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by pram
1884 days ago
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Appreciation due to contracting supply. In a fractional reserve system, if monetary velocity is low enough the total supply naturally shrinks. This is the "pro-savings, deflation-allowable" economy I am responding to. Money can appreciate in the sense that there is literally less of it to be spent on things, in aggregate. It's a pretty basic econ 101 supply and demand problem. Aggregate demand and supply is very much affected by currency and commodity appreciation, contrary to what you're saying. Additionally there is volatility, and there is price discovery. Today, right now. Things are already how you want them to be. The dollar depreciates and appreciates against commodities and other currencies all the time. |
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Bingo! But, I do not see anyone complaining about this "only benefiting the creditors".
> econ 101
To be fair, I find a reference to very weakly approximating models of reality, taught to ignorant and naïve students for the sake of starting them off somewhere, to be slightly disingenuous.
> Appreciation due to contracting supply.
Contracting supply is not the only reason for appreciation. If we take that fact into consideration then your causality arrow of 'low monetary velocity' -> 'supply shrinks' -> 'appreciation' is one of many possible paths. Therefore, deflation is not what causes appreciation, it is in of itself a description of that very appreciation. Again, appreciation RELATIVE to something. You seem to be ignoring this very important fact.
You also created circular thinking. In a prior comment you said the deflation causes monetary velocity to fall, and then you say monetary velocity causes appreciation. Appreciation is where the deflation comes from. So, which is it? Deflation pops into existence and causes monetary velocity to fall? Or a magical appreciation occurs from a slowing monetary velocity and causes deflation to occur?
> In a fractional reserve system
Yes, in a central banking system the 'monetary velocity' is artificially controlled. Almost completely. You can push money into parts of the economy to inflate things at a whims notice. Then everyone loves that the "values" of investment vehicles are bigger than they were yesterday.
So, you are effectively only arguing for the status quo. But the status quo is not working. Is this really your best argument?
> volatility, and there is price discovery
Ah, word games. Even if someone might provide definitional differences, there is no objective real-world difference between the two things.
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Here is what I argue for:
Not allowing natural (not managed) volatility (or 'monetary velocity') -- MOVEMENT -- is a fool's game. You cannot beat basic game theory that is dependent on the biology of humans. You just can't. There is no fancy economic jargon that can allow you to. There is no monetary policy that will enable you to. You can pitch and sell artificial manipulation of the economy (via economic theories or political ideologies) but you are only pitching bubbles.
Allowing natural periods of deflation in the economy allows for volatility, trade, flux, interest, investment, wins, ... and here is the most important word: losses.
Loss. It allows for someone to actually lose.
These hippie boomers have never had to lose anything in their lives. The artificial manipulation of the markets and the economy reflects this mindset and attitude.
There is more than one currency and that fact alone negates any possible argument against allowing deflation to occur naturally in the economy. If it occurs because of temporary "contracting supply" (of one currency) then so be it.