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> 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 pandering to anyone. I'm po

> 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 pandering to anyone. I'm pointing out that deflation is a transfer of wealth. I'm not judging it, just pointing out the economic fact. > If one has wealth saved up, then what is the problem? If you don't care about being unemployed then that's fine. All power to you. But most people do care. > forcibly driving this process through overstimulating the economy is needlessly screwing over future generations. Recessions do not increase people's overall savings. They force people into bankruptcy and reduce total wealth, now and in the future. Recessions screw over future generations. > If your problem is withdrawal, the solution is to avoid engaging in the first place. Almost everyone suffers in a recession, not just the people who caused it. > Let's pass laws mandating that everybody must work 16 hours a day! That would be a reduction in wealth, as people would be forced to make economic decisions they otherwise wouldn't. I would never support it. > Instead, the excess wealth is siphoned off to the bankers and government, precisely through the inflationary sleight of hand that you are advocating. This is just conspiracy theory nonsense. And I'm not advocating inflation. I'm advocating a stable price level, the kind that has enabled the economic growth that has lifted millions of people out of poverty over the last decade. Inflation and deflation are both bad. However, if we are forced to choose one or the other, it is better to choose inflation.

mindslight 18y ago
> If you don't care about being unemployed then that's fine. All power to you. But most people do care. Because they live paycheck to paycheck, with perhaps a finite safety net on which to make their debt payments. The need of people to be productive is another topic, which doesn't necessarily need to be (and sometimes isn't even) fulfilled by full time day job. > They [recessions] force people into bankruptcy and reduce total wealth, now and in the future Yes, which is why I'd like to stop the inflationary bubble policy. Remember the dot com bust? And then 2004? Our current problems stem from patching those up by permanently lowering interest rates. Further lowering them now will just cause another bubble that will burst in several years. > Almost everyone suffers in a recession, not just the people who caused it. Yes, but as we're talking about monetary policy, we're talking about the people who caused it. > That would be a reduction in wealth, as people would be forced to make economic decisions they otherwise wouldn't. Well if you've got a problem with the "forcing", then how about just government subsidies of 5x salary to those who work 16 hours a day? Flooding the market with cheap money is the same kind of manipulation which causes people to make economic decisions they otherwise wouldn't. > This is just conspiracy theory nonsense. I'm not saying they meet up an plan this, or even do it consciously, but there most certainly is a parasitic economy that receives all of the newly introduced money first, and therefore gets its benefits before the effects of the inflation are felt. Furthermore, the wealthy are able to hire "asset managers" to help them avoid the inflation, while the little guys have their savings eroded. > I'm advocating a stable price level ... However, if we are forced to choose one or the other, it is better to choose inflation. And if you haven't noticed, prices aren't anywhere near stable, but are generally on the rise. One can't claim to be for "stable prices" but also be against any possible drop. There will always be fluctuations, so suppressing any downwards movement will always produce a net upwards trend, not stability. But the main problem is that technology disagrees. To maintain a stable price index while technologically influenced goods are dropping requires everything else to go up. When efficiency is increasing, why should prices be stable?
- cchooper 18y ago
  I have plenty of savings but I still don't want to lose my job. I did not spend recklessly, but the recession could hurt me nonetheless. I am saving for retirement, but I can't do that without work. > which is why I'd like to stop the inflationary bubble policy The current monetary policy of all the Western governments is inflation targeting (with the exception of the US, which uses a triple mandate, of which inflation targeting is the most important part). The intention of inflation targeting is to act as an anti-cyclical force in the naturally pro-cyclical credit markets. Left to their own devices, financial institutions would increase credit levels in good times and decrease them in bad times, producing a succession of bubbles and busts. Monetary policy acts against this by pushing up interest rates when it believes there is too much credit and pushing them down when there is too little. It's barometer of whether credit levels are too high or too low is some chosen measure of consumer inflation. In this way, monetary policy reduces the inherently boom/bust nature of financial markets. There is no 'inflationary bubble policy'. The markets themselves have an inherent tendency towards bubbles. They have existed since the beginning of modern financial markets, long before the current monetary policies were put in place. The claim that central banks inadvertently caused the dot com crash, or other bubbles, is a hotly contested subject in economics. It is not at all certain that it's true, and in any case is something that requires years of study and masses of evidence to resolve. What is certain, however, is that there is no policy of producing bubbles or inflation. The policy is to prevent it. In terms of stabilising consumer prices, inflation targeting has been one of the most successful monetary policies in all history, and the economic growth that has been part of the Great Moderation has lifted millions of people across the world out of poverty. In fact, more people have been lifted out of poverty under inflation targeting than under any other period of stability in history. > Well if you've got a problem with the "forcing", then how about just government subsidies of 5x salary to those who work 16 hours a day? How would they pay for it? Presumably by allocating resources from elsewhere, producing no net benefit. > Flooding the market with cheap money is the same kind of manipulation Central banks do not flood the market with cheap money. Inflation targeting is a policy whereby the market determines the quantity of money in the economy, and the central bank sets interest rates to encourage or choke off demand for credit. The result is stable consumer prices, at which the central banks have been uncannily successful. > there most certainly is a parasitic economy that receives all of the newly introduced money first Money is created through bank loans. The banks and the government do not receive the money first. The person who borrows is the first recipient. If the total amount of credit in a day grows, then the central bank will have to increase the quantity of base money through the purchase of bonds. If it shrinks, then it will sell bonds to reduce the quantity. The first people to see this money are therefore people who trade in the bond market, not banks and not governments. As far as I am aware, there is no evidence that bond traders profit unduly from this. The central bank simply operates as another trader in the market. > Furthermore, the wealthy are able to hire "asset managers" to help them avoid the inflation, while the little guys have their savings eroded. This is one of the many reasons why inflation is a bad thing. I agree that inflation is bad. That's why I support inflation targeting. Its raison d'être is to prevent inflation and deflation. It is incredibly good at it. > To maintain a stable price index while technologically influenced goods are dropping requires everything else to go up. If the quantity and demand for money and the number of products on the market were fixed, then the decrease in the nominal price of one good would necessarily cause an increase in the nominal price of others. Even if every good were being produced at lower real cost (i.e. with less labour, material and capital input) the 'average' nominal cost of products would stay the same. So you are right, the price of other goods has to go up. That's not a consequence of inflation targeting, but a standard economic result about nominal prices.

