Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Inflation is at a 40 year high. What can history teach us?

yarn.pranshum.com

Post reply on HN
Print view View original

511–520 of 550 posts

Re: Inflation is at a 40 year high. What can history teach us?

#511

Post by WalterBright »

imtringued wrote: post #369
WalterBright wrote: post #133

Earlier quoted context omitted.

Fiat money (or anything that increases the supply of money, like gold rushes) is the common factor with all instances of inflation. There are thousands of years of examples of this. You're right on one point, the Law of Supply & Demand. It is an emergent property of many individual actions, though each might be completely ignorant of the big picture.

Egyptians used grain money which spoils over time and the grain banks charged the depositors a fee for the liquidity they provide. If you want a stable banking system you are going to have to make depositors pay for the costs they impose onto other people.

I suggest reading up on how banks make money from fractional reserve banking. No need for depositors to pay, and in fact lending money is so lucrative banks will pay the depositors.

Re: Inflation is at a 40 year high. What can history teach us?

#512