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Price deflation or money deflation? Price deflation is a good thing. I'm typing on something which is a "living" proof of these.

by vrotaru 14y ago

danielweber 14y ago
If a specific good becomes cheaper because the means of production become more efficient, that's awesome. If everything is becoming cheaper because everything is getting more efficient, that's super awesome. If things are getting "cheaper" because the currency is becoming more valuable, that is a disaster. You have society-wide rent-seeking instead of wealth creation.
- vrotaru 14y ago
  Well, that's exactly my point. In a system with a fixed money supply (all things equal) the only way to have price deflation is to have greater output, greater productivity. Now tell me again, how this is awful? EDIT: As for the rent seeking.. If you hold your money for a while, while the productivity soars, then after a while you can buy more stuff, but only because the stuff has become cheaper. As a fraction of total buying power you are still were you were before. Do you really call it rent-seeking?
  - Nursie 14y ago
    In a system with a fixed money supply (all things equal) the only way to have price deflation is to have greater output, greater productivity. Uh, what the hell gave you that idea? Another way would be people hoarding cash, making the rest of it more valuable -> deflationary spiral.
    - vrotaru 14y ago
      First you have missed the all things equal caveat, second people hoarding cash will not lead to a deflationary spiral, who give that idea? It will lead to a new equilibrium. The greater the cash balances and lower the prices the greater the temptation to spend, and to break the spiral.
      - Nursie 14y ago
        Why spend when you can buy tomorrow even cheaper? A deflationary currency is not a good idea.
        vrotaru 14y ago
        a) Time preference (I guess you have a phone, even if..) b) Marginal utility of every extra unit of money decreases when a person holds more of them. Couple that with falling prices and you have the killer of deflationary spiral. A nice theory, though. The deflationary spiral one. But just a theory. Never happened.
        Nursie 14y ago
        a) That's a downward pressure on sales any way you paint it. b) Obviously this is why the well-off never want any more. You have no concept of history or the problems associated with a gold standard do you?
        vrotaru 14y ago
        a) Now, that's a different assertion from the original one. (People will stop buying stuff). I'm glad we agree on this one. Ain't gonna happen. b) Are saying the well-off never squander money on stupid things? Is the last sentence some kind of "ad hominem"? Because, it would be a pity.
        Nursie 14y ago
        a) No, it's not different at all. If money is worth more tomorrow than today, that exerts negative pressure on purchases, suppressing the retail economy. People will still buy things, just less of them. What's so hard to understand? b) I really have no idea where you're trying to take b. "Is the last sentence some kind of "ad hominem"? Because, it would be a pity." An ad hominem would be if I said your arguments were invalid because of who you are, that's what it means. I was making an observation about your ignorance based on the content of your arguments, entirely different.
  - danielweber 14y ago
    If the economy today is 10 billion quatloos, and it grows to 11 billion quatloos next year, you would also want the money supply to grow by 10% over the same period of time. Capital can make money because it increases productivity. If you use your 10,000 quatloos to buy a machine that makes a worker more productive, your reward comes from the interest on that. Everyone can increase the value of their savings if everyone does this. If everyone is hiding their quatloos in the mattress, there is no input of capital to increase productivity. Yet a deflationary spiral exactly encourages people to hide their quatloos in their mattress. Why bother taking even minimal market risks when you can make 10% from the growth of the rest of the economy? And economies can grow not just from increased productivity. EDIT: As a fraction of total buying power you are still were you were before. This is a really, really, really bad idea. If I have shillings equal to 5% of GDP, and I put myself into cryosleep for 100 years, there is no reason I should expect my uninvested shillings to still have 5% of GDP. This is a child's view of an economy.
    - vrotaru 14y ago
      What does exactly happen when an economy grows from 10 billion quatloos to 11 billion quatloos? Until you tell me that, we are measuring woomdums in quatloos and while that can be kind of fun.. it not very rewarding. If you speaking about physical output.. than the only way achieve this is to learn to produce woomdums cheaper.. Then there is no harm in selling them cheaper. So do I want the money to grow to a degree that it will anihiliate the increase in productivity? Certainly not.
    - vrotaru 14y ago
      > If I have shillings equal to 5% of GDP, and I put myself into cryosleep for 100 years, there is no reason I should expect my uninvested shillings to still have 5% of GDP. This is a child's view of an economy. Can your elaborate? Actually it an argument against the idea that hoarding gives some kind rent. It doesn't. But again, can you elaborate? If own 5% of land and go to a cryosleep for a hundred years, how much of that do you expect to own when you wake up?
      - danielweber 14y ago

