7 ms·

This is a very Keynesian way to look at things that isn't necessarily absolutely true. There are a lot of times when this ideal of "slight inflation" is detrime

This is a very Keynesian way to look at things that isn't necessarily absolutely true. There are a lot of times when this ideal of "slight inflation" is detrimental given the actual output of said policies.

seanmcdirmid 12y ago
For example, when? There are very fundamental truths here; e.g. consumption has to match production with very few exceptions, no matter how much someone has to save (or can't spend according to what they are earning). You might be able to save for a rainy day (or retirement), but it is impossible for the world to do that (instead, they must invest for the future to prepare for that rainy day). I'm not sure you could find a single serious economist who would claim "slight inflation is bad;" i.e. would argue that 2-3% is worse than 0%. Maybe a libertarian, but there is a good reason we never vote them into power.
- eru 12y ago
  From what I've heard, 0% inflation would be best, but that risks getting into deflation (eg -5% 'inflation'). So 2% inflation is worse than 0%, but better than risking deflation.
  - seanmcdirmid 12y ago
    0% risks stagnation, which means investment isn't envouraged or discouraged. Even 1% inflation slightly encourages investment, and really the scale only needs to be tipped a bit to keep the economy moving forward toward growth.
    - deleted 12y ago
      [deleted]
    - eru 12y ago
      I don't get that argument. Perhaps you want something like Demurrage (https://en.wikipedia.org/wiki/Demurrage_(currency) https://en.wikipedia.org/wiki/Demurrage_(currency)), which could give you that incentive without debasing the currency.
      - Dylan16807 12y ago
        If you're talking about the natural costs of holding money, those are miniscule. If you're talking about a tax I don't see how it avoids debasing the currency, or is meaningfully different from inflation. It just makes things more complicated because people can attempt to avoid paying.
    - icelancer 12y ago
      Inflation encourages "investment" which is another way of saying inflation encourages gambling.
  - Spooky23 12y ago
    The problem with 0% inflation is that people with money have no incentive to risk it. IMO you need a cycle of inflation between 2-7% to keep things healthy. Dollars stockpiled in some account are not doing anyone any good.
    - seanmcdirmid 12y ago
      Dollars stockpiled in an account will be lent by the bank at a low interest rate (since they have to be invested with little risk). Dollars saved under a mattress actually lead to deflation while they aren't being used, which can mess things up even more.
    - icelancer 12y ago
      >Dollars stockpiled in some account are not doing anyone any good. Why is it that Keynesians believe that money just gets stuffed under a mattress or stockpiled somewhere? It is loaned out at X% interest rates to people who need present-day liquidity to fuel growth. What do you think the VC industry is based on, Keynesian economics?
      - Spooky23 12y ago
        The reality today is that most banks dump deposits into fixed income securities, the vast majority of which in 2014 are Treasury instruments. VC investments are a completely different universe. None of the $7 trillion in deposit balance is going to a VC. Right now, smaller businesses are starved of loan capital, and if you don't offer the high growth rates that VCs need to succeed, it is difficult to get loans.
- authatheist 12y ago
  You have no idea what you're talking about. Inflation is a tax on savings, but that's alright because money has no value?! But if money actually had no value, there would be no use for it. Consumption "has to" match production?! What's that supppsed to mean? If I produce something no one wants, people "have to" consume it anyway? You say inflation is good because it motivates people to invest (because their money loses value just sitting in a bank), but why wouldn't people want to invest even if their money was gaining in value? The purchasing power of whatever money you earn through investments is increased by deflation too, so the sooner you make a good investment, the better off you'll be.
  - Dylan16807 12y ago
    >If I produce something no one wants, people "have to" consume it anyway? You go out of business and stop producing.
    - authatheist 12y ago
      I know that, but the OP didn't seem to. He claimed consumption "has to" match production.
      - Dylan16807 12y ago
        It does, in the same way that effects have to match causes. The only time production can run free with "no consumption" is when someone personally bankrolls extra production, and in that case they're actually the consumer.
        authatheist 12y ago
        So you're telling me that if I produce a bunch of shit-sandwiches and no one wants them, for whatever mysterious reason, then if I produce some more anyway, suddenly I'm the sole consumer of said sandwiches? How does that make sense, considering no one has even eaten (=consumed) one?
- icebraining 12y ago
  You might not vote them into part, but the people you do appoint them into power, since Alan Greenspan has argued for zero inflation has the best policy in the long run. I'm not saying that it isn't a misguided theory - I'm far too ignorant to honestly argue macroeconomics - but I disagree with your representation of it as a settled argument, disputed only by cranks.
  - tomrod 12y ago
    Economist here. In my view you're exactly right. Though there has been a merging of Neo-Keynesian and Neoclassical modeling methods in recent decades, interpretation thereof is still a battle.