mindslight 18y ago

> If you don't care about being unemployed then that's fine. All power to you. But most people do care. Because they live paycheck to paycheck, with perhaps a finite safety net on which to make their debt payments. The need of people to be productive is another topic, which doesn't necessarily need to be (and sometimes isn't even) fulfilled by full time day job. > They [recessions] force people into bankruptcy and reduce total wealth, now and in the future Yes, which is why I'd like to stop the inflationary bubble policy. Remember the dot com bust? And then 2004? Our current problems stem from patching those up by permanently lowering interest rates. Further lowering them now will just cause another bubble that will burst in several years. > Almost everyone suffers in a recession, not just the people who caused it. Yes, but as we're talking about monetary policy, we're talking about the people who caused it. > That would be a reduction in wealth, as people would be forced to make economic decisions they otherwise wouldn't. Well if you've got a problem with the "forcing", then how about just government subsidies of 5x salary to those who work 16 hours a day? Flooding the market with cheap money is the same kind of manipulation which causes people to make economic decisions they otherwise wouldn't. > This is just conspiracy theory nonsense. I'm not saying they meet up an plan this, or even do it consciously, but there most certainly is a parasitic economy that receives all of the newly introduced money first, and therefore gets its benefits before the effects of the inflation are felt. Furthermore, the wealthy are able to hire "asset managers" to help them avoid the inflation, while the little guys have their savings eroded. > I'm advocating a stable price level ... However, if we are forced to choose one or the other, it is better to choose inflation. And if you haven't noticed, prices aren't anywhere near stable, but are generally on the rise. One can't claim to be for "stable prices" but also be against any possible drop. There will always be fluctuations, so suppressing any downwards movement will always produce a net upwards trend, not stability. But the main problem is that technology disagrees. To maintain a stable price index while technologically influenced goods are dropping requires everything else to go up. When efficiency is increasing, why should prices be stable?

