5 ms·

You're engaging in a pretty common fallacy by taking the contemporary standard, in a world full of wild inflation and funny money, retroactively applying it bac

You're engaging in a pretty common fallacy by taking the contemporary standard, in a world full of wild inflation and funny money, retroactively applying it backwards, seeing [correctly] that it wouldn't work, and thus concluding that funny money is needed. But you need to consider the impacts of the funny money itself. One fundamental difference is that inflationary systems incentivize the hoarding of 'things', like housing, as a means of escaping inflation. This is because the price of 'things' will always increase with inflation. But in stable or deflationary systems there's no inflation to hide from and the price of 'things' is stable or can even decrease over time, so there's no longer a hoarding incentivization for 'things.' So you can see a visible impact of this in housing prices. In the 50s a typical house used to cost about 2 median salaries. [1] Go further back in time and you're down to 1 median salary. In modern times, we're at historic highs of a median home costing 5x a median salary, and in desirable locations like western California it even gets up to 12x local median salary for a median home. [2] That's median, not Beverley Hills. So yes, in modern times you need endless funny money to do achieve even basic societal things, like owning a roof over your head. But that's because of the funny money. And this is before we get into realities like the fact that when the government 'prints' a trillion dollars, most all of that is going to end up in the pockets of the wealthiest of society giving them even more money to speculate with, driving prices up even more. And much more, there are endless self feedback mechanisms that have left us in a vicious cycle that's probably inescapable at this point. Real wages are up 14% over the past 47 years [3], and we now have a trillionaire. That's inflation for you. What do you think they'll call this era in the future? [1] - https://www.huduser.gov/portal/sites/default/files/pdf/Housing-Situation-1951.pdf https://www.huduser.gov/portal/sites/default/files/pdf/Housi... [2] - https://www.jchs.harvard.edu/blog/home-prices-surge-five-times-median-income-nearing-historic-highs https://www.jchs.harvard.edu/blog/home-prices-surge-five-tim... [3] - https://fred.stlouisfed.org/series/LES1252881600Q https://fred.stlouisfed.org/series/LES1252881600Q

