago
    I'm not arguing that deflation leads to economic success. I'm arguing the evidence that it is bad is nonexistent. Although it has some interesting interactions with the tax system and government policies. If you go through the arguments, inflation/deflation are both mostly neutral because people just adjust their expectations by whatever they think the rate will be. In practice though inflation policy is typically masking money printing projects or policies that destroy wealth. And by reversing that, deflation is usually positive but only because it suggests that the political leadership at the time was interested in honest market signals rather than seizing an opportunity to conduct handouts. > 'prices dropping' often includes labor as well, since currency is primarily a medium of exchange. Inflation or deflation, by definition, doesn't impact how much someone can buy in real terms. Because wages and goods are theoretically changing at the same rate.