Price deflation or money deflation? Price deflation is a good thing. I'm typing on something which is a "living" proof of these.

by vrotaru 14y ago

Price deflation or money deflation? Price deflation is a good thing. I'm typing on something which is a "living" proof of these.

danielweber 14y ago

If a specific good becomes cheaper because the means of production become more efficient, that's awesome. If everything is becoming cheaper because everything is getting more efficient, that's super awesome. If things are getting "cheaper" because the currency is becoming more valuable, that is a disaster. You have society-wide rent-seeking instead of wealth creation.

vrotaru 14y ago
Well, that's exactly my point. In a system with a fixed money supply (all things equal) the only way to have price deflation is to have greater output, greater productivity. Now tell me again, how this is awful? EDIT: As for the rent seeking.. If you hold your money for a while, while the productivity soars, then after a while you can buy more stuff, but only because the stuff has become cheaper. As a fraction of total buying power you are still were you were before. Do you really call it rent-seeking?
- Nursie 14y ago
  In a system with a fixed money supply (all things equal) the only way to have price deflation is to have greater output, greater productivity. Uh, what the hell gave you that idea? Another way would be people hoarding cash, making the rest of it more valuable -> deflationary spiral.
  - vrotaru 14y ago
    First you have missed the all things equal caveat, second people hoarding cash will not lead to a deflationary spiral, who give that idea? It will lead to a new equilibrium. The greater the cash balances and lower the prices the greater the temptation to spend, and to break the spiral.
    - Nursie 14y ago
      Why spend when you can buy tomorrow even cheaper? A deflationary currency is not a good idea.
      - vrotaru 14y ago
        a) Time preference (I guess you have a phone, even if..) b) Marginal utility of every extra unit of money decreases when a person holds more of them. Couple that with falling prices and you have the killer of deflationary spiral. A nice theory, though. The deflationary spiral one. But just a theory. Never happened.
        Nursie 14y ago
        a) That's a downward pressure on sales any way you paint it. b) Obviously this is why the well-off never want any more. You have no concept of history or the problems associated with a gold standard do you?
        vrotaru 14y ago
        a) Now, that's a different assertion from the original one. (People will stop buying stuff). I'm glad we agree on this one. Ain't gonna happen. b) Are saying the well-off never squander money on stupid things? Is the last sentence some kind of "ad hominem"? Because, it would be a pity.
        Nursie 14y ago
        a) No, it's not different at all. If money is worth more tomorrow than today, that exerts negative pressure on purchases, suppressing the retail economy. People will still buy things, just less of them. What's so hard to understand? b) I really have no idea where you're trying to take b. "Is the last sentence some kind of "ad hominem"? Because, it would be a pity." An ad hominem would be if I said your arguments were invalid because of who you are, that's what it means. I was making an observation about your ignorance based on the content of your arguments, entirely different.
- danielweber 14y ago
  If the economy today is 10 billion quatloos, and it grows to 11 billion quatloos next year, you would also want the money supply to grow by 10% over the same period of time. Capital can make money because it increases productivity. If you use your 10,000 quatloos to buy a machine that makes a worker more productive, your reward comes from the interest on that. Everyone can increase the value of their savings if everyone does this. If everyone is hiding their quatloos in the mattress, there is no input of capital to increase productivity. Yet a deflationary spiral exactly encourages people to hide their quatloos in their mattress. Why bother taking even minimal market risks when you can make 10% from the growth of the rest of the economy? And economies can grow not just from increased productivity. EDIT: As a fraction of total buying power you are still were you were before. This is a really, really, really bad idea. If I have shillings equal to 5% of GDP, and I put myself into cryosleep for 100 years, there is no reason I should expect my uninvested shillings to still have 5% of GDP. This is a child's view of an economy.
  - vrotaru 14y ago
    What does exactly happen when an economy grows from 10 billion quatloos to 11 billion quatloos? Until you tell me that, we are measuring woomdums in quatloos and while that can be kind of fun.. it not very rewarding. If you speaking about physical output.. than the only way achieve this is to learn to produce woomdums cheaper.. Then there is no harm in selling them cheaper. So do I want the money to grow to a degree that it will anihiliate the increase in productivity? Certainly not.
  - vrotaru 14y ago
    > If I have shillings equal to 5% of GDP, and I put myself into cryosleep for 100 years, there is no reason I should expect my uninvested shillings to still have 5% of GDP. This is a child's view of an economy. Can your elaborate? Actually it an argument against the idea that hoarding gives some kind rent. It doesn't. But again, can you elaborate? If own 5% of land and go to a cryosleep for a hundred years, how much of that do you expect to own when you wake up?
    - danielweber 14y ago