[jr3592]

> Inflation does incentivize spending, yes.

All inflation incentivizes is finding an asset class that isn't devaluing. If that is what you mean by "spending" then we align. But does inflation incentivize spending money on depreciating assets? Only for fools.

[inigyou]

Everything depreciates in a long enough term. What would you rather own?

[fragmede]

Does it? Outside of a couple of rich island city-states, they're not making more land, so on a long enough timeline, that asset class is bound to go up eventually. Same with gold – there's a limited supply of it on Earth, so at some point we'll mine it all, and then what? The question is how assets perform on a given timeline, and how it does relative to inflation. I could guarantee you 1% a year returns if you give me money, but no one would do that because that's less than inflation, as well as a number of other classes of assets.

[fluoridation]

The price of land is approximately correlated to the total population, because that's the variable part of the supply-demand equation. If there's fewer people there's less need to grow a lot of food, less space needed to manage waste, less space needed to house them, etc. etc. There's nothing productive you can do with land that would justify a very high price if there's only 50 thousand humans in the world; if one parcel of land is too expensive just go find and claim a different one for yourself.

So, yes, on a long enough time frame, land also goes down in value, because human population is likely to at some point go down.

>I could guarantee you 1% a year returns if you give me money, but no one would do that because that's less than inflation

What do you mean, "no one would do that"? If you're guaranteeing that ROI, someone who's investing with you instead of holding currency at 2% inflation would see their savings depreciate by only half as much, at no risk, perhaps with just some liquidity loss depending on what your terms are for pulling out. I assure you there's people out there who would take that deal.

[fluoridation]

??? "All" it incentivizes? Uh, no. The vast majority of people don't treat their salaries as an investment opportunity, they have to live off it. If you need to fix your water heater, you might get it fixed now while inflation is high than wait until winter (not a great example given the time scales involved, but it gets the point across). Even if you have nothing that you desperately need, if inflation is really high you might blow it on something frivolous because if you try saving it it won't be worth anything in one or two year's time.

Inflation doesn't push people towards non-devaluating assets, it pushes people to get rid of currency by any means they have available.

[jr3592]

???

OBVIOUSLY if you absolutely HAVE to spend money because your life depends on it (ex: hot water) then you're going to be incentivized to spend it sooner rather than later in an inflationary market.

I'm referring to discretionary spending. Eating out. Buying a new laptop. Traveling. Etc.

This statement: "it pushes people to get rid of currency by any means they have available." is just flat out wrong. If you're draining your bank accounts on discretionary purchases right now, that's your mistake.

I would include retiring before you absolutely have to as "discretionary". Now is not the time to make a decision like that, when the alternative is a smarter financial decision (work, save, invest in assets that aren't devaluing at the same rate as currency).

[phil21]

Inflation absolutely stimulates spending. Especially if it's predictable and people are paying attention.

Peak COVID it was obvious inflation was going to hit hard in some sectors. So I loaded up on durable goods like HVAC, hot water heater refreshes, major appliances, and even pushed some home maintenance forward where labor and materials were likely to skyrocket.

I certainly made a bet, and a lot of it had to do with "lifestyle" - in that I wanted upgrades of most of those things either way over the next 5 years. I just pushed the spending forward by a whole lot since money was going to be rapidly worth less and those specific goods I predicted were going to outpace generalized inflation. I also wasn't certain my income was going to be secure for the long haul so I'd rather spend the money while it was still regularly coming in vs. being stuck later.

Same went for looking at laptops late last year. Since I'm in the IT industry it was obvious memory and flash storage prices were going to go parabolic, and consumer pricing was lagging the market at the time. If you saw this happening you'd be pretty silly to sit and wait on it for another 6mo.

And the same goes for investment class assets. As those outpace wage growth by multiples, your salary becomes less and less important. Once your salary is in the low double digits of your total income in a given year I'd say it's probably time to take a hard look at continuing to work. The juice no longer becomes worth the squeeze. And asset price inflation means this decision point is brought forward years - perhaps decades - for some people.

It obviously doesn't mean go YOLO in your 20's. But if you're 58 years old and were thinking you'd work another 8 years - perhaps it's time to reevaluate the situation. Adding another 3% a year to your dragon hoard via wage savings might not pencil out how you think it will.

[danaris]

> OBVIOUSLY if you absolutely HAVE to spend money because your life depends on it

Food. Clothing. Shelter.

For most people in the world, all or nearly all (or, in some cases, more than all!) of their annual earnings go toward these absolute necessities.

The way you talk here makes you sound incredibly out of touch, as if you think everyone has vast amounts of disposable income they can just chuck toward whatever investment opportunity looks best at the time.

[fluoridation]

It's not flat out wrong. If the means you have available include investing, you might do that. If they don't, you're still better off spending it on something not strictly necessary now that you're able to than saving it to have its purchasing power be eaten away by inflation.