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What's your opinion on inflation as an economic driver? I'm also a fan of deflation (as I want to save my money) but the Federal Reserve and other central banks

What's your opinion on inflation as an economic driver? I'm also a fan of deflation (as I want to save my money) but the Federal Reserve and other central banks (Japan being a notable example) are advocating for higher inflation, which begs another question: Are they right and both deflation and inflation can supply economic growth? If so, does that mean another factor is the main proponent for growth?

jwallaceparker 13y ago
> What's your opinion on inflation as an economic driver? My opinion is that inflation does not drive economic growth. > Are they right and both deflation and inflation can supply economic growth? Neither one supplies economic growth. > does that mean another factor is the main proponent for growth? Increased productive capacity is the source of economic growth. Not the supply of currency. Take a simple example. Three people live on an island after a plane crash. They fish, build huts, make tools. To facilitate exchange, they use paper money from the game Monopoly happened to survive among the wreckage. One day a new box of Monopoly washes ashore, including a fresh supply of Monopoly money. Their money supply has doubled. Will they experience any economic growth? Clearly not. The next day a power saw and generator wash ashore. They have new tools and increased productive capacity. Will they experience any economic growth? Clearly they will.
- tokenizer 13y ago
  Thank you very much for your response. Furthering your point on neither deflation nor inflation driving economic growth but rather productivity increases, does that mean what the FED is doing through monetary policy zero sum? I subscribe to a camp that believes that what the FED is doing through quantitative easing and zero percent interest rates, is actually harming the economy by sacrificing quality of life of persons without wealth (investments, property, assets) for gains for those that do (real estate bubble, stock market gains since 2008). Can this be true? Or am I looking at the situation too simplistically? Regarding the topic at hand, do you believe that bitcoin's low cost of transmission and features such as escrow and consignment lend the commodity-currency true value (like gold's value being that you can wear it, use it for electrical equipment)? Or do you look at the protocol as having no intrinsic value (pure fiat)? -And do you think that that matters as a currency? Many skeptics claim that a crypto currency backed by a mineral would be ideal, and that bitcoin's only value is in it's perceived worth. They also believe that this means it could be a big tulip party waiting to crash. I'm not sure what to believe regarding bitcoin's future, as gold has had 4000+ years to earn it's place in the world. Thank you for your time.
  - jwallaceparker 13y ago
    > does that mean what the FED is doing through monetary policy zero sum? It leads to malinvestment as you pointed out. > Can this be true? Or am I looking at the situation too simplistically? I agree. It's a wealth transfer. > Or do you look at the protocol as having no intrinsic value (pure fiat)? And do you think that that matters as a currency? I'm not a Bitcoin expert. Right now I see no value in it in the short term other than a speculative investment. There is much political uncertainty surrounding it. It could go to zero in a day. Like you say, gold has over 5000 years as a consistent store of value. Bitcoin is a few years old and wildly volatile. Do I believe a crypto-currency with no real-world backing could thrive? Sure, someday. Do I believe that crypto-currency will be Bitcoin? I have no clue.

jwallaceparker 13y ago

> What's your opinion on inflation as an economic driver? My opinion is that inflation does not drive economic growth. > Are they right and both deflation and inflation can supply economic growth? Neither one supplies economic growth. > does that mean another factor is the main proponent for growth? Increased productive capacity is the source of economic growth. Not the supply of currency. Take a simple example. Three people live on an island after a plane crash. They fish, build huts, make tools. To facilitate exchange, they use paper money from the game Monopoly happened to survive among the wreckage. One day a new box of Monopoly washes ashore, including a fresh supply of Monopoly money. Their money supply has doubled. Will they experience any economic growth? Clearly not. The next day a power saw and generator wash ashore. They have new tools and increased productive capacity. Will they experience any economic growth? Clearly they will.

tokenizer 13y ago
Thank you very much for your response. Furthering your point on neither deflation nor inflation driving economic growth but rather productivity increases, does that mean what the FED is doing through monetary policy zero sum? I subscribe to a camp that believes that what the FED is doing through quantitative easing and zero percent interest rates, is actually harming the economy by sacrificing quality of life of persons without wealth (investments, property, assets) for gains for those that do (real estate bubble, stock market gains since 2008). Can this be true? Or am I looking at the situation too simplistically? Regarding the topic at hand, do you believe that bitcoin's low cost of transmission and features such as escrow and consignment lend the commodity-currency true value (like gold's value being that you can wear it, use it for electrical equipment)? Or do you look at the protocol as having no intrinsic value (pure fiat)? -And do you think that that matters as a currency? Many skeptics claim that a crypto currency backed by a mineral would be ideal, and that bitcoin's only value is in it's perceived worth. They also believe that this means it could be a big tulip party waiting to crash. I'm not sure what to believe regarding bitcoin's future, as gold has had 4000+ years to earn it's place in the world. Thank you for your time.
- jwallaceparker 13y ago
  > does that mean what the FED is doing through monetary policy zero sum? It leads to malinvestment as you pointed out. > Can this be true? Or am I looking at the situation too simplistically? I agree. It's a wealth transfer. > Or do you look at the protocol as having no intrinsic value (pure fiat)? And do you think that that matters as a currency? I'm not a Bitcoin expert. Right now I see no value in it in the short term other than a speculative investment. There is much political uncertainty surrounding it. It could go to zero in a day. Like you say, gold has over 5000 years as a consistent store of value. Bitcoin is a few years old and wildly volatile. Do I believe a crypto-currency with no real-world backing could thrive? Sure, someday. Do I believe that crypto-currency will be Bitcoin? I have no clue.