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People with debt have an income with which they service their debt. If the real value of the debt increases, the real value of the money they pay to service it

People with debt have an income with which they service their debt. If the real value of the debt increases, the real value of the money they pay to service it also increases. Thus their future wealth is decreased. If one person hoards dollars, they are being frugal. If everyone increases their liquidity preference, real wealth is destroyed. The gratification is not delayed, but lost forever. You are committing the fallacy of composition. Moore's law is not deflation. Deflation is a persistent rise in the general price level, as measured using a representative basket of goods. Have you never delayed buying a new console because you knew the price would drop soon? I have.

gravitycop 18y ago
Moore's law is not deflation. Actually, it is. Moore's law implies a continuous decline in the prices of computers. Deflation is a persistent rise Decline. in the general price level as measured using a representative basket of goods The defined goods area can be broad or specific, and in any direction. There has been consistent deflation, for the past several decades, in the area of computer products. Individuals and groups (companies, etc.) that tend to value computer products highly also tend to delay their purchases of those computer products in anticipation of price declines, i.e. deflationary action.
- cchooper 18y ago
  Sorry, I meant rise in the value of money. If you're going to define deflation as a fall in the price of any basket of goods, then you're just using it to mean 'the price of something went down'. You can do that if you want, but it's hardly helping the conversation.
  - gravitycop 18y ago
    If you're going to define deflation as a fall in the price of any basket of goods, then you're just using it to mean 'the price of something went down'. That would be the same thing as a rise in the value of money. You can [flexibly define things narrowly or broadly] if you want, but it's hardly helping the conversation. Do you use a different word for "temperature" for the temperature in your home, because some other parties use the word "temperature" to mean "gobal temperature"? Different economic actors will value different things at different rates. Economic actors that happen to value computers highly will indeed perceive a rise in the value of money when computer prices drop.
    - cchooper 18y ago
      But deflation is not defined that way. It's defined as a decline of the general price level, and this is measured using a basket of goods that is intended to reflect general prices. You can pick holes in the problem of measuring 'general' prices if you want, but that is nevertheless the definition.
      - gravitycop 18y ago
        deflation is not defined that way. It's defined as a decline of the general price level And the term "general" is also defined. It can mean general within a nation. It can mean general worldwide. It can mean general on a continent. It can mean general in a state. It can mean general in an economic sector (food, computers, cars, clothes, houses, etc.). Etc. So, we have to use a different word to describe non-general price declines? If so, what word would you suggest? http://www.google.com/search?q=deflation+prices+computers http://www.google.com/search?q=deflation+prices+computers Why would it be OK to use the word "temperature" in different contexts, but not the word "deflation"? What about the word "pressure"? Should we use a different word for tire pressure, because of the fact that "pressure" is also used in other contexts?
        cchooper 18y ago
        If temperature meant 'global temperature' then it would indeed be wrong to use it to describe your room temperature. But it doesn't mean that, so it isn't. > what word would you suggest? How about 'falling prices'? >And the term "general" is also defined. Now you're just trolling.
        gravitycop 18y ago
        >> what word would you suggest? > How about 'falling prices'? You are going to have to go after a lot of people and criminally prosecute them for illegally using the term "deflation" instead of the legal term "falling prices". http://www.google.com/search?q=deflation+prices+housing http://www.google.com/search?q=deflation+prices+housing There are over 2 million Google hits for housing-price deflation, alone.
mindslight 18y ago
> Thus their future wealth is decreased. From what it would be if they got to borrow money for free, yes. However, their future wealth is still higher than it would be if they didn't take the loan in the first place and therefore could not generate that income. Of course the creditor expects more "real value" back than he loaned out - he wouldn't be in business very long otherwise. > If everyone increases their liquidity preference, real wealth is destroyed Nothing is destroyed, production has been delayed. Natural resources stay in the ground and people enjoy time off, rather than being forced to work full time just to dump their excess income into nondurable goods. Unless your goal is to strip mine the planet as fast as possible, these are good things. > Have you never delayed buying a new console because you knew the price would drop soon? I have. Precisely! My point about electronics is that people delay purchases, but don't stop altogether. Cautious purchasing based on real costs is healthy; the cheap-money fueled consumerism bubble of the past decade is not.
- cchooper 18y ago
  You have completely misunderstood the point about debt. They were paying interest before, but the onset of deflation means that the real value of that interest has increased beyond what it was. The creditor charges interest either way, but gets even more real value in a deflationary period than if the deflation had not happened. > Natural resources stay in the ground and people enjoy time off Unemployment is not time off, nor is it delayed gratification. > My point about electronics is that people delay purchases, but don't stop altogether Yes, they delay their purchases, causing a contraction of the economy that creates real suffering, hence a loss of wealth that otherwise could have existed. Consequently most of the purchases never happen, and are therefore not 'delayed' but lost. > Prudence is healthy; instant gratification consumerism is not. It is prudent for the individual and destructive to total economic output. Are you trying to deny that recessions reduce people's wealth?
  - mindslight 18y ago
    Yes, the price of borrowing money goes up. The only thing you're doing with your debt point is pandering to those who have taken on debt instead of saved up wealth. I'm not particularly interested in encouraging more wage slaves. > Unemployment is not time off If one has wealth saved up, then what is the problem? When people don't need their jobs, it creates a much healthier employer-employee relationship. How many entrepreneurs start off in personal debt? > nor is it delayed gratification. Maybe it's just me, but I'd rather have more minerals in the ground, and less discarded crap in the landfill. I've got no problem depleting natural resources, but forcibly driving this process through overstimulating the economy is needlessly screwing over future generations. > causing a contraction of the economy that creates real suffering I hate being hungover too. But man, that party was killer! If your problem is withdrawal, the solution is to avoid engaging in the first place. > destructive to total economic output I suppose it's pointless to argue with someone who thinks the ultimate goal is to maximize "total economic output". Let's pass laws mandating that everybody must work 16 hours a day! Technology should be making it so we work ever less. Instead, the excess wealth is siphoned off to the bankers and government, precisely through the inflationary sleight of hand that you are advocating. But remember, deflation is scary; why should the plebs ever see the benefits of technology?

