[ketchupdebugger]

wages not rising contributes to lower inflation. If prices fall, thats deflation, arguably worse than inflation. When prices fall, people stop buying in anticipation of prices falling further. When people dont buy, economy basically stops.

[WalterBright]

> arguably worse than inflation. When prices fall, people stop buying in anticipation of prices falling further. When people dont buy, economy basically stops.

The idea that 2% inflation is good for the economy, and deflation is bad smacks of the government selling the idea because increasing government spending via inflation is a way to raise taxes without raising taxes.

As for deferring spending because prices will be lower in the future is not economically any different than deferring spending because you want the gains from investing the money. The economy doesn't collapse when people invest for the future, so I'm skeptical of that theory.

[kldavis4]

> The idea that 2% inflation is good for the economy, and deflation is bad smacks of the government selling the idea because increasing government spending via inflation is a way to raise taxes without raising taxes.

I think the premise is that deflation is much much worse (and not amenable to the available controls that the Fed has available) and it is pretty impossible to reliably target < %2 inflation, so effectively the idea of "2% inflation" is the minimal possible amount of inflation.

[WalterBright]

Before the Fed took over the banks, 0% inflation was common and normal. Inflation netted out to zero for the previous century.

The very first year after the Fed took over, endemic inflation settled in.

> and not amenable to the available controls that the Fed has available

We had deflation in the Great Depression because the Fed did not understand their role in creating money.

[vharuck]

>The economy doesn't collapse when people invest for the future, so I'm skeptical of that theory.

Investing is different from storing cash in your mattress for a rainy day. Investment is effectively buying things now (labor, machines, supplies, property) in order to produce something more valuable later. So that money stays active in the economy. Even if you're buying stock from somebody unrelated to the company behind the stock, that person might use your cash to buy a house, pay donate to charity, or start a company.

[WalterBright]

But again, people are delaying purchases because they'd have more money later. With people not buying, the economy collapses according to your theory. But that doesn't happen.

BTW, all the money you have on deposit is invested back into the economy by the bank, less the reserve requirement.

[littlestymaar]

> all the money you have on deposit is invested back into the economy by the bank, less the reserve requirement.

Please read how the money system works before talking on the topic, you really are embarrassing yourself here Mr Bright.

Banks aren't lending their customers' deposits (because you can't lend your liabilities…) and reserve requirements are in federal funds, which is a specific type of currency, it's not the same dollar as the one their customers have in deposits (which again, are on the liabilities side of banks balance sheet).

[littlestymaar]

And yet you have all the crypto tokens being used as securities instead of the currency they were supposed to be, and that's because of this exact reason!

[ketchupdebugger]

you are not going to defer on everyday necessities, but you can defer on big item purchases. If you are in the market for an EV, and the report is that EV's are getting cheaper every year. You may just defer that purchase as long as you can. If you are in the market for a house and the report is that housing prices are increasing by 10% every year, you regret not buying that house yesterday.

[WalterBright]

And yet if you invest the money, the EV gets cheaper for you every year.

[nah_no_not]

Quoting: "The idea that 2% inflation is good for the economy..."

Two goods (A and B) both were aviable for US$100 in 2019.

First A: 2020 inflation added +1.4% so good A cost $101.40 2021 added another +6.8% so good A now aviable for $108.30 2022 adds um ~8% A now costs $117,- 2023 added another ~3.6% buy good A now for $121,- (!!!)

Wow! Some may think, the price is up 20%

Now take good B everyear inflation adds +2

so good B costs also $100,- [Liste:] 2020 = $102,- 2021 = $104,- 2022 = $106.10 2023 = $108.24

"quoting": "Government selling an idea to raise spending -cos inflation is a way to raise taxes without raising taxes."

...or -marketing-(crossed) to sell stability over "Control" ?

now that became political...(wayback)

hint: //wiki/Starve_the_beast

"Starve the beast" is a political strategy employed by American conservatives to limit government spending by cutting taxes. Economist Paul Krugman summarized: "Rather than proposing unpopular spending cuts, Republicans would push through popular tax cuts, with the deliberate intention of worsening the government's fiscal position. Spending cuts could then be sold as a necessity rather than a choice, the only way to eliminate an unsustainable budget deficit.

regards...

[WalterBright]

Without republican votes, we now have an unsustainable budget deficit. What do you suggest?

[littlestymaar]

Get back to Nixon's era tax rates and deficit is gone…

[Geisterde]

Look at the time price of goods, its easy to dispell this myth. The price of news tvs goes down in time price constantly, and it shows in the overabundance of TVs. You have been totally deceived regarding economics, unfortunately.

