[roenxi]

> What's the grand cosmic purpose of having something that holds a "constant amount of value" (whatever that means)?

Well, if a sandwich shop was selling sandwiches for $10 last year and $11 this year, it'd be convenient for me to have a way of telling if the real price of a sandwich has gone up without needing to do any calculations and look up statistical data. I think most people would benefit from that sort of comparative power to be honest; it is difficult to keep track of whether the offers being made are better or worse value as time passes. If the value of money were constant, then a $11 sandwich in 2024 would be guaranteed more expensive than a $10 sandwich in 2023.

I've talked to several people who are convinced the economy would collapse if that sort of constant pricing was normal practice. I have reservations about their claims.

[SiempreViernes]

But what purpose does the "constant value object" serve here? To evaluate if the real sandwich price has changed you need information about the sandwich (and the rest of the economy)...

[roenxi]

Seems like the easy way to get close to a 0-inflation policy. How would you get close to a situation where the price going from $10 to $11 indicated that the real price of a sandwich had risen?

[JumpCrisscross]

> How would you get close to a situation where the price going from $10 to $11 indicated that the real price of a sandwich had risen

You can’t. You need more data. Otherwise, you wind up trying to mandate what a wheat plant does by law. The simple answer is a siren’s call.

[roenxi]

If it is possible to target 2% inflation and 3% inflation, then it is possible to target 0%. We're not dealing with particularly complex ideas here.

And if we anchored the unit of measurement to some commodity - which appears to have been standard practice for most of human history, I might add - then we'd be able to get a pretty good estimate of relative real changes in prices. It'd be more accurate than the current system of targeting constant price changes.

It wouldn't be perfect, but the current policy is basically printing money and handing it out to asset owners - which is not only imperfect but wildly unfair, distorts markets in unhelpful ways and looks a lot like it is heading for a large financial collapse.

[JumpCrisscross]

> If it is possible to target 2% inflation and 3% inflation, then it is possible to target 0%

Look at the variance about 2%. Except now you risk depression. Which means when you get it a little wrong, you get people and companies defaulting on loans and mass lay-offs.

> if we anchored the unit of measurement to some commodity - which appears to have been standard practice for most of human history

The theory for why this is a bad idea was written in the 19th century and practice the 20th. Also, if you’re concerned about the rich getting richer, deflationary and anti-growth commodity money is the opposite of what you want.

[roenxi]

Does any of this this theory come with a reference? Because as arguments go that is so information-lite I'm not even what theory you are invoking.

I'm not worried about the rich getting richer. I'm worried about market distortions and unfairness. I think everyone should be getting richer; the rich included.

> Which means when you get it a little wrong, you get people and companies defaulting on loans and mass lay-offs.

So, not much change from the current state? We have a big financial crisis about once a decade, usually accompanied by mass layoffs and bankruptcies.

Besides, defaulting on loans and layoffs isn't when the damage is done. The damage is done when bad loans are made and people are hired for jobs that aren't actually value-creating. You're complaint here is that we would be detecting and recognising real economic damage - that is something we should be doing. If people make bad loans they shouldn't get to pretend they made good ones, and people should be redeployed from low-value jobs to high-value jobs. There is no point making people do bullshit work.

[JumpCrisscross]

> it'd be convenient for me to have a way of telling if the real price of a sandwich has gone up without needing to do any calculations and look up statistical data

This is the core problem of economics. If we solve it, we solve, well, the economy. Nobody would need to buy anything; we could just produce and send everyone what we know they want. No need to consider unpredictable variations in individual choice and discretion.

Of course when you include that pesky individualism, this model breaks down. Because it becomes impossible to structure production today to perfectly meet demand tomorrow. Making currency transformations across eons breaks down because it doesn’t make sense to ask how many talents of silver Caesar would have paid for an iPhone.

> talked to several people who are convinced the economy would collapse if that sort of constant pricing was normal practice

No? Are you confusing what you described—which is the aim of price-level targeting—with fixed-price policy?

[roenxi]

> No? Are you confusing what you described—which is the aim of price-level targeting—with fixed-price policy?

There are people who seem to literally believe that without inflation people will refuse to invest in anything and choose to return to a cave-dwelling existence. I don't know how prevalent they are, but they turn up in these sort of threads.

[littlestymaar]

> There are people who seem to literally believe that without inflation people will refuse to invest in anything

No. The problem comes without increase of the money supply. If there isn't enough growth to support the growth of the economy, then yes you're definitely hurting it (and if the supply is fixed, then your economy is going to be practically deadlocked).

The nice thing with commodity currency in the preindustrial era is that they accumulate roughly like the overall capital accumulation and productivity so it kind of works (it's not optimal though, and the massive increase of supply from the “new world” and the adoption of credit-based paper money triggered a period of higher growth that eventually led to the industrial revolution).

There's debate on inflation itself, but the economic consensus is in favor of price stability and that's what central bank are targeting. The reason why they are targeting 2% and not 0% is something you can learn from any book or economic resource on the internet, but there's nothing we can do against the fact that you somehow decided never to document yourself on the subject…

Your stance of “I've no idea how the works works or why it works this way and I won't try, but it definitely suck and doing this instead would be better” doesn't make you look good, you know?

[JumpCrisscross]

> people who seem to literally believe that without inflation people will refuse to invest in anything and choose to return to a cave-dwelling existence

Yeah, I’ve seen them. They’re wrong. The point is price levelling is computationally expensive. It can never come for free. If your economy is dynamic—let alone growing—prices will slip. From time to time, they will do so in a generalised form.

I actually think policymakers’ aversion to deflation comes from its intractability. Lots of societies have collapsed before they could solve deflation. Our examples of inflationary shitshows is partly due to their resilience—a deflating society starves fast.

[roenxi]

> Lots of societies have collapsed before they could solve deflation.

Are there? What were these societies?

If I go to the deflation page on Wikipedia (https://en.wikipedia.org/wiki/Deflation) the preponderance of examples are places that are actually pretty nice to live and as far as I can see have uniformly not collapsed.

[littlestymaar]

Look up Brüning maybe? ;)

[roenxi]

I looked him [0] up. They were trying deflation because they'd tried inflation in the 1920s and that, spectacularly, didn't work. The issue at the time seems to have been that old favourite; the Treaty of Versailles. Germany at the time was under what was described as a "Carthaginian peace" by Keynes who took the opinion that it was trying to destroy Germany's economy.

Given that the German economy then failed; I don't think that is necessarily a reasonable example of failed internal policy. It would be reasonable to interpret it as a society burdened with too many debts to foreign powers with no way to recover.

[0] https://en.wikipedia.org/wiki/Heinrich_Br%C3%BCning