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With words like "invest" and "hoard", you're using language that short-circuits critical thinking. Surely, for example, you agree that not all investments are g

With words like "invest" and "hoard", you're using language that short-circuits critical thinking. Surely, for example, you agree that not all investments are good? But "invest" has an undeniable positive connotation, so in order not to prejudge the outcome let's replace "invest" with "spend". Then, instead of the inflammatory word "hoard", let's use the word "save". With this neutral terminology, we're now ready for some actual thought. We can recast the claim as follows: currency dilution is good because it encourages spending and discourages saving. There's no doubt about the factual claim—dilution does indeed encourage spending and discourage saving). But why is saving bad and spending good? This is an ethical judgment that depends on your particular set of values, but it is undeniable that currency dilution transfers purchasing power from savers to spenders. In particular, it's mathematically equivalent to combining a perfectly hard currency with forced confiscation (from savers) and transfer (to spenders), i.e., organized theft. Thus, from an ethical point of view, there is a strong reason not to give dilution the benefit of the doubt. Regarding the so-called "gold standard", the historical evidence is not nearly as clear-cut as you've been led to believe. Though flawed in many ways, What Has Government Done to Our Money? by Murray Rothbard is a good place to start: http://mises.org/money.asp http://mises.org/money.asp

anigbrowl 13y ago
I picked my terms carefully. Investment and spending are absolutely not the same; investments can certainly go bad (although even bad investments generate some economic activity), just as spending can be misappropriated. But the main difference is that while you may get some utility from spending, you do not anticipate any kind of future return. As for saving and hoarding, those are not the same either. If someone saves they typically do so via a savings account or a CD at an institution engaged in fractional lending but (within the US and within limits) a government backstop to prevent loss of savings. Hoarding is putting your money under the mattress where it's absolutely not doing anything. The fact that your argument requires redefining basic economic terms should be a clue that there is something terribly wrong with your priors.
- lexcorvus 13y ago
  I looked into it, and you're right; I was sloppy in my terminology, and will be more careful in the future. I appreciate the correction. In this light, let's consider four activities: spending, investing, saving, and hoarding. Currency dilution encourages the first two and discourages the second two. It also systematically transfers purchasing power from savers/hoarders to spenders/investors. Can you build a case that the benefit from dilution outweighs the costs? Dilution certainly encourages "economic activity" (for certain values of "activity"), which you seem to regard as axiomatically good. What is your justification for this?

anigbrowl 13y ago

I picked my terms carefully. Investment and spending are absolutely not the same; investments can certainly go bad (although even bad investments generate some economic activity), just as spending can be misappropriated. But the main difference is that while you may get some utility from spending, you do not anticipate any kind of future return. As for saving and hoarding, those are not the same either. If someone saves they typically do so via a savings account or a CD at an institution engaged in fractional lending but (within the US and within limits) a government backstop to prevent loss of savings. Hoarding is putting your money under the mattress where it's absolutely not doing anything. The fact that your argument requires redefining basic economic terms should be a clue that there is something terribly wrong with your priors.

lexcorvus 13y ago
I looked into it, and you're right; I was sloppy in my terminology, and will be more careful in the future. I appreciate the correction. In this light, let's consider four activities: spending, investing, saving, and hoarding. Currency dilution encourages the first two and discourages the second two. It also systematically transfers purchasing power from savers/hoarders to spenders/investors. Can you build a case that the benefit from dilution outweighs the costs? Dilution certainly encourages "economic activity" (for certain values of "activity"), which you seem to regard as axiomatically good. What is your justification for this?