notahacker 4mo ago
> One fundamental difference is that inflationary systems incentivize the hoarding of 'things', like housing, as a means of escaping inflation. This is because the price of 'things' will always increase with inflation. But in stable or deflationary systems there's no inflation to hide from and the price of 'things' is stable or can even decrease over time, so there's no longer a hoarding incentivization for 'things.' It would incentivise the hoarding of currency instead. Holding or investing in anything else is, on average, a losing bet in a sustained deflation. By definition, deflation is people choosing not to contribute to production obtaining increasing returns on doing and risking absolutely nothing at the expense of those who do contribute to production working harder or taking more risks to serve them. You're accusing me of "engaging with a pretty common fallacy" whilst arguing against a tautology. > So you can see a visible impact of this in housing prices. In the 50s a typical house used to cost about 2 median salaries. [1] Go further back in time and you're down to 1 median salary. In modern times, we're at historic highs of a median home costing 5x a median salary, and in desirable locations like western California it even gets up to 12x local median salary for a median home. [2] That's median, not Beverley Hills. That's the supply and demand of housing, as well evidenced by the large disparity of house price changes. Deflation does not incentivise building more houses (quite the opposite actually). In practice, it just means you pay higher mortgage rates and end up with a house that isn't worth anywhere near as much as your mortgage repayments, or you rent - both of which involve more of your lifetime income being transferred to richer people. > Real wages are up 14% over the past 47 years [3], and we now have a trillionaire. The trillionaire is arguing the same position as you on currency. I'm sure he and the other billionaire funded think tanks attacking "fiat money" almost as strongly as they attack tax and regulation on billionaires and services for the poor do so because they care about giving the little guy more...
- somenameforme 4mo ago
  > By definition, deflation is people choosing not to contribute to production obtaining increasing returns on doing and risking absolutely nothing Deflation results from not printing money. When the growth in the amount of stuff in the economy exceeds the growth in the amount of money in the economy - each dollar becomes worth more over time. That is deflation. Yeah you can sit on it and take it as passive gains. You can also use those gains in your spending power to achieve even greater things. It's up to the person. As for the past having higher mortgages, this provides data on such from 1950. [1] "...the typical monthly mortgage payment [of] $54.31 for principal, interest, FHA mortgage insurance premium, hazard insurance, taxes and special assessments, and any miscellaneous items such as ground rent." 1950 median personal was $3300, so a house mortgage cost 20% of that. Current median personal income is $45k, so that'd be a mortgage on a new house of about $750 with tax/insurance/assessment/etc included in that. We can safely reject the claim that mortgages were higher. However, your critique that your house would not be worth as much as you paid is 100% true. When things do not endlessly increase in value, going into debt to purchase them comes with a real cost. That is one of the many reasons prices were able to be kept in check. Housing becoming a vessel for speculation just inevitably drives their prices endlessly up while people actually trying to find a place to live and raise a family suffer for it all. This is all only magnified when you add the surplus of funny money. It being speculation or supply and demand are not somehow different things as you seem to be implying. --- Basically I find most of all arguments about the past tend to be false or exaggerated, and not at all intentionally. We're all taught that economic policy in the past primitive and misguided, as true as the sky is blue and grass is green. Yet when you look at what people could buy in the past on a typical median salary, or the lifestyle it could provide - it almost sounds like make believe, and is way more than enough to make one wonder what went wrong? And I think currency policy is largely the answer to that question. [1] - https://www.huduser.gov/portal/sites/default/files/pdf/Housing-Situation-1951.pdf https://www.huduser.gov/portal/sites/default/files/pdf/Housi...
  - notahacker 4mo ago
    > Deflation results from not printing money. When the growth in the amount of stuff in the economy exceeds the growth in the amount of money in the economy - each dollar becomes worth more over time. That is deflation. Yeah you can sit on it and take it as passive gains. You can also use those gains in your spending power to achieve even greater things. It's up to the person. It is, indeed up to the person. But if you offer billionaires risk free gains from turning their billions into cash and burying it in the ground (quite literally at the expense of everyone else having to work harder to make up for it), even the ones that are willing to invest or lend need to extract more out of the poor to make it worth their while. Again, when it's tautological the policy you are advocating gives the idle rich risk free real gains at the expense of the working poor, it is impossible to argue with a straight face that the implications are beneficial for equity and growth... > As for the past having higher mortgages, this provides data on such from 1950. [1] "...the typical monthly mortgage payment [of] $54.31 for principal, interest, FHA mortgage insurance premium, hazard insurance, taxes and special assessments, and any miscellaneous items such as ground rent." 1950 median personal was $3300, so a house mortgage cost 20% of that. Current median personal income is $45k, so that'd be a mortgage on a new house of about $750 with tax/insurance/assessment/etc included in that. We can safely reject the claim that mortgages were higher.\ I am not sure why you are pretending that this was a period of sustained deflation though. Au contraire, the large increase to housing supply in the 1940s coincided with CPI being much higher than recent averages, driven in part by a relaxation in monetary policy to support war financing and full recovery from the Great Depression.[1] We're not interested in reinventing the 1950s though, we're interested in how to achieve deflation. Since monetary base growth has an inverse relationship with interest rates, eliminating it implies structurally higher base interest rates, which implies homebuyers pay more money to the bank for the same house (which is almost guaranteed to be worth significantly less than its financing costs). No amount of inaccurate historical claims is going to dress that up as a progressive move that will make housing more affordable. > Yet when you look at what people could buy in the past on a typical median salary, or the lifestyle it could provide - it almost sounds like make believe, and is way more than enough to make one wonder what went wrong? Seriously, you'd rather live in the 1950s where according to the report there's a 5% chance you don't have a toilet, never mind extreme luxuries like a toilet or television. Well I guess at least aspiring to that lifestyle is consistent with your enthusiasm for policies that enrich the haves at the expense of the have nots... [1]A Great Depression which is the last period to actually sees sustained price falls for more than a quarter or two, which was also the last period to see free convertibility of the USD to gold. It was a period of 25% unemployment...
throw0101d 4mo ago
> But in stable or deflationary systems there's no inflation to hide from and the price of 'things' is stable or can even decrease over time, so there's no longer a hoarding incentivization for 'things.' Here's how things worked in the early 20th century: Let us say a farmer had taken out a mortgage in 1928, and let us say his mortgage payment was US$20 (equivalent of 1 oz. of gold). In May 1929 he would have had to have sold 114 pounds of cotton to earn $20 (or 18 bushels of wheat, 23 of corn, 44 of oats). By May 1932 he would have had to sold 369 pounds of cotton (or 38 bushels of wheat, …): * https://www.sciencedirect.com/science/article/abs/pii/0304393287900456 https://www.sciencedirect.com/science/article/abs/pii/030439... * https://econbrowser.com/archives/2012/02/why_not_abolish https://econbrowser.com/archives/2012/02/why_not_abolish If he had 4 farm hands and paid each $5 (total $20), that's a lot more crops that need to be sold to cover payroll. And it would have been the same for selling any good or service: a company that makes widgets needing to pay the same wages: sell more widgets to cover payroll, or reduce payroll (per head, or total heads). Falling prices may seem good from a buyer/consumer point of view, but there's also the seller/supplier side of the equation.
- somenameforme 4mo ago
  I don't think assessing data during the Great Depression is meaningful. It's in the same way that I wouldn't look at data from the ever-recurring crashes/bubbles in modern times to critique things, outside of the frequency of those events themselves. But, that said, your overall point is perfectly reasonable, but does something the other poster also did in that you're taking present times and retroactively applying it, when that's not really accurate. For instance this [1] is from the 1910 census. There were about 3.95 million farms operated by owners and about 66% of them were owned with no mortgage. Page 8 / table 7. And that was at a record high for the time owing to the increasing trend of becoming a debt riddled society. Go back not that much further in history and near to 100% of farmers owned their farmers, free and clear. Modern times incentivizes going deep into debt, past times disincentivized it. I think it's becoming fairly clear that a debt driven society is unsustainable, largely because it requires infinite exponential growth to sustain itself. We swapped to a completely free floating currency only in 1971, after defaulting on our debt obligations under Bretton Woods. And that's also when the digitization expansion started taking off, which drove decades of unimaginable growth, making that infinite exponential growth seem briefly viable. But now that growth phase is slowing. We need either LLMs or space to trigger another exponential growth phase. If they don't, then there's going to be rough seas ahead. [1] - https://www2.census.gov/library/publications/decennial/1910/bulletins/agriculture/384-agriculture-tenure-mortgage-indebtedness-color-nativity-of-farmers-size-of-farms.pdf https://www2.census.gov/library/publications/decennial/1910/...

