[bko]

> A monetary policy targeting stable, low, but positive inflation balances savers' need for a risk-free store of value with the social need for continued investment and consumption.

I think both these purposes are served with zero or deflation. As a saver, I don't like my dollars being depreciated and people on fixed income also don't like that. And as someone who wants to promote investments, a lower deflation rate reduces my minimum expected return since it doesn't have to clear some inflation hurdle rate. And for consumption, like I mentioned in my original post, the hottest selling items are rapidly depreciating, so I don't think it would negatively effect consumption. So the only one the inflationary system works for are the politicians that use money printing as a backdoor form of taxation

[AnimalMuppet]

Deflation means that I can make money (or more precisely, value) simply by leaving what I have in cash. That doesn't promote investment; it promotes hoarding.

[immibis]

That's the same as investment. If a part of society's resources aren't directed towards consumption, they are directed towards enabling future consumption. It's a tautology in economics that savings equals investment.

[AnimalMuppet]

Saving it under a mattress is not investment, as "investment" is normally understood. It's just savings.

[immibis]

It's the same thing in economics. It causes the government to print more money to make up for the money missing from circulation, which will be invested. If the government doesn't do that, it increases the value of all other money in circulation.

[soVeryTired]

But that’s under some weird, incorrect model of how money works. Presumably if we go down this route any further you’ll start talking about IS/LM and the money multiplier. All models are wrong, but there’s a better model that involves capital constraints and the Basel accords.

In any case, one of the major failings of modern macro is to assume you can think your way around the implications of economic actions. You have no way of knowing the consequences of stashing money under a mattress unless you actually do it, and even then there’s no guarantee the effect will be the same across different economies and in different eras. The world is just too complex for that.

[immibis]

Are you calling the entire field of economics a pseudoscience?