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The most important point I gathered from this is that the pumping of stimulus in the form of fiat currency has no meaning if it doesn't spur new forms of techno

The most important point I gathered from this is that the pumping of stimulus in the form of fiat currency has no meaning if it doesn't spur new forms of technological breakthroughs. The value of the currency comes from a foundation, and through many convoluted layers of society, that is built on education, discovery, and passionate individuals. We have many such people in America, but that population has not been growing fast enough to hold up the rest of the country. The economy is simply a way to try and measure the value of those individuals and the advancements they create for everyone else. The problem starts once we assume that more money fixes the economic measurement. It depends on where the funds are directed, and I believe that supplementing these funds to banks is how the Fed tries to create "perceived" value and growth. This creates a loop in the financial world that comes in the form of inflation. Inflation isn't good or bad, it is a by product of the real problem: trying to increase the value of an economy without actually supporting the creation of economic value. Economy is a measure of growth and innovation, and using fiat currency to increase the value of the economy, or more simply put, the "measurement" of economy, is a convenient way of fudging the numbers. The value or measure of economy then becomes based on societal beliefs instead tangible truths (increase in knowledge, health, etc).

makomk 14y ago
I actually suspect inflation does fix aspects of the economy that do actually matter, just not ones that most of us think about because we're so used to them being the norm. Remember that money has no worth in itself - they're effectively tokens of exchange. Now, inflation is effectively a tax on sitting on your money and not actually putting it to use. If a lot of people do that it causes problems for the parts of the economy that are actually doing useful trade - suddenly there aren't enough tokens to go around to represent the actual business they're doing, and you get some really weird economic effects that neither I nor anyone else can wrap their heads around because we've never actually experienced them. (I believe this may have actually happened in the past.)
- washedup 14y ago
  True, there is certainly a level of healthy or optimal inflation. Careful though, trade is only useful if people are willing to spend their money on it. If they choose to hold their money because they believe that the good/service/trade isn't beneficial to them or others, they should hold their money or put it somewhere else. If society decides that the good/service/trade isn't beneficial to itself, then it will work to extinguish it. It is dangerous to create artificial demand. I don't think society should be so afraid of losing jobs or industries, because it frees up labor and resources that can be devoted to more important ventures (importance in society's eyes, which isn't always the optimal solution, but adequate. Similar process that happens in evolution).

makomk 14y ago

I actually suspect inflation does fix aspects of the economy that do actually matter, just not ones that most of us think about because we're so used to them being the norm. Remember that money has no worth in itself - they're effectively tokens of exchange. Now, inflation is effectively a tax on sitting on your money and not actually putting it to use. If a lot of people do that it causes problems for the parts of the economy that are actually doing useful trade - suddenly there aren't enough tokens to go around to represent the actual business they're doing, and you get some really weird economic effects that neither I nor anyone else can wrap their heads around because we've never actually experienced them. (I believe this may have actually happened in the past.)

washedup 14y ago
True, there is certainly a level of healthy or optimal inflation. Careful though, trade is only useful if people are willing to spend their money on it. If they choose to hold their money because they believe that the good/service/trade isn't beneficial to them or others, they should hold their money or put it somewhere else. If society decides that the good/service/trade isn't beneficial to itself, then it will work to extinguish it. It is dangerous to create artificial demand. I don't think society should be so afraid of losing jobs or industries, because it frees up labor and resources that can be devoted to more important ventures (importance in society's eyes, which isn't always the optimal solution, but adequate. Similar process that happens in evolution).