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Inflation is not the only reason why I want to spend/invest money now rather than save them. In fact, it's not even a good reason, because it forces me to spend
by snitko 14y ago
Inflation is not the only reason why I want to spend/invest money now rather than save them. In fact, it's not even a good reason, because it forces me to spend money.
Deflation doesn't discourage spending by itself. The price of holding to the money is the lost opportunity of investing those money into something else. I'd say, generally saving money is a good thing rather than bad because it allows me to only invest them when I consider the opportunity good enough. Presently, inflation punishes me if I save money. So, if we talk about particular individuals saving money, inflation is not a good thing for them. It might be good for specific groups of people who receive the money I spend, but then one might say it is good for them at my expense. Which brings us to the idea that inflation is simply a tax.
- guylhem 14y agoWow you just laid down in words what I was thinking and couldn't express! Opportunity costs are more important than deflation or inflation. Thanks a lot - it's quite clear!!
- enki 14y agoi love your description of this. using up resources is not valuable by itself. forcing someone to spend on anything, anything at all, does not lead to a good allocation of resources. it might increase GDP, but it does not create value. under inflationary interpretations of value creation, building a road circling back onto itself - not connected to anything - in the middle of a desert that no one ever visits - increases GDP and thus helps the economy. the better if you afterwards tear it up and rebuild it a second time. on the other hand, in a stable currency system, if someone holds on to their capital, they actually free up resources for those who do spend. this means the purchasing power of those who do spend goes up. in such a system money flows away from those who spend on things that have no return (consumption), and towards those who create (value creation by seizing and creating opportunities).
- kybernetikos 14y ago> it's not even a good reason, because it forces me to spend money. It doesn't force you to spend money, it does however attach a cost to you hoarding your currency. This makes sense, because you're harming the system as a whole by hoarding. If you were allowed to hoard currency without paying some sort of price that would be an externality.
- snitko 14y agoNo, I'm awaiting a good opportunity to invest. If in my judgement there's currently nothing good on the market that I can invest into, why should I be paying the price? I don't quite understand. If you want my money, make something I want to buy/invest into. Inflation forces me to spend money on things I otherwise would not buy. Thus, it promotes goods and services that are not quite as good. Also, I don't understand why do you consider hoarding a bad thing? If you agree that I honestly earned the money, than you should also agree that I am free to do with them whatever the hell I want. Currencies controlled by governments tax me with inflation, bitcoin doesn't (or at least, it's predictable, open and not controlled by one organization). Upd: attaching additional costs (because there are other costs that are inherent to hoarding, like lost opportunity costs) is, in my view, forcing. It makes me it more likely that I spend the money. Let's not debate semantics.
- sigkill 14y agoThis is a very interesting discussion. I now take away that hoarding money is like paying for storage costs, i.e paying someone so that you can keep your money.