notahacker 4mo ago

> One fundamental difference is that inflationary systems incentivize the hoarding of 'things', like housing, as a means of escaping inflation. This is because the price of 'things' will always increase with inflation. But in stable or deflationary systems there's no inflation to hide from and the price of 'things' is stable or can even decrease over time, so there's no longer a hoarding incentivization for 'things.' It would incentivise the hoarding of currency instead. Holding or investing in anything else is, on average, a losing bet in a sustained deflation. By definition, deflation is people choosing not to contribute to production obtaining increasing returns on doing and risking absolutely nothing at the expense of those who do contribute to production working harder or taking more risks to serve them. You're accusing me of "engaging with a pretty common fallacy" whilst arguing against a tautology. > So you can see a visible impact of this in housing prices. In the 50s a typical house used to cost about 2 median salaries. [1] Go further back in time and you're down to 1 median salary. In modern times, we're at historic highs of a median home costing 5x a median salary, and in desirable locations like western California it even gets up to 12x local median salary for a median home. [2] That's median, not Beverley Hills. That's the supply and demand of housing, as well evidenced by the large disparity of house price changes. Deflation does not incentivise building more houses (quite the opposite actually). In practice, it just means you pay higher mortgage rates and end up with a house that isn't worth anywhere near as much as your mortgage repayments, or you rent - both of which involve more of your lifetime income being transferred to richer people. > Real wages are up 14% over the past 47 years [3], and we now have a trillionaire. The trillionaire is arguing the same position as you on currency. I'm sure he and the other billionaire funded think tanks attacking "fiat money" almost as strongly as they attack tax and regulation on billionaires and services for the poor do so because they care about giving the little guy more...

