[Panzer04]

Making an inelastic resource (gold) the unit of exchange in a growing economy is a recipe for deflation. You don't want the most economically sensible decision to be holding onto capital, since that results in precisely nothing useful being done.

[tmn]

This seems to be an orthodox opinion I see often, and I get the intuition. But time preference is a real thing. Tech is the easiest example. People buy tech that they don’t need that will be significantly cheaper in the future. I’m not a historical expert, but this specific point didn’t seem to be an issue during the time periods we were on the gold standard.

[csense]

Having lived through the 1990's, "Deflation = bad" is a claim I am very skeptical of.

In the 1980's and 1990's computer industry, your dollars could buy a lot more megahertz or megabytes every year.

If the "deflation = bad" people were correct, everyone should have held onto their dollars waiting for next year's tech, knowing it would be a lot better than this year's tech. No one should have wanted to buy computers, and the tech industry should have been in a gigantic depression.

[Panzer04]

There's a difference between deflation due to productivity growth and deflation due to lack of money. Deflation is good if it's the result of us producing more of a thing better and thus driving the price down.

Broad-based deflation due to a lack of money to buy goods and services is bad.

[tony69]

Deflation is fairer and reduces moral hazard in finance. The weak point of gold is that it’s too slow to settle transactions (you have to move it), so a paper gold system on top of it inevitably arises. [0] “broken money” by Lyn Alden

[shash]

Deflation (defined as, the value of the currency goes up with time) means that prices go down with time. This however tends to accumulate wealth and not have it move around in the economy (it being more remunerative to hold on to your currency because its value increases). This makes it harder to run an economy because eventually, with a fixed supply, all the currency gets hoarded and only a bare minimum circulates to buy essentials.

A little inflation means that your currency buys stuff _today_ that's worth more than hoarding it for _tomorrow_, so you spend, vitalizing the economy.

The reality is, it needs to be balanced. There needs to be enough money in circulation such that economic activity is not stymied, but not so much that it starts price wars.

Kinda like blood sugar!

[tony69]

You have it reversed.

Currency inflation leads to unfair distribution because the value of financial assets grows faster than the real economy (it inflates).

Currency deflation benefits the poorer. As technology and productivity grow, it costs less to produce goods, so their prices should decrease.

The currency hoarding behavior that you describe is no different than today’s financial investment.

It is trivially easy to avoid the effects of inflation by investing - if you have assets to invest, that is. But if you live month to month, you get screwed by inflation, because your salary is sticky as prices rise.

[fuzzfactor]

What if everybody's correct in some way and things like this are so uncertain simply because a "consumer" economy no longer bears much resmeblance to a "producer" economy.