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>inflation is literally destroying your economy for any foreseeable future. Is that actually true? Is inflation really worse than default? I mean, we don't hav

>inflation is literally destroying your economy for any foreseeable future. Is that actually true? Is inflation really worse than default? I mean, we don't have any samples from "advanced" economies, but from the what I've seen, high inflation, in the long run, doesn't seem to be that much worse for economic health than default. They're both very painful, but it's not clear to me that one is especially worse than the other.

ekianjo 12y ago
Have you heard of Argentina, or Germany in the 30s ? Both of them did not like Inflation too much.
- jernfrost 12y ago
  What I've read is that inflation in Germany in the 1930s was actually very usefull. They had an enormous amount of debt they were incapable of servicing. The huge inflation cut the debt to pieces very efficiently. The inflation was not the cause of German problems, it was a symptom of problem of having a too large debt. It is sort of like blaming the flu on the fever. The fever might feel bad but it is actually your body's way of fighting the flu.
  - ekianjo 12y ago
    Probably you should read another version of how inflation "helped" Germany. When you have hyper inflation like that it may be good for paying back your debts, but your creditors soon realize that their payments are worth nothing (because you just print paper, you don't create value like that), and you disintegrate all private investment in your country. Why do you think the Third Reich nationalized every industry out there?
  - dllthomas 12y ago
    My understanding is that German debt was not denominated in paper, but that they had to print money to buy gold at whatever rapidly falling rate people would give. Presuming my understanding is correct, the debt was certainly the root problem, but the inflation wasn't helping - it made it harder to buy the next payment's gold.
- quanticle 12y ago
  Have you heard of Malaysia or Mexico in the '90s? They didn't like default too much either. Germany in the '20s (not the '30s - hyperinflation was over by the '30s - just in time for Germany to be sucker-punched by the Great Depression) was a special case. They hyper-inflated in order to default. Namely, the Triple Entente had imposed massive war debts onto Germany at the end of World War 1, and Germany resorted to printing currency in order to pay off its war debts. When formal default justifies military invasion and the annexation of your territory (which was the French argument when the Weimar Republic talked about default), hyper-inflation begins to look awfully attractive. While it's a trope to use the Weimar Republic as an cautionary tale about inflation, we can't really learn very many lessons from it, because of the relatively exceptional historical circumstances preceding the founding of the Weimar Republic. (In the end, it was all moot, of course. Hitler unilaterally canceled Germany's debt payments, essentially calling the French on their bluff about invading the Rhineland. The French didn't invade, and Hitler was emboldened to pursue further expansionism.)
paganel 12y ago
> Is that actually true? Is inflation really worse than default? I mean, we don't have any samples from "advanced" economies, but from the what I've seen, high inflation, in the long run, doesn't seem to be that much worse for economic health than default. I grew up in an Eastern-European post-communist country which was very badly affected by inflation in the '90s (it ran in the high double-digits for almost all the decade, and in one year it actually surpassed 100%). Let me tell you that to see your life-savings absolutely annihilated in a matter of 2-3 years it's much, much, much worse than deflation. Japan got into the current mess after 20 years and it still manages to build Maglev trains and to be an economic power, but in a country affected by very high inflation all that goes out of the window (see the Soviet Union implosion). And anecdotal recollection, I remember when my parents had asked me to be the one in charge of answering the family's phone (I was 14 or 15), and to tell whomever was calling that they were not home (they had borrowed money from lots of their friends to buy food and to pay for basic apartment maintenance and there is no-way to pay it back). One day a lady judge called, asking my parents to pay back the money they owned her because she did not have money to buy bread. Now, you can imagine that in a country where even judges cannot afford to buy bread for their family things are worse than worse.
- nhaehnle 12y ago
  Your response completely misses quanticle's point. Quanticle was talking about the choice between inflation and default. (So, when it comes to your life-savings, both can be utterly destructive.) Instead of actually addressing quanticle, you went into an irrelevant inflation/deflation rant. It would be nice if we could actually talk with each other rather than at each other in this kind of discussion. Edit to point out once again: Default and deflation are not the same thing. By bringing up deflation in this particular sub-thread, you are further reducing the signal-to-noise ratio in a comment thread that is already of low average quality.
  - paganel 12y ago
    > (So, when it comes to your life-savings, both can be utterly destructive.) As I was trying to say, after 20 years of a shitty deflationary economy the Japanese people still pretty much have their pensions more or less intact, while in a highly inflationary economy (like the one I experienced) the pensions become almost null in a matter of maximum 5 years. So your point, "So, when it comes to your life-savings, both can be utterly destructive" is actually demonstrably false, based on recent historic examples. I agree, we can start the discussion from here, i.e. from demonstrable economic facts. Granted, English is my second to third language, so I try my best at holding a conversation.