somenameforme 4mo ago
> By definition, deflation is people choosing not to contribute to production obtaining increasing returns on doing and risking absolutely nothing Deflation results from not printing money. When the growth in the amount of stuff in the economy exceeds the growth in the amount of money in the economy - each dollar becomes worth more over time. That is deflation. Yeah you can sit on it and take it as passive gains. You can also use those gains in your spending power to achieve even greater things. It's up to the person. As for the past having higher mortgages, this provides data on such from 1950. [1] "...the typical monthly mortgage payment [of] $54.31 for principal, interest, FHA mortgage insurance premium, hazard insurance, taxes and special assessments, and any miscellaneous items such as ground rent." 1950 median personal was $3300, so a house mortgage cost 20% of that. Current median personal income is $45k, so that'd be a mortgage on a new house of about $750 with tax/insurance/assessment/etc included in that. We can safely reject the claim that mortgages were higher. However, your critique that your house would not be worth as much as you paid is 100% true. When things do not endlessly increase in value, going into debt to purchase them comes with a real cost. That is one of the many reasons prices were able to be kept in check. Housing becoming a vessel for speculation just inevitably drives their prices endlessly up while people actually trying to find a place to live and raise a family suffer for it all. This is all only magnified when you add the surplus of funny money. It being speculation or supply and demand are not somehow different things as you seem to be implying. --- Basically I find most of all arguments about the past tend to be false or exaggerated, and not at all intentionally. We're all taught that economic policy in the past primitive and misguided, as true as the sky is blue and grass is green. Yet when you look at what people could buy in the past on a typical median salary, or the lifestyle it could provide - it almost sounds like make believe, and is way more than enough to make one wonder what went wrong? And I think currency policy is largely the answer to that question. [1] - https://www.huduser.gov/portal/sites/default/files/pdf/Housing-Situation-1951.pdf https://www.huduser.gov/portal/sites/default/files/pdf/Housi...
- notahacker 4mo ago
  > Deflation results from not printing money. When the growth in the amount of stuff in the economy exceeds the growth in the amount of money in the economy - each dollar becomes worth more over time. That is deflation. Yeah you can sit on it and take it as passive gains. You can also use those gains in your spending power to achieve even greater things. It's up to the person. It is, indeed up to the person. But if you offer billionaires risk free gains from turning their billions into cash and burying it in the ground (quite literally at the expense of everyone else having to work harder to make up for it), even the ones that are willing to invest or lend need to extract more out of the poor to make it worth their while. Again, when it's tautological the policy you are advocating gives the idle rich risk free real gains at the expense of the working poor, it is impossible to argue with a straight face that the implications are beneficial for equity and growth... > As for the past having higher mortgages, this provides data on such from 1950. [1] "...the typical monthly mortgage payment [of] $54.31 for principal, interest, FHA mortgage insurance premium, hazard insurance, taxes and special assessments, and any miscellaneous items such as ground rent." 1950 median personal was $3300, so a house mortgage cost 20% of that. Current median personal income is $45k, so that'd be a mortgage on a new house of about $750 with tax/insurance/assessment/etc included in that. We can safely reject the claim that mortgages were higher.\ I am not sure why you are pretending that this was a period of sustained deflation though. Au contraire, the large increase to housing supply in the 1940s coincided with CPI being much higher than recent averages, driven in part by a relaxation in monetary policy to support war financing and full recovery from the Great Depression.[1] We're not interested in reinventing the 1950s though, we're interested in how to achieve deflation. Since monetary base growth has an inverse relationship with interest rates, eliminating it implies structurally higher base interest rates, which implies homebuyers pay more money to the bank for the same house (which is almost guaranteed to be worth significantly less than its financing costs). No amount of inaccurate historical claims is going to dress that up as a progressive move that will make housing more affordable. > Yet when you look at what people could buy in the past on a typical median salary, or the lifestyle it could provide - it almost sounds like make believe, and is way more than enough to make one wonder what went wrong? Seriously, you'd rather live in the 1950s where according to the report there's a 5% chance you don't have a toilet, never mind extreme luxuries like a toilet or television. Well I guess at least aspiring to that lifestyle is consistent with your enthusiasm for policies that enrich the haves at the expense of the have nots... [1]A Great Depression which is the last period to actually sees sustained price falls for more than a quarter or two, which was also the last period to see free convertibility of the USD to gold. It was a period of 25% unemployment...

