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Tell me more how an inflationary currency would appeal more to the masses. You're being delusional - it appeals to Keynesian economists.

by snitko 14y ago

kiba 14y ago
It appeals to those that borrow money because it means their debt is being eroded through inflation.
- snitko 14y ago
  That only means people will borrow less and the denial of capital some may face will be exactly to the extent to which they profit from deflation and hoarding. Borrowing is not the solution to all of the problems, yet it is pictured to be that precisely because of the perverted inflationary economy we currently have.
- tlrobinson 14y ago
  Don't interest rates generally factor in inflation? Also, perhaps it would be a good thing for some of us to borrow less money...
InclinedPlane 14y ago
Because inflation discourages hoarding. It encourages people to actually do something with their currency. Use it, generate economic activity, make it grow through investment, etc.
- snitko 14y ago
  This cannot be further from the truth. Inflation encourages people to spend, that's true. However there's nothing in inflation that encourages the right kind of spending. If I'm not sure what to invest in right now or don't see an opportunity, I may want to hoard for a while. Inflation punishes careful investors, so more stupid and risky projects are funded. Let me give you another example. Let's say I decided to bootstrap my own business using only my savings which I intend to live off for a year or so. Inflation decreases the time I have to bootstrap my business so instead of a year I may only be able to afford 8 months, which in turn decreases my chances for success. Thus, it is precisely the productive entrepreneurs and innovators who are punished.
  - InclinedPlane 14y ago
    You're being silly. Typical rates of inflation tend to be less than 5%, often around 3% or so, per year. That's not enough to cause anyone serious worry about their savings becoming diluted over a period of a year or even a few years. At 3% inflation it would take 7 years of letting your money sit around doing nothing before the savings necessary to survive for a year degraded to only being able to support you for 8 months. I rather think that's more than enough time to figure out how to invest.
    - snitko 14y ago
      You're not taking into the account the time it takes to accumulate the necessary savings! For many people who start their businesses it may as well be 5-7 years. You're also not taking into the account such investments as buying a house. In many non-western countries people actually save for that instead of borrowing. It is still an investment that creates jobs and inflation hurts that.
      - InclinedPlane 14y ago
        So, put your savings in an interest bearing account. Doesn't seem to be rocket science to me.
        snitko 14y ago
        If only there was a currency that would do it for me even better than a bearing account. Oh wait.
        InclinedPlane 14y ago
        Beautifully illustrating my point. Inflation forces people to get off their butts. To put their money in investments. To loan it to other people with interest. To use it to build businesses. To buy durable goods and land and so forth. There's no such thing as money for nothing. An implicitly deflationary currency comes at a cost, and that cost is the entire economy based on that currency. It stifles growth and activity compared to an implicitly inflationary currency. Which costs the individual a little over the short-term but benefits the entire economy as a whole. The end result being that economic growth spurred by the activity of people trying to avoid loss due to inflation more than makes up for that loss. In the time since 1950 the US dollar has inflated by a whopping 840% (a factor of 9.4x), but the per capita GDP has grown by an even more impressive 3200% (a factor of 33x in nominal dollars), or 250% in inflation adjusted dollars.
brownbat 14y ago
> You're being delusional... I found this needlessly uncivil, making it more difficult for me to sympathize with your point.
- snitko 14y ago
  You're right, I apologize. It was an unnecessary statement. I think I tend to be a bit passionate when it comes to certain subjects and it hurts the discussion. I hope the author of the comment I replied to didn't take it personally.
  - brownbat 14y ago
    It's an issue that evokes strong passions, we've all been there. Sorry if I made too big a deal about it. I'd just spent half an hour browsing comments on Reddit, it left me a little hyper-protective and self-righteous about this place.
dualogy 14y ago
Yeah I'm myself anti-"Keynesian" in the "what should be" department. In the "what is" department, I get the impression that, given an official sanctioned and sufficiently convoluted "vehicle", the "masses" don't mind consuming more than they produce for a while, as long the gravy flows. Else, current fiat wouldn't stand a chance with the electorate, even accounting for "propaganda" and legal tender laws etc.

