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1. The only "producer" of fiat currency is the government that issues it. There is no incentive for a government to hoard money it creates to pay its own bills.

1. The only "producer" of fiat currency is the government that issues it. There is no incentive for a government to hoard money it creates to pay its own bills. 2. Even if we imagine a currency which must be produced, it's a matter of degrees. A little inflation is good, a little deflation isn't terrible. 3. Arguing that, because your dollar buys a better computer next year, it is the same as your dollar buying more food tomorrow than what it can today is beyond ridiculous. They are not the same thing in any rational way.

msandford 13y ago
If consumers (of goods) hoard currency in a deflationary environment then producers (of goods) should hoard commodities in an inflationary environment. In both cases they're acting rationally to maximize value.
- Jtsummers 13y ago
  Inflation: A producer should hoard goods because it will (likely) be worth more tomorrow than it is today. In the mean time they have to spend money to maintain storage of the good. They have to maintain the condition of the goods so it's still useful when they sell it. They have to pay people to maintain these things. Which means eventually they have to sell something in order to pay these costs associated with their hoarding. Very few goods (outside of raw materials like metals) can sit around for years at a time and gain value. If it's food, it'll rot. If it's a technology good, it'll be obsoleted. Even oil and many other non-dietary consumables will succumb to decay of some sort over time. Deflation: A consumer should hoard cash because it will (likely) be worth more tomorrow than it is today. Outside of home security they don't need much to store it. They'll eventually spend some of it, because they need to eat and feed and clothe their family. But overall, the hoarding here is relatively cheap. These may both be rational positions, but they are not equivalent positions or mirrors of each other. There is a symmetry, but similarity is not the same as equality.

msandford 13y ago

If consumers (of goods) hoard currency in a deflationary environment then producers (of goods) should hoard commodities in an inflationary environment. In both cases they're acting rationally to maximize value.

Jtsummers 13y ago
Inflation: A producer should hoard goods because it will (likely) be worth more tomorrow than it is today. In the mean time they have to spend money to maintain storage of the good. They have to maintain the condition of the goods so it's still useful when they sell it. They have to pay people to maintain these things. Which means eventually they have to sell something in order to pay these costs associated with their hoarding. Very few goods (outside of raw materials like metals) can sit around for years at a time and gain value. If it's food, it'll rot. If it's a technology good, it'll be obsoleted. Even oil and many other non-dietary consumables will succumb to decay of some sort over time. Deflation: A consumer should hoard cash because it will (likely) be worth more tomorrow than it is today. Outside of home security they don't need much to store it. They'll eventually spend some of it, because they need to eat and feed and clothe their family. But overall, the hoarding here is relatively cheap. These may both be rational positions, but they are not equivalent positions or mirrors of each other. There is a symmetry, but similarity is not the same as equality.