ekianjo 12y ago

Have you heard of Argentina, or Germany in the 30s ? Both of them did not like Inflation too much.

jernfrost 12y ago
What I've read is that inflation in Germany in the 1930s was actually very usefull. They had an enormous amount of debt they were incapable of servicing. The huge inflation cut the debt to pieces very efficiently. The inflation was not the cause of German problems, it was a symptom of problem of having a too large debt. It is sort of like blaming the flu on the fever. The fever might feel bad but it is actually your body's way of fighting the flu.
- ekianjo 12y ago
  Probably you should read another version of how inflation "helped" Germany. When you have hyper inflation like that it may be good for paying back your debts, but your creditors soon realize that their payments are worth nothing (because you just print paper, you don't create value like that), and you disintegrate all private investment in your country. Why do you think the Third Reich nationalized every industry out there?
- dllthomas 12y ago
  My understanding is that German debt was not denominated in paper, but that they had to print money to buy gold at whatever rapidly falling rate people would give. Presuming my understanding is correct, the debt was certainly the root problem, but the inflation wasn't helping - it made it harder to buy the next payment's gold.
quanticle 12y ago
Have you heard of Malaysia or Mexico in the '90s? They didn't like default too much either. Germany in the '20s (not the '30s - hyperinflation was over by the '30s - just in time for Germany to be sucker-punched by the Great Depression) was a special case. They hyper-inflated in order to default. Namely, the Triple Entente had imposed massive war debts onto Germany at the end of World War 1, and Germany resorted to printing currency in order to pay off its war debts. When formal default justifies military invasion and the annexation of your territory (which was the French argument when the Weimar Republic talked about default), hyper-inflation begins to look awfully attractive. While it's a trope to use the Weimar Republic as an cautionary tale about inflation, we can't really learn very many lessons from it, because of the relatively exceptional historical circumstances preceding the founding of the Weimar Republic. (In the end, it was all moot, of course. Hitler unilaterally canceled Germany's debt payments, essentially calling the French on their bluff about invading the Rhineland. The French didn't invade, and Hitler was emboldened to pursue further expansionism.)

paganel 12y ago

> Is that actually true? Is inflation really worse than default? I mean, we don't have any samples from "advanced" economies, but from the what I've seen, high inflation, in the long run, doesn't seem to be that much worse for economic health than default. I grew up in an Eastern-European post-communist country which was very badly affected by inflation in the '90s (it ran in the high double-digits for almost all the decade, and in one year it actually surpassed 100%). Let me tell you that to see your life-savings absolutely annihilated in a matter of 2-3 years it's much, much, much worse than deflation. Japan got into the current mess after 20 years and it still manages to build Maglev trains and to be an economic power, but in a country affected by very high inflation all that goes out of the window (see the Soviet Union implosion). And anecdotal recollection, I remember when my parents had asked me to be the one in charge of answering the family's phone (I was 14 or 15), and to tell whomever was calling that they were not home (they had borrowed money from lots of their friends to buy food and to pay for basic apartment maintenance and there is no-way to pay it back). One day a lady judge called, asking my parents to pay back the money they owned her because she did not have money to buy bread. Now, you can imagine that in a country where even judges cannot afford to buy bread for their family things are worse than worse.

nhaehnle 12y ago
Your response completely misses quanticle's point. Quanticle was talking about the choice between inflation and default. (So, when it comes to your life-savings, both can be utterly destructive.) Instead of actually addressing quanticle, you went into an irrelevant inflation/deflation rant. It would be nice if we could actually talk with each other rather than at each other in this kind of discussion. Edit to point out once again: Default and deflation are not the same thing. By bringing up deflation in this particular sub-thread, you are further reducing the signal-to-noise ratio in a comment thread that is already of low average quality.
- paganel 12y ago
  > (So, when it comes to your life-savings, both can be utterly destructive.) As I was trying to say, after 20 years of a shitty deflationary economy the Japanese people still pretty much have their pensions more or less intact, while in a highly inflationary economy (like the one I experienced) the pensions become almost null in a matter of maximum 5 years. So your point, "So, when it comes to your life-savings, both can be utterly destructive" is actually demonstrably false, based on recent historic examples. I agree, we can start the discussion from here, i.e. from demonstrable economic facts. Granted, English is my second to third language, so I try my best at holding a conversation.