3 ms·

We have nonnegative gains in efficiency and we have population growth. If those are not reflected in the monetary base, then the result is a trend in the direct

We have nonnegative gains in efficiency and we have population growth. If those are not reflected in the monetary base, then the result is a trend in the direction of deflation. That presents a set of problems, challenges to very deeply established assumptions about things like government, business and personal debt. Deflation leads to instability, as people who want to work cannot - and not for a good reason, but because of monetary "evils". Happiness is rather a dangerous standard to use - it varies widely. Material comfort is more appropriate for discussions involving economics. Low interest rates also contribute to income inequality - if the market interest rate is 0.5% and your business produces returns of 5%, you're now a "rock star" business, and will attract "too much" investment. As there evolves winners and losers in that game, income inequality rises.

mark_l_watson 12y ago
You might enjoy reading the Austrian Economics take on this at the mises.org web site. Their front page has a few articles on how (sometimes) deflation is just fine.
- ArkyBeagle 12y ago
  This ( plus nearly all of Rothbard ) is where I disagree with the Austrians. I don't think specie-fever is particularly an Austrian .. opinion but they're also highly correlated - Austrians tend to be fond of gold. If I win my bet, specie is pretty dramatically a bad idea, as the interwar stories show well enough for me. Austrians in general don't seem to grasp that flows matter as much. When I want to be hyperbolic, I will accuse deflation of being a big contributor to WWII. I just don't like the idea of the level of currency in circulation being a drag on transactions. Throw in that how debt can be a real problem for people, and I just can't go there. I rather giggle at the "Hayek and the suit" story, although I admire Hayek greatly. I'm closest to Friedman/Fisher/(these days)Sumner. Mainly because the story is one of poor instrumentation leading to policy that doesn't do what we want, which suits my biases. "Interfluidity" did an ( I think ) brilliant piece titled "Depression Is A Choice" in which they mused that deflation may well reflect our revealed preferences.

mark_l_watson 12y ago

You might enjoy reading the Austrian Economics take on this at the mises.org web site. Their front page has a few articles on how (sometimes) deflation is just fine.

ArkyBeagle 12y ago
This ( plus nearly all of Rothbard ) is where I disagree with the Austrians. I don't think specie-fever is particularly an Austrian .. opinion but they're also highly correlated - Austrians tend to be fond of gold. If I win my bet, specie is pretty dramatically a bad idea, as the interwar stories show well enough for me. Austrians in general don't seem to grasp that flows matter as much. When I want to be hyperbolic, I will accuse deflation of being a big contributor to WWII. I just don't like the idea of the level of currency in circulation being a drag on transactions. Throw in that how debt can be a real problem for people, and I just can't go there. I rather giggle at the "Hayek and the suit" story, although I admire Hayek greatly. I'm closest to Friedman/Fisher/(these days)Sumner. Mainly because the story is one of poor instrumentation leading to policy that doesn't do what we want, which suits my biases. "Interfluidity" did an ( I think ) brilliant piece titled "Depression Is A Choice" in which they mused that deflation may well reflect our revealed preferences.