gravitycop 18y ago

Moore's law is not deflation. Actually, it is. Moore's law implies a continuous decline in the prices of computers. Deflation is a persistent rise Decline. in the general price level as measured using a representative basket of goods The defined goods area can be broad or specific, and in any direction. There has been consistent deflation, for the past several decades, in the area of computer products. Individuals and groups (companies, etc.) that tend to value computer products highly also tend to delay their purchases of those computer products in anticipation of price declines, i.e. deflationary action.

cchooper 18y ago
Sorry, I meant rise in the value of money. If you're going to define deflation as a fall in the price of any basket of goods, then you're just using it to mean 'the price of something went down'. You can do that if you want, but it's hardly helping the conversation.
- gravitycop 18y ago
  If you're going to define deflation as a fall in the price of any basket of goods, then you're just using it to mean 'the price of something went down'. That would be the same thing as a rise in the value of money. You can [flexibly define things narrowly or broadly] if you want, but it's hardly helping the conversation. Do you use a different word for "temperature" for the temperature in your home, because some other parties use the word "temperature" to mean "gobal temperature"? Different economic actors will value different things at different rates. Economic actors that happen to value computers highly will indeed perceive a rise in the value of money when computer prices drop.
  - cchooper 18y ago
    But deflation is not defined that way. It's defined as a decline of the general price level, and this is measured using a basket of goods that is intended to reflect general prices. You can pick holes in the problem of measuring 'general' prices if you want, but that is nevertheless the definition.
    - gravitycop 18y ago
      deflation is not defined that way. It's defined as a decline of the general price level And the term "general" is also defined. It can mean general within a nation. It can mean general worldwide. It can mean general on a continent. It can mean general in a state. It can mean general in an economic sector (food, computers, cars, clothes, houses, etc.). Etc. So, we have to use a different word to describe non-general price declines? If so, what word would you suggest? http://www.google.com/search?q=deflation+prices+computers http://www.google.com/search?q=deflation+prices+computers Why would it be OK to use the word "temperature" in different contexts, but not the word "deflation"? What about the word "pressure"? Should we use a different word for tire pressure, because of the fact that "pressure" is also used in other contexts?
      - cchooper 18y ago
        If temperature meant 'global temperature' then it would indeed be wrong to use it to describe your room temperature. But it doesn't mean that, so it isn't. > what word would you suggest? How about 'falling prices'? >And the term "general" is also defined. Now you're just trolling.
        gravitycop 18y ago
        >> what word would you suggest? > How about 'falling prices'? You are going to have to go after a lot of people and criminally prosecute them for illegally using the term "deflation" instead of the legal term "falling prices". http://www.google.com/search?q=deflation+prices+housing http://www.google.com/search?q=deflation+prices+housing There are over 2 million Google hits for housing-price deflation, alone.