throw0101d 4mo ago

> But in stable or deflationary systems there's no inflation to hide from and the price of 'things' is stable or can even decrease over time, so there's no longer a hoarding incentivization for 'things.' Here's how things worked in the early 20th century: Let us say a farmer had taken out a mortgage in 1928, and let us say his mortgage payment was US$20 (equivalent of 1 oz. of gold). In May 1929 he would have had to have sold 114 pounds of cotton to earn $20 (or 18 bushels of wheat, 23 of corn, 44 of oats). By May 1932 he would have had to sold 369 pounds of cotton (or 38 bushels of wheat, …): * https://www.sciencedirect.com/science/article/abs/pii/0304393287900456 https://www.sciencedirect.com/science/article/abs/pii/030439... * https://econbrowser.com/archives/2012/02/why_not_abolish https://econbrowser.com/archives/2012/02/why_not_abolish If he had 4 farm hands and paid each $5 (total $20), that's a lot more crops that need to be sold to cover payroll. And it would have been the same for selling any good or service: a company that makes widgets needing to pay the same wages: sell more widgets to cover payroll, or reduce payroll (per head, or total heads). Falling prices may seem good from a buyer/consumer point of view, but there's also the seller/supplier side of the equation.

somenameforme 4mo ago
I don't think assessing data during the Great Depression is meaningful. It's in the same way that I wouldn't look at data from the ever-recurring crashes/bubbles in modern times to critique things, outside of the frequency of those events themselves. But, that said, your overall point is perfectly reasonable, but does something the other poster also did in that you're taking present times and retroactively applying it, when that's not really accurate. For instance this [1] is from the 1910 census. There were about 3.95 million farms operated by owners and about 66% of them were owned with no mortgage. Page 8 / table 7. And that was at a record high for the time owing to the increasing trend of becoming a debt riddled society. Go back not that much further in history and near to 100% of farmers owned their farmers, free and clear. Modern times incentivizes going deep into debt, past times disincentivized it. I think it's becoming fairly clear that a debt driven society is unsustainable, largely because it requires infinite exponential growth to sustain itself. We swapped to a completely free floating currency only in 1971, after defaulting on our debt obligations under Bretton Woods. And that's also when the digitization expansion started taking off, which drove decades of unimaginable growth, making that infinite exponential growth seem briefly viable. But now that growth phase is slowing. We need either LLMs or space to trigger another exponential growth phase. If they don't, then there's going to be rough seas ahead. [1] - https://www2.census.gov/library/publications/decennial/1910/bulletins/agriculture/384-agriculture-tenure-mortgage-indebtedness-color-nativity-of-farmers-size-of-farms.pdf https://www2.census.gov/library/publications/decennial/1910/...