Tell me more how an inflationary currency would appeal more to the masses. You're being delusional - it appeals to Keynesian economists.

by snitko 14y ago

Tell me more how an inflationary currency would appeal more to the masses. You're being delusional - it appeals to Keynesian economists.

kiba 14y ago

It appeals to those that borrow money because it means their debt is being eroded through inflation.

snitko 14y ago
That only means people will borrow less and the denial of capital some may face will be exactly to the extent to which they profit from deflation and hoarding. Borrowing is not the solution to all of the problems, yet it is pictured to be that precisely because of the perverted inflationary economy we currently have.
tlrobinson 14y ago
Don't interest rates generally factor in inflation? Also, perhaps it would be a good thing for some of us to borrow less money...

InclinedPlane 14y ago

Because inflation discourages hoarding. It encourages people to actually do something with their currency. Use it, generate economic activity, make it grow through investment, etc.

snitko 14y ago
This cannot be further from the truth. Inflation encourages people to spend, that's true. However there's nothing in inflation that encourages the right kind of spending. If I'm not sure what to invest in right now or don't see an opportunity, I may want to hoard for a while. Inflation punishes careful investors, so more stupid and risky projects are funded. Let me give you another example. Let's say I decided to bootstrap my own business using only my savings which I intend to live off for a year or so. Inflation decreases the time I have to bootstrap my business so instead of a year I may only be able to afford 8 months, which in turn decreases my chances for success. Thus, it is precisely the productive entrepreneurs and innovators who are punished.
- InclinedPlane 14y ago
  You're being silly. Typical rates of inflation tend to be less than 5%, often around 3% or so, per year. That's not enough to cause anyone serious worry about their savings becoming diluted over a period of a year or even a few years. At 3% inflation it would take 7 years of letting your money sit around doing nothing before the savings necessary to survive for a year degraded to only being able to support you for 8 months. I rather think that's more than enough time to figure out how to invest.
  - snitko 14y ago
    You're not taking into the account the time it takes to accumulate the necessary savings! For many people who start their businesses it may as well be 5-7 years. You're also not taking into the account such investments as buying a house. In many non-western countries people actually save for that instead of borrowing. It is still an investment that creates jobs and inflation hurts that.
    - InclinedPlane 14y ago
      So, put your savings in an interest bearing account. Doesn't seem to be rocket science to me.
      - snitko 14y ago
        If only there was a currency that would do it for me even better than a bearing account. Oh wait.
        InclinedPlane 14y ago
        Beautifully illustrating my point. Inflation forces people to get off their butts. To put their money in investments. To loan it to other people with interest. To use it to build businesses. To buy durable goods and land and so forth. There's no such thing as money for nothing. An implicitly deflationary currency comes at a cost, and that cost is the entire economy based on that currency. It stifles growth and activity compared to an implicitly inflationary currency. Which costs the individual a little over the short-term but benefits the entire economy as a whole. The end result being that economic growth spurred by the activity of people trying to avoid loss due to inflation more than makes up for that loss. In the time since 1950 the US dollar has inflated by a whopping 840% (a factor of 9.4x), but the per capita GDP has grown by an even more impressive 3200% (a factor of 33x in nominal dollars), or 250% in inflation adjusted dollars.

brownbat 14y ago

> You're being delusional... I found this needlessly uncivil, making it more difficult for me to sympathize with your point.

snitko 14y ago
You're right, I apologize. It was an unnecessary statement. I think I tend to be a bit passionate when it comes to certain subjects and it hurts the discussion. I hope the author of the comment I replied to didn't take it personally.
- brownbat 14y ago
  It's an issue that evokes strong passions, we've all been there. Sorry if I made too big a deal about it. I'd just spent half an hour browsing comments on Reddit, it left me a little hyper-protective and self-righteous about this place.

dualogy 14y ago

Yeah I'm myself anti-"Keynesian" in the "what should be" department. In the "what is" department, I get the impression that, given an official sanctioned and sufficiently convoluted "vehicle", the "masses" don't mind consuming more than they produce for a while, as long the gravy flows. Else, current fiat wouldn't stand a chance with the electorate, even accounting for "propaganda" and legal tender laws etc.