cchooper 18y ago
I have plenty of savings but I still don't want to lose my job. I did not spend recklessly, but the recession could hurt me nonetheless. I am saving for retirement, but I can't do that without work. > which is why I'd like to stop the inflationary bubble policy The current monetary policy of all the Western governments is inflation targeting (with the exception of the US, which uses a triple mandate, of which inflation targeting is the most important part). The intention of inflation targeting is to act as an anti-cyclical force in the naturally pro-cyclical credit markets. Left to their own devices, financial institutions would increase credit levels in good times and decrease them in bad times, producing a succession of bubbles and busts. Monetary policy acts against this by pushing up interest rates when it believes there is too much credit and pushing them down when there is too little. It's barometer of whether credit levels are too high or too low is some chosen measure of consumer inflation. In this way, monetary policy reduces the inherently boom/bust nature of financial markets. There is no 'inflationary bubble policy'. The markets themselves have an inherent tendency towards bubbles. They have existed since the beginning of modern financial markets, long before the current monetary policies were put in place. The claim that central banks inadvertently caused the dot com crash, or other bubbles, is a hotly contested subject in economics. It is not at all certain that it's true, and in any case is something that requires years of study and masses of evidence to resolve. What is certain, however, is that there is no policy of producing bubbles or inflation. The policy is to prevent it. In terms of stabilising consumer prices, inflation targeting has been one of the most successful monetary policies in all history, and the economic growth that has been part of the Great Moderation has lifted millions of people across the world out of poverty. In fact, more people have been lifted out of poverty under inflation targeting than under any other period of stability in history. > Well if you've got a problem with the "forcing", then how about just government subsidies of 5x salary to those who work 16 hours a day? How would they pay for it? Presumably by allocating resources from elsewhere, producing no net benefit. > Flooding the market with cheap money is the same kind of manipulation Central banks do not flood the market with cheap money. Inflation targeting is a policy whereby the market determines the quantity of money in the economy, and the central bank sets interest rates to encourage or choke off demand for credit. The result is stable consumer prices, at which the central banks have been uncannily successful. > there most certainly is a parasitic economy that receives all of the newly introduced money first Money is created through bank loans. The banks and the government do not receive the money first. The person who borrows is the first recipient. If the total amount of credit in a day grows, then the central bank will have to increase the quantity of base money through the purchase of bonds. If it shrinks, then it will sell bonds to reduce the quantity. The first people to see this money are therefore people who trade in the bond market, not banks and not governments. As far as I am aware, there is no evidence that bond traders profit unduly from this. The central bank simply operates as another trader in the market. > Furthermore, the wealthy are able to hire "asset managers" to help them avoid the inflation, while the little guys have their savings eroded. This is one of the many reasons why inflation is a bad thing. I agree that inflation is bad. That's why I support inflation targeting. Its raison d'être is to prevent inflation and deflation. It is incredibly good at it. > To maintain a stable price index while technologically influenced goods are dropping requires everything else to go up. If the quantity and demand for money and the number of products on the market were fixed, then the decrease in the nominal price of one good would necessarily cause an increase in the nominal price of others. Even if every good were being produced at lower real cost (i.e. with less labour, material and capital input) the 'average' nominal cost of products would stay the same. So you are right, the price of other goods has to go up. That's not a consequence of inflation targeting, but a standard economic result about nominal prices.