Partially true. It’s also an attempt to run away from deflation, which destroys economies. Holding a stable position with no inflation or deflation is not really possible in the real world.
Important to distinguish two types of deflation from each other.
Type one is the deflation that is caused by contraction of the money supply. In the current system if the M2 aggregate shrinks it causes deflation. Slowing economy causes bankruptcies which cause shrinking of M2 which looks as a deflation and forces more slowing down of economy as money gets scarce. Central banks inflate money supply to fight this kind of deflation. If you are not rich already, you will never see any money from these money bags.
Type two deflation is natural and happens organically with progress. We saw natural deflation for years in electronics, where it beated the inflation targets by central banks. And prices of electronics were going down in the whole sector without disturbance. Savings allows you to eventually buy more efficient products.
A given amount of time and labor producing more and being able to get you more is progress.
Deflation brings a host of problems - but among them are it encourages hoarding (not saving), and the fact that it makes previous debts more and more costly over time.
The core of the problem is that deflation encourages and enables wealth hoarding. The rich get richer by doing nothing but sitting on the wealth they already have.
inflation does this too given that the rich have access to investment vehicles that the poor don’t
This is true with the way that things currently are.
In theory, investing is participating in the economy, and functionally better (for everyone else) than simply keeping money in a static account (or just keeping it under your mattress). In a deflationary economy, everything beyond basic needs grinds to a halt because spending money is disadvantaged. This fucks over the poor who have to spend most of their money on basic needs, while the wealthy sit on their hoards like dragons.
Exactly, which is why poor people go bankrupt during deflation, while the rich can just save their money and get richer and richer without even taking risks or investing (no investment, no jobs)
There is a balance though or else the system feedback breaks the economy. Too much deflation and the “progress” stops because it starts making more and more sense for people to hold off on spending their money as much as they can. As an extreme example, if you know you can buy twice as much of something for the same dollar tomorrow, you must really need that thing right now to justify not waiting for a day. Scale that behavior across the entire population and it can start producing real problems.
It would break the economy if people stopped buying shit they didn’t need. I really wish these numbers didn’t correlate to whether or not people had food or housing or healthcare, otherwise that sounds like a wonderful way to slow the erosion of the natural world at the hands of overconsumption
Sorry but the beliefs you’re expressing are deeply neoliberal (and false).
First of all, NOTHING is natural about money.
If people are saving in cash, then more and more money is removed from circulation, which leads to economic downturn (see any example of deflation in history). This is among the reasons why most countries aim for 2% inflation target.
Also, investment is important actually (shocker). If you don’t want to invest in business or anything you can invest in government bonds. That’s right, the entity that creates the money in the first place also gives you a tool to save your money and mostly beat inflation.
“We could have 0% inflation if we wanted” - No we can’t? If a raw material becomes scarce and the price goes up, the products have to increase in price too. These prices don’t go back down on their own, thats unfortunately not how markets work. That’s literally what this whole post is about.
markets and money are entirely human creations. Nothing about them is natural. Stop worshipping them.
It is natural. It’s something that is suppose to happen in a healthy economy. When businesses do well, they should increase wages, when wages increases demand for goods and services increases and supply decreases, when supply decreases cost goes up. That is inflation. It is normal when things are going correctly.
Currently everything is shitty and the Fed is throwing money at the economy to keep us out of a recession. They’ve been doing that since trumps first term and it’s the reason our debt is out of control.
It is natural. It’s something that is suppose to happen in a healthy economy. When businesses do well, they should increase wages, when wages increases demand for goods and services increases and supply decreases, when supply decreases cost goes up. That is inflation. It is normal when things are going correctly.
…
All of what you just said relies on an ever growing economy…
Something that on a (not even really consider how long humans have been around) long timeline isn’t possible.
It’s just not.
It’s like if Newton saw an apple fall from a tree, and immediately looked away before it hit the ground so he said that means gravity always accelerates a dropped item faster and faster and it will never stop even when the ground shows up it will just barrel thru the entire planet and out the other side…
The reason you think it can go on growing forever, is youre thinking on way too small of a timeline.
Like, that’s the main problem with today’s economy…
It doesn’t rely on ever growing economy. Again it’s normal. Ups and downs are normal. When demand pulls back due to high prices the economy is suppose to shrink, thereby going through something like a reset. The government tries to prevent that because people get mad when they lose their jobs and vote out whoever is in power at the time.
It is basic economics it has nothing to do with my ideology or ideas. You should check your ego because you think that every single country is dumber than you and hasn’t figured out how to balance their economies. Trust me you are not the first person on the planet to think about how to minimize or eliminate inflation.
Ive already explained it as simply as I can and have nothing to gain from trying any harder. Whether or not you understand this, or anything else… just doesn’t matter.
Congrats, you “win”. I’ll never explain anything to your account again.
Reminder that inflation isn’t a natural thing
It’s something intentional to discourage people from having savings accounts and make them feel like they need to invest to “beat inflation”.
We could 100% have zero inflation, it just wouldn’t benefit the wealthy.
Inflation is just a tax on trying to save money.