[littlestymaar]

How many people are buying pizzas in bitcoin nowadays? That's what you get when a currency is deflationary: everyone hoards it. (For bitcoin it's not a big deal, when it was Reichmarks we got the worse economic crisis of the continent and questionable people reaching power…)

[Geisterde]

Are you asking how much money is transacted on the bitcoin network every day? Have you heard about the treaty of Versailles? You think it was a shortage of Reichsmark's?

Are you serious?

[littlestymaar]

> Are you asking how much money is transacted on the bitcoin network every day?

No I'm talking about the amount of bitcoin that's being used for actually buying things, like what money is doing.

> Have you heard about the treaty of Versailles?

The rise of Hitler is as related to the Treaty of Versailles as it is related to the Jews having backstabbed Germany: absolutely not except that it was part of the Nazis' populist discourse [0].

> You think it was a shortage of Reichsmarks?

In 1930-1933 definitely, and it's a well documented[1] fact that the memory of the hyperinflation of the decade before pushed the government to a destructive deflationary monetary and fiscal policy that cause way more economic damage than in neighboring countries and led the Nazis to power.

[0] the US Congress not having ratified the treaty, and the influence of Keynes book *The economic consequences of peace” in the UK made the treaty kind of moot anyway, as Germany really never really respected it in the first place (especially, they weren't paying what the treaty said they should) and France alone had little leverage to enforce it.

[1] see for instance:

- https://krugman.blogs.nytimes.com/2013/02/12/its-always-1923...

- https://blogs.lse.ac.uk/businessreview/2021/10/19/debunking-...

But there really a lot of resources out there talking about Brüning's deflationary policy.

[Geisterde]

>like what money is doing

Currency isnt money. Your money, believe it or not, is gold. In 1971 the gold window closed, the price (of this gold) is controlled centrally, its supply is relatively unknown, but the global banking standard was formed under the gold standard, and a few policies were enacted to abstract the dollar away from the gold underneath. Today, governments and banks do a lot to obfuscate this fact, but it is evidenced in the fact that currency cannot be created without a corresponding debt. This is fiduciary credit, implicitly not explicity backed, and created in quantities that are politically acceptable.

The deflation you speak of is the natural consequence of this system. It is inherently unstable; dollars are created when a loan is issued, that loan must eventually be repaid with interest, but there was only ever enough currency to repay the principle. The only way to keep any amount of currency in circulation is to take on more debt, and that requires willing buyers who are continuously devalued, but if you dont then of course everything collapses, only thing is, you cant compare that to gold or bitcoin.

When times turn sour and people hold their money, you see interest rates rise, unprofitable ventures get washed out of the market. Those companies capital goods return to market creating opportunities for profitable companies. As conditions stabalize around companies that pull their own weight, rates go down and new ventures form. Not so with fiat, when conditions go bad and people save money, the blast radius is everyone with debt, for which there is not enough currency to pay, and cascading defaults emerge as an existential threat to the economy.

I liken it to playing with explosives. Whatever you think you gain by cheap credit, I would point to the disastrous effects of WWI, the prolonging of the great depression, the housing bubble of 2008, and the overall inflation of the last few years. There is far more, but in terms of major events its easy to point to these as examples of how much damage fiat causes.

[littlestymaar]

> Your money, believe it or not, is gold

Ahahahha.

Let me teach you something: you know this interesting factoid that everything that you've know as a child appears to be obvious whereas everything that comes after is regarded as being somewhat unnatural (in good or in bad though)?

Well that's exactly how this idea of gold being the money was born: gold as the money standard is a pretty recent idea, it only took of in the late 19th century[0], when bimetallism (gold + silver, which had been ubiquitous for hundreds of years[1]) died because of the massive improvement in silver extraction capacity (thanks industrial revolution, yet another good ol' thing you destroyed!). But lots of folks grew up during the short period of time where the gold standard had existed, and then it appeared to some of them that “money equals gold” was obvious and everything that came after was bad.

But the truth is, money is whatever people use to pay stuff, although it's better if it can be stored in some fashion for a certain time without losing all value (that's why overinflation is bad, even though people routinely live fine with low double digit inflation).

(Also, everything else I read from your comment is QAnnon-level of “dude WTF”… I quited reading after too many yikes, sorry)

If you really want to learn stuff about money, free from contemporary ideologies, you should go read Allynn Young, he's from a century ago and he talks brilliantly about the history of money in the US before the Fed was created. And, spoiler alert, it's not the kind of “rosy sound money” fantasy: it was a bloody mess.

But you can also keep parroting conspiracy theories if that's your thing, who am I to judge.

[0]: though most money was debt-based fiat already, but at least there was some kind of pegging.

[1]: even then, the metal itself was only really used for international trade, for domestic trade the face value was commonly used, and debasement was routine)