seanmcdirmid 12y ago

For example, when? There are very fundamental truths here; e.g. consumption has to match production with very few exceptions, no matter how much someone has to save (or can't spend according to what they are earning). You might be able to save for a rainy day (or retirement), but it is impossible for the world to do that (instead, they must invest for the future to prepare for that rainy day). I'm not sure you could find a single serious economist who would claim "slight inflation is bad;" i.e. would argue that 2-3% is worse than 0%. Maybe a libertarian, but there is a good reason we never vote them into power.

eru 12y ago
From what I've heard, 0% inflation would be best, but that risks getting into deflation (eg -5% 'inflation'). So 2% inflation is worse than 0%, but better than risking deflation.
- seanmcdirmid 12y ago
  0% risks stagnation, which means investment isn't envouraged or discouraged. Even 1% inflation slightly encourages investment, and really the scale only needs to be tipped a bit to keep the economy moving forward toward growth.
  - deleted 12y ago
    [deleted]
  - eru 12y ago
    I don't get that argument. Perhaps you want something like Demurrage (https://en.wikipedia.org/wiki/Demurrage_(currency) https://en.wikipedia.org/wiki/Demurrage_(currency)), which could give you that incentive without debasing the currency.
    - Dylan16807 12y ago
      If you're talking about the natural costs of holding money, those are miniscule. If you're talking about a tax I don't see how it avoids debasing the currency, or is meaningfully different from inflation. It just makes things more complicated because people can attempt to avoid paying.
  - icelancer 12y ago
    Inflation encourages "investment" which is another way of saying inflation encourages gambling.
- Spooky23 12y ago
  The problem with 0% inflation is that people with money have no incentive to risk it. IMO you need a cycle of inflation between 2-7% to keep things healthy. Dollars stockpiled in some account are not doing anyone any good.
  - seanmcdirmid 12y ago
    Dollars stockpiled in an account will be lent by the bank at a low interest rate (since they have to be invested with little risk). Dollars saved under a mattress actually lead to deflation while they aren't being used, which can mess things up even more.
  - icelancer 12y ago
    >Dollars stockpiled in some account are not doing anyone any good. Why is it that Keynesians believe that money just gets stuffed under a mattress or stockpiled somewhere? It is loaned out at X% interest rates to people who need present-day liquidity to fuel growth. What do you think the VC industry is based on, Keynesian economics?
    - Spooky23 12y ago
      The reality today is that most banks dump deposits into fixed income securities, the vast majority of which in 2014 are Treasury instruments. VC investments are a completely different universe. None of the $7 trillion in deposit balance is going to a VC. Right now, smaller businesses are starved of loan capital, and if you don't offer the high growth rates that VCs need to succeed, it is difficult to get loans.
authatheist 12y ago
You have no idea what you're talking about. Inflation is a tax on savings, but that's alright because money has no value?! But if money actually had no value, there would be no use for it. Consumption "has to" match production?! What's that supppsed to mean? If I produce something no one wants, people "have to" consume it anyway? You say inflation is good because it motivates people to invest (because their money loses value just sitting in a bank), but why wouldn't people want to invest even if their money was gaining in value? The purchasing power of whatever money you earn through investments is increased by deflation too, so the sooner you make a good investment, the better off you'll be.
- Dylan16807 12y ago
  >If I produce something no one wants, people "have to" consume it anyway? You go out of business and stop producing.
  - authatheist 12y ago
    I know that, but the OP didn't seem to. He claimed consumption "has to" match production.
    - Dylan16807 12y ago
      It does, in the same way that effects have to match causes. The only time production can run free with "no consumption" is when someone personally bankrolls extra production, and in that case they're actually the consumer.
      - authatheist 12y ago
        So you're telling me that if I produce a bunch of shit-sandwiches and no one wants them, for whatever mysterious reason, then if I produce some more anyway, suddenly I'm the sole consumer of said sandwiches? How does that make sense, considering no one has even eaten (=consumed) one?
icebraining 12y ago
You might not vote them into part, but the people you do appoint them into power, since Alan Greenspan has argued for zero inflation has the best policy in the long run. I'm not saying that it isn't a misguided theory - I'm far too ignorant to honestly argue macroeconomics - but I disagree with your representation of it as a settled argument, disputed only by cranks.
- tomrod 12y ago
  Economist here. In my view you're exactly right. Though there has been a merging of Neo-Keynesian and Neoclassical modeling methods in recent decades, interpretation thereof is still a battle.