Partially true. It’s also an attempt to run away from deflation, which destroys economies. Holding a stable position with no inflation or deflation is not really possible in the real world.
Important to distinguish two types of deflation from each other.
Type one is the deflation that is caused by contraction of the money supply. In the current system if the M2 aggregate shrinks it causes deflation. Slowing economy causes bankruptcies which cause shrinking of M2 which looks as a deflation and forces more slowing down of economy as money gets scarce. Central banks inflate money supply to fight this kind of deflation. If you are not rich already, you will never see any money from these money bags.
Type two deflation is natural and happens organically with progress. We saw natural deflation for years in electronics, where it beated the inflation targets by central banks. And prices of electronics were going down in the whole sector without disturbance. Savings allows you to eventually buy more efficient products.
Money buying more goods/services than it did 2 years ago is called “progress” and is literally the entire point of human civilization…
no - money is the means by which value is traded.
A given amount of time and labor producing more and being able to get you more is progress.
Deflation brings a host of problems - but among them are it encourages hoarding (not saving), and the fact that it makes previous debts more and more costly over time.
Money being worth more than it was 2 years ago also means any debt you carry is suddenly worth more than it was when you borrowed it…
Exactly. Nobody is gonna say “I won’t buy food today because it will be cheaper tomorrow.” A man’s gotta eat.
The core of the problem is that deflation encourages and enables wealth hoarding. The rich get richer by doing nothing but sitting on the wealth they already have.
Got some bad news for you, inflation does this too given that the rich have access to investment vehicles that the poor don’t.
I would argue this is better for poor people, cause they can’t just keep all their money as investments
This is true with the way that things currently are.
In theory, investing is participating in the economy, and functionally better (for everyone else) than simply keeping money in a static account (or just keeping it under your mattress). In a deflationary economy, everything beyond basic needs grinds to a halt because spending money is disadvantaged. This fucks over the poor who have to spend most of their money on basic needs, while the wealthy sit on their hoards like dragons.
Exactly, which is why poor people go bankrupt during deflation, while the rich can just save their money and get richer and richer without even taking risks or investing (no investment, no jobs)
it will change what you eat and how you eat and how frequently you do it.
There is a balance though or else the system feedback breaks the economy. Too much deflation and the “progress” stops because it starts making more and more sense for people to hold off on spending their money as much as they can. As an extreme example, if you know you can buy twice as much of something for the same dollar tomorrow, you must really need that thing right now to justify not waiting for a day. Scale that behavior across the entire population and it can start producing real problems.
It would break the economy if people stopped buying shit they didn’t need. I really wish these numbers didn’t correlate to whether or not people had food or housing or healthcare, otherwise that sounds like a wonderful way to slow the erosion of the natural world at the hands of overconsumption
Sorry but the beliefs you’re expressing are deeply neoliberal (and false).
First of all, NOTHING is natural about money.
If people are saving in cash, then more and more money is removed from circulation, which leads to economic downturn (see any example of deflation in history). This is among the reasons why most countries aim for 2% inflation target.
Also, investment is important actually (shocker). If you don’t want to invest in business or anything you can invest in government bonds. That’s right, the entity that creates the money in the first place also gives you a tool to save your money and mostly beat inflation.
“We could have 0% inflation if we wanted” - No we can’t? If a raw material becomes scarce and the price goes up, the products have to increase in price too. These prices don’t go back down on their own, thats unfortunately not how markets work. That’s literally what this whole post is about.
markets and money are entirely human creations. Nothing about them is natural. Stop worshipping them.
If you’d have asked questions, you could have learned things…
It is natural. It’s something that is suppose to happen in a healthy economy. When businesses do well, they should increase wages, when wages increases demand for goods and services increases and supply decreases, when supply decreases cost goes up. That is inflation. It is normal when things are going correctly.
Currently everything is shitty and the Fed is throwing money at the economy to keep us out of a recession. They’ve been doing that since trumps first term and it’s the reason our debt is out of control.
…
All of what you just said relies on an ever growing economy…
Something that on a (not even really consider how long humans have been around) long timeline isn’t possible.
It’s just not.
It’s like if Newton saw an apple fall from a tree, and immediately looked away before it hit the ground so he said that means gravity always accelerates a dropped item faster and faster and it will never stop even when the ground shows up it will just barrel thru the entire planet and out the other side…
The reason you think it can go on growing forever, is youre thinking on way too small of a timeline.
Like, that’s the main problem with today’s economy…
It doesn’t rely on ever growing economy. Again it’s normal. Ups and downs are normal. When demand pulls back due to high prices the economy is suppose to shrink, thereby going through something like a reset. The government tries to prevent that because people get mad when they lose their jobs and vote out whoever is in power at the time.
It is basic economics it has nothing to do with my ideology or ideas. You should check your ego because you think that every single country is dumber than you and hasn’t figured out how to balance their economies. Trust me you are not the first person on the planet to think about how to minimize or eliminate inflation.
Ive already explained it as simply as I can and have nothing to gain from trying any harder. Whether or not you understand this, or anything else… just doesn’t matter.
Congrats, you “win”. I’ll never explain anything to your account again.