mindslight 18y ago

> Thus their future wealth is decreased. From what it would be if they got to borrow money for free, yes. However, their future wealth is still higher than it would be if they didn't take the loan in the first place and therefore could not generate that income. Of course the creditor expects more "real value" back than he loaned out - he wouldn't be in business very long otherwise. > If everyone increases their liquidity preference, real wealth is destroyed Nothing is destroyed, production has been delayed. Natural resources stay in the ground and people enjoy time off, rather than being forced to work full time just to dump their excess income into nondurable goods. Unless your goal is to strip mine the planet as fast as possible, these are good things. > Have you never delayed buying a new console because you knew the price would drop soon? I have. Precisely! My point about electronics is that people delay purchases, but don't stop altogether. Cautious purchasing based on real costs is healthy; the cheap-money fueled consumerism bubble of the past decade is not.

cchooper 18y ago
You have completely misunderstood the point about debt. They were paying interest before, but the onset of deflation means that the real value of that interest has increased beyond what it was. The creditor charges interest either way, but gets even more real value in a deflationary period than if the deflation had not happened. > Natural resources stay in the ground and people enjoy time off Unemployment is not time off, nor is it delayed gratification. > My point about electronics is that people delay purchases, but don't stop altogether Yes, they delay their purchases, causing a contraction of the economy that creates real suffering, hence a loss of wealth that otherwise could have existed. Consequently most of the purchases never happen, and are therefore not 'delayed' but lost. > Prudence is healthy; instant gratification consumerism is not. It is prudent for the individual and destructive to total economic output. Are you trying to deny that recessions reduce people's wealth?
- mindslight 18y ago
  Yes, the price of borrowing money goes up. The only thing you're doing with your debt point is pandering to those who have taken on debt instead of saved up wealth. I'm not particularly interested in encouraging more wage slaves. > Unemployment is not time off If one has wealth saved up, then what is the problem? When people don't need their jobs, it creates a much healthier employer-employee relationship. How many entrepreneurs start off in personal debt? > nor is it delayed gratification. Maybe it's just me, but I'd rather have more minerals in the ground, and less discarded crap in the landfill. I've got no problem depleting natural resources, but forcibly driving this process through overstimulating the economy is needlessly screwing over future generations. > causing a contraction of the economy that creates real suffering I hate being hungover too. But man, that party was killer! If your problem is withdrawal, the solution is to avoid engaging in the first place. > destructive to total economic output I suppose it's pointless to argue with someone who thinks the ultimate goal is to maximize "total economic output". Let's pass laws mandating that everybody must work 16 hours a day! Technology should be making it so we work ever less. Instead, the excess wealth is siphoned off to the bankers and government, precisely through the inflationary sleight of hand that you are advocating. But remember, deflation is scary; why should the plebs ever see the benefits of technology?