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Up voted. Would add that in a deflationary environment no one will want credit so really you have to print money and give it away (or just print it and spend i

Up voted. Would add that in a deflationary environment no one will want credit so really you have to print money and give it away (or just print it and spend it).

eli_gottlieb 14y ago
Or you'll have to allow some form of fiat currency as an alternative currency. Or you'll have to more-or-less allow the entire real economy to collapse as the exponentially dropping remnants of actual aggregate demand become utterly unable to facilitate, or rather justify, real trade. One last point: deflation always favors whoever, in a transaction, is the creditor/seller. In a certain sense, this is not only economically harmful but morally unfair. After all, if I pay a contractor $150k to build me a house (assume I own the land and we're only paying for construction), what I'm really doing, underneath the illusion of money, is trading my skills and property (program code, raw building materials) for his skills and property (architecture, construction, use of his materials and tools). In theory, this can and should be modeled as a spot-trade of my stuff for his stuff with no unwanted side-effects. But once we get money and its time-value (deeply affected by deflation) involved, then one of us has an automatic advantage over the other based on the currency value when the work is done and when the payment is made. If the currency is deflating, even predictably, then whoever gets paid has an automatic advantage over whoever does the paying. An arbitrage opportunity across time has appeared solely because we involved currency.
- AnthonyMouse 14y ago
  >If the currency is deflating, even predictably, then whoever gets paid has an automatic advantage over whoever does the paying. If the value of the currency is changing predictably and the date of the future payments is known then it can be taken into account in determining the amount of the payments. However, the purchaser does benefit if the seller doesn't know enough to account for it or is timid and fails to assert the demand, etc.
jerguismi 14y ago
But what about free currency competition? Allow all kind of currencies co-exist. Those who want inflation can use the inflatable currencies, the people demanding deflation can use more deflationary currencies.
- yk 14y ago
  There can not really be competition between currencies, since the major advantage of a currency is that everyone uses it. ( Compare the situation to a situation where some people offer meat for arrowheads and other berries for bone knives. ) And besides, sellers will want to use deflationary currencies, because then they raise prices without changing the nominal price. Therefore no one would be able to use a inflationary currency.
  - jerguismi 14y ago
    > There can not really be competition between currencies, since the major advantage of a currency is that everyone uses it. There already exists global competition between fiat currencies... The competition exists but the competition has bery high barrier to entry. > And besides, sellers will want to use deflationary currencies, because then they raise prices without changing the nominal price. Therefore no one would be able to use a inflationary currency. Nope, seller doesn't care if the conversion process is painless. Almost all sellers on the internet accept any currencies - for example, US sellers accept euros without knowing that they accept euros. Payment processors do the conversion. In the end, the thing that matters is what kind of currency each participant wants to hold. If the buyer wants to hold currency A and seller currency B, they both can still do trade, if there exist somewhat efficient market between currency A and B. And there probably exists, currency markets are probably the first thing to evolve for any kind of usable currency.
- josephlord 14y ago
  Of course everyone wants to borrow and spend inflating currencies and earn and save deflating currencies and it just adds another issue to negotiate in every deal. I don't see any major harm but I don't see any benefit either. In fact you can currently choose from many global currencies now including the Yen that has deflated over the past decades.

Up voted. Would add that in a deflationary environment no one will want credit so really you have to print money and give it away (or just print it and spend it).

eli_gottlieb 14y ago

Or you'll have to allow some form of fiat currency as an alternative currency. Or you'll have to more-or-less allow the entire real economy to collapse as the exponentially dropping remnants of actual aggregate demand become utterly unable to facilitate, or rather justify, real trade. One last point: deflation always favors whoever, in a transaction, is the creditor/seller. In a certain sense, this is not only economically harmful but morally unfair. After all, if I pay a contractor $150k to build me a house (assume I own the land and we're only paying for construction), what I'm really doing, underneath the illusion of money, is trading my skills and property (program code, raw building materials) for his skills and property (architecture, construction, use of his materials and tools). In theory, this can and should be modeled as a spot-trade of my stuff for his stuff with no unwanted side-effects. But once we get money and its time-value (deeply affected by deflation) involved, then one of us has an automatic advantage over the other based on the currency value when the work is done and when the payment is made. If the currency is deflating, even predictably, then whoever gets paid has an automatic advantage over whoever does the paying. An arbitrage opportunity across time has appeared solely because we involved currency.

AnthonyMouse 14y ago
>If the currency is deflating, even predictably, then whoever gets paid has an automatic advantage over whoever does the paying. If the value of the currency is changing predictably and the date of the future payments is known then it can be taken into account in determining the amount of the payments. However, the purchaser does benefit if the seller doesn't know enough to account for it or is timid and fails to assert the demand, etc.

jerguismi 14y ago

But what about free currency competition? Allow all kind of currencies co-exist. Those who want inflation can use the inflatable currencies, the people demanding deflation can use more deflationary currencies.

yk 14y ago
There can not really be competition between currencies, since the major advantage of a currency is that everyone uses it. ( Compare the situation to a situation where some people offer meat for arrowheads and other berries for bone knives. ) And besides, sellers will want to use deflationary currencies, because then they raise prices without changing the nominal price. Therefore no one would be able to use a inflationary currency.
- jerguismi 14y ago
  > There can not really be competition between currencies, since the major advantage of a currency is that everyone uses it. There already exists global competition between fiat currencies... The competition exists but the competition has bery high barrier to entry. > And besides, sellers will want to use deflationary currencies, because then they raise prices without changing the nominal price. Therefore no one would be able to use a inflationary currency. Nope, seller doesn't care if the conversion process is painless. Almost all sellers on the internet accept any currencies - for example, US sellers accept euros without knowing that they accept euros. Payment processors do the conversion. In the end, the thing that matters is what kind of currency each participant wants to hold. If the buyer wants to hold currency A and seller currency B, they both can still do trade, if there exist somewhat efficient market between currency A and B. And there probably exists, currency markets are probably the first thing to evolve for any kind of usable currency.
josephlord 14y ago
Of course everyone wants to borrow and spend inflating currencies and earn and save deflating currencies and it just adds another issue to negotiate in every deal. I don't see any major harm but I don't see any benefit either. In fact you can currently choose from many global currencies now including the Yen that has deflated over the past decades.