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> We are sick of the fed and banks inflating money. Actually, I quite like it. It has advantages like stabilising the economy and encouraging investment. I've

> We are sick of the fed and banks inflating money. Actually, I quite like it. It has advantages like stabilising the economy and encouraging investment. I've never heard a serious economist suggest that moderate inflation is anything but good for the economy, and I've heard plenty tell me why deflation is dangerous. Inflation is important because economics is all about creating incentives. We have property rights because it gives people an incentive to work hard and takes risks. We have patents because they give people an incentive to explain how their invention works. We have a market economy because it means that if a company wants to gain market share, it has to create value for the consumer. In the same way, central banks try to maintain low levels of inflation (~3%) because it encourages people to invest their money in profitable ventures, rather than just leaving it under the mattress. Investment is the way wealth is created, so it should be pretty obvious that deflation is bad for the economy. Notice that I'm talking about the economic health of the country, not the individual citizen. If you're only concerned about immediate short term benefits, you should push for zero taxes, high deflation, and the gold standard. But that's penny wise and pound foolish. You're shooting yourself in the foot. Better by far is to support actions which improve the economy, because a rising tide lifts all boats.

ekianjo 13y ago
> In the same way, central banks try to maintain low levels of inflation (~3%) You must be joking. The way the inflation is officially calculated is totally biased (they don't even take in account energy costs properly) and 3% is basically the best number they can get by tweaking it like crazy. The actual inflation is way higher.
- necubi 13y ago
  Energy is so volatile that it makes little sense to count it in measures of inflation. When oil prices double in a year, is that really because USD became less valuable? There are certainly a number of methodologies for calculating inflation, but this idea that inflation is 10+% seems to be something of an Austrian fantasy. The consensus that moderate inflation is good for the economy is about as uncontroversial as you get in economics, and is generally agreed upon by economists across the political spectrum.
  - ekianjo 13y ago
    The fact is that oil prices affect significantly your purchasing power across every product you buy. There is no reason why you should remove energy costs since there are a significant cost in most of what we buy. And the price of oil does not double every year, it's been rather stable most of the time. Again, if moderate inflation is that good for the economy, why do they need to tweak the numbers? (rhetorical question, the answer is obvious).
- chad_oliver 13y ago
  Note that I said they try to maintain low levels of inflation. It's sure better than nothing. The economy is a chaotic system, and you need to use all means at your disposal to try to counter the boom-and-bust cycle.
  - ekianjo 13y ago
    > The economy is a chaotic system It's certainly been even more chaotic since Central Banks have so much power in the first place. How many crashes were directly linked to the artificially low interest rates decided by the Central Banks ?
    - chad_oliver 13y ago
      Yeah, they've got far too much power. We should stop trying to regulate the economy. The market knows best. </sarcasm> I don't think that Central Banks have always made the right decisions. To the contrary: they're made plenty of bad mistakes. But they have to keep trying, because the alternative is much worse. And slowly, very slowly, we'll get better at riding the dragon.
      - ekianjo 13y ago
        Obviously we are not on the same end of the philosophical spectrum, because of course the market knows best. The market is the sum of invididuals' actions. No amount of geniuses sitting around a table can predict how each decision they take impacts people's lives. That's why Central Banks make stupid decisions. It's not that they are learning, it's the best they can do. And Central Banks were supposed to be independent in the first place from political power, but we all know how that turned out.
        chad_oliver 13y ago
        Fair enough. I disagree with your position, but I can see that it is entirely consistent with your starting assumptions.
GoldenMonkey 13y ago
The problem is, the current money supply increase of $85B a month is not a moderate amount of inflation. And they are not tapering anytime soon either. Case in point: M1-Money Supply has doubled from $1.2T to $2.6T since late 2008. This is not leading to the stabilization of the economy and the encouragement of investment. This can be seen in that unemployment/underemployment has spiked to 24%. And worker participation has dropped from 66% to 63% over the last 4 years. And it is still dropping. So, we have a devaluation of currency and real wealth, tied to an increase in unemployment. How is this a net gain for people who work for a living? And this devaluation will accelerate as Govt's debts increase. References: http://www.shadowstats.com/alternate_data/unemployment-charts http://www.shadowstats.com/alternate_data/unemployment-chart... http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/06/the-incredible-shrinking-labor-force-again/ http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/06/t...

ekianjo 13y ago

> In the same way, central banks try to maintain low levels of inflation (~3%) You must be joking. The way the inflation is officially calculated is totally biased (they don't even take in account energy costs properly) and 3% is basically the best number they can get by tweaking it like crazy. The actual inflation is way higher.

necubi 13y ago
Energy is so volatile that it makes little sense to count it in measures of inflation. When oil prices double in a year, is that really because USD became less valuable? There are certainly a number of methodologies for calculating inflation, but this idea that inflation is 10+% seems to be something of an Austrian fantasy. The consensus that moderate inflation is good for the economy is about as uncontroversial as you get in economics, and is generally agreed upon by economists across the political spectrum.
- ekianjo 13y ago
  The fact is that oil prices affect significantly your purchasing power across every product you buy. There is no reason why you should remove energy costs since there are a significant cost in most of what we buy. And the price of oil does not double every year, it's been rather stable most of the time. Again, if moderate inflation is that good for the economy, why do they need to tweak the numbers? (rhetorical question, the answer is obvious).
chad_oliver 13y ago
Note that I said they try to maintain low levels of inflation. It's sure better than nothing. The economy is a chaotic system, and you need to use all means at your disposal to try to counter the boom-and-bust cycle.
- ekianjo 13y ago
  > The economy is a chaotic system It's certainly been even more chaotic since Central Banks have so much power in the first place. How many crashes were directly linked to the artificially low interest rates decided by the Central Banks ?
  - chad_oliver 13y ago
    Yeah, they've got far too much power. We should stop trying to regulate the economy. The market knows best. </sarcasm> I don't think that Central Banks have always made the right decisions. To the contrary: they're made plenty of bad mistakes. But they have to keep trying, because the alternative is much worse. And slowly, very slowly, we'll get better at riding the dragon.
    - ekianjo 13y ago
      Obviously we are not on the same end of the philosophical spectrum, because of course the market knows best. The market is the sum of invididuals' actions. No amount of geniuses sitting around a table can predict how each decision they take impacts people's lives. That's why Central Banks make stupid decisions. It's not that they are learning, it's the best they can do. And Central Banks were supposed to be independent in the first place from political power, but we all know how that turned out.
      - chad_oliver 13y ago
        Fair enough. I disagree with your position, but I can see that it is entirely consistent with your starting assumptions.

GoldenMonkey 13y ago

The problem is, the current money supply increase of $85B a month is not a moderate amount of inflation. And they are not tapering anytime soon either. Case in point: M1-Money Supply has doubled from $1.2T to $2.6T since late 2008. This is not leading to the stabilization of the economy and the encouragement of investment. This can be seen in that unemployment/underemployment has spiked to 24%. And worker participation has dropped from 66% to 63% over the last 4 years. And it is still dropping. So, we have a devaluation of currency and real wealth, tied to an increase in unemployment. How is this a net gain for people who work for a living? And this devaluation will accelerate as Govt's debts increase. References: http://www.shadowstats.com/alternate_data/unemployment-charts http://www.shadowstats.com/alternate_data/unemployment-chart... http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/06/the-incredible-shrinking-labor-force-again/ http://www.washingtonpost.com/blogs/wonkblog/wp/2013/09/06/t...