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The price of gold is not a measure of inflation. Banks don't get most of the money they loan from deposits, they create it from fractional reserve banking via

The price of gold is not a measure of inflation. Banks don't get most of the money they loan from deposits, they create it from fractional reserve banking via the money multiplier. Continual low inflation is good for the economy, it encourages spending and investment and discourages hoarding cash. The purpose of money is not as a store of value, but as an enabler of economic exchange. If you want to store value, invest in assets of some sort. Money is not meant for saving, people with money know this, it's why they don't keep their fortunes liquid.

ekianjo 13y ago
> they create it from fractional reserve banking via the money multiplier. Yes, but they need cash in the first place in order to use the "multiplier" defined by regulators. They cannot create money ad vitam eternam without cash deposits. When there is a crisis, a bank low on real cash value will go bankrupt very easily. Have you already forgotten?
- gnaritas 13y ago
  Was there a point in stating the obvious?
  - ekianjo 13y ago
    You tell me. By the way, you still have not explained why a zero inflation is not preferable to some low inflation. You said: "it encourages spending and investment and discourages hoarding cash." But inflation discourages savings (as I said, critical for the banking system, and therfore impacting investment), and hoarding cash would be anyway discouraged in case you have zero inflation, because you would be able to place your money in portfolio to gain more than 0 on yearly returns (dividends at least). So there would be no net return in hoarding cash. Or are you saying you need inflation to have growth ? In that case you would be mistaken, there was ample growth even when the markets were following the Gold standards... So I am not really sure where you come from to recommend "low inflation". Besides, who can ensure the inflation remains low, and who can control that there is no dumping of cash on the market when there is a central bank in charge, serving the current political agenda ? Again, what's good with Bitcoin and Gold is that they are both neutral and relatively free of political control (well, at least for Bitcoin).
    - dllthomas 13y ago
      Don't conflate "zero growth of the money supply" with "zero inflation". Unless the population and amount of goods and services produced stays constant, these two won't correspond. With zero growth of the money supply, a growing population with a growing economy will experience deflation, which is what worries me.
      - nunb 13y ago
        Why does deflation worry you? It's a good thing. I would like my healthcare to get cheaper and better over time just as my Android phone does. > Don't conflate "zero growth of the money supply" with "zero inflation". Inflation is always and everywhere a monetary phenomenon, according to Milton Friedman.
        gnaritas 13y ago
        > Why does deflation worry you? It's a good thing. You haven't actually studied modern economics if you don't understand why deflation is worrisome and why the monetary policy we have now exists to prevent deflation to achieve this stability: http://upload.wikimedia.org/wikipedia/commons/2/20/US_Historical_Inflation_Ancient.svg http://upload.wikimedia.org/wikipedia/commons/2/20/US_Histor....
        nunb 13y ago
        https://yourlogicalfallacyis.com/appeal-to-authority https://yourlogicalfallacyis.com/appeal-to-authority
        gnaritas 13y ago
        Try reading your own link, "It's important to note that this fallacy should not be used to dismiss the claims of experts, or scientific consensus.". You are trying to do exactly that. Pointing out that you are in conflict with basic economic knowledge is not an appeal to authority. You asked why he was worried about deflation, I showed you why, I wasn't making an argument, I was giving you the information you asked for. Ignore it if you like, I'm not interested in arguing with you.

ekianjo 13y ago

> they create it from fractional reserve banking via the money multiplier. Yes, but they need cash in the first place in order to use the "multiplier" defined by regulators. They cannot create money ad vitam eternam without cash deposits. When there is a crisis, a bank low on real cash value will go bankrupt very easily. Have you already forgotten?

gnaritas 13y ago
Was there a point in stating the obvious?
- ekianjo 13y ago
  You tell me. By the way, you still have not explained why a zero inflation is not preferable to some low inflation. You said: "it encourages spending and investment and discourages hoarding cash." But inflation discourages savings (as I said, critical for the banking system, and therfore impacting investment), and hoarding cash would be anyway discouraged in case you have zero inflation, because you would be able to place your money in portfolio to gain more than 0 on yearly returns (dividends at least). So there would be no net return in hoarding cash. Or are you saying you need inflation to have growth ? In that case you would be mistaken, there was ample growth even when the markets were following the Gold standards... So I am not really sure where you come from to recommend "low inflation". Besides, who can ensure the inflation remains low, and who can control that there is no dumping of cash on the market when there is a central bank in charge, serving the current political agenda ? Again, what's good with Bitcoin and Gold is that they are both neutral and relatively free of political control (well, at least for Bitcoin).
  - dllthomas 13y ago
    Don't conflate "zero growth of the money supply" with "zero inflation". Unless the population and amount of goods and services produced stays constant, these two won't correspond. With zero growth of the money supply, a growing population with a growing economy will experience deflation, which is what worries me.
    - nunb 13y ago
      Why does deflation worry you? It's a good thing. I would like my healthcare to get cheaper and better over time just as my Android phone does. > Don't conflate "zero growth of the money supply" with "zero inflation". Inflation is always and everywhere a monetary phenomenon, according to Milton Friedman.
      - gnaritas 13y ago
        > Why does deflation worry you? It's a good thing. You haven't actually studied modern economics if you don't understand why deflation is worrisome and why the monetary policy we have now exists to prevent deflation to achieve this stability: http://upload.wikimedia.org/wikipedia/commons/2/20/US_Historical_Inflation_Ancient.svg http://upload.wikimedia.org/wikipedia/commons/2/20/US_Histor....
        nunb 13y ago
        https://yourlogicalfallacyis.com/appeal-to-authority https://yourlogicalfallacyis.com/appeal-to-authority
        gnaritas 13y ago
        Try reading your own link, "It's important to note that this fallacy should not be used to dismiss the claims of experts, or scientific consensus.". You are trying to do exactly that. Pointing out that you are in conflict with basic economic knowledge is not an appeal to authority. You asked why he was worried about deflation, I showed you why, I wasn't making an argument, I was giving you the information you asked for. Ignore it if you like, I'm not interested in arguing with you.