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Yes, it is harmful, particularly to savers. Of course, the Holy Keynesian view is that savings is bad and that we all need to be encouraged to spend. Tell me r

by jstalin 13y ago

Yes, it is harmful, particularly to savers. Of course, the Holy Keynesian view is that savings is bad and that we all need to be encouraged to spend. Tell me right now where I can save and earn more than 2%. Maybe 30 year treasuries (with nominal values at 30 year highs, meaning that they have no where to go but down, further eroding savings), but certainly not in savings, a CD, or any other classic savings product. 2% compounding per year is a 22% loss in value over just 10 years. Chasing yield over that 2% per year further distorts savings and markets, and of course that 2% loss per year is good for what? It's just confiscation by the money printers to devalue future debt payments, making it seem all the easier to borrow and spend unsustainably. But, of course, a steady 2% per year is the pipe dream of central planners and doesn't happen in real life. See, e.g., the 1970s.

EvanKelly 13y ago
Treasury Inflation Protected Securities (TIPS) adjust your principal accordingly with the CPI. You also get the coupon rate.
thomaspaine 13y ago
Small nominal inflation encourages investment, whereas deflation incentivizes people to just hold their money in the form of cash.
- jstalin 13y ago
  Of course, the other option is stability. I'm not saying that bitcoin's deflationary behavior is good, only that it challenges the accepted collective wisdom.
sergiosgc 13y ago
Saving is not harmful nor beneficial. It all depends on what you do with your savings. If you stuff them under the mattress, saving is harmful. If you invest, then it's beneficial. An inflationary currency promotes investment. A deflationary one promotes mattress stuffing. You may draw the conclusion yourself.
- jquery 13y ago
  > If you stuff them under the mattress, saving is harmful. I don't see how. Isn't this equivalent to a distributed loan to everyone who holds dollars?
  - sergiosgc 13y ago
    It is unstable. The currency is deflationary by design and the mattress effect effectively reduces monetary mass, creating more deflationary pressure. Up until the point price drops suddenly. It is the poster example of a bubble: artificial valuation, self feeding cycle, disruptable only by change of public perception.
mc-lovin 13y ago
Milton Friedman wasn't a Keynesian, and yet he advocated monetarism, which is essentially the same as inflation targeting, except instead of keeping inflation constant, you keep the rate of increase of the money supply constant. In academic economics, even Keynes never advocated permanently distorting the economy towards consumption and away from spending. Of course people who like government spending for other reasons will incorrectly cite Keynes to justify their position. Real interest rates determine the saving vs consumption decision, not inflation. See here for the arguments that real economists use to justify a 2% inflation rate http://econfan.blogspot.com/2011/07/why-target-inflation-at-2-and-what.html http://econfan.blogspot.com/2011/07/why-target-inflation-at-...

by jstalin 13y ago

EvanKelly 13y ago

Treasury Inflation Protected Securities (TIPS) adjust your principal accordingly with the CPI. You also get the coupon rate.

thomaspaine 13y ago

Small nominal inflation encourages investment, whereas deflation incentivizes people to just hold their money in the form of cash.

jstalin 13y ago
Of course, the other option is stability. I'm not saying that bitcoin's deflationary behavior is good, only that it challenges the accepted collective wisdom.

sergiosgc 13y ago

Saving is not harmful nor beneficial. It all depends on what you do with your savings. If you stuff them under the mattress, saving is harmful. If you invest, then it's beneficial. An inflationary currency promotes investment. A deflationary one promotes mattress stuffing. You may draw the conclusion yourself.

jquery 13y ago
> If you stuff them under the mattress, saving is harmful. I don't see how. Isn't this equivalent to a distributed loan to everyone who holds dollars?
- sergiosgc 13y ago
  It is unstable. The currency is deflationary by design and the mattress effect effectively reduces monetary mass, creating more deflationary pressure. Up until the point price drops suddenly. It is the poster example of a bubble: artificial valuation, self feeding cycle, disruptable only by change of public perception.

mc-lovin 13y ago

Milton Friedman wasn't a Keynesian, and yet he advocated monetarism, which is essentially the same as inflation targeting, except instead of keeping inflation constant, you keep the rate of increase of the money supply constant. In academic economics, even Keynes never advocated permanently distorting the economy towards consumption and away from spending. Of course people who like government spending for other reasons will incorrectly cite Keynes to justify their position. Real interest rates determine the saving vs consumption decision, not inflation. See here for the arguments that real economists use to justify a 2% inflation rate http://econfan.blogspot.com/2011/07/why-target-inflation-at-2-and-what.html http://econfan.blogspot.com/2011/07/why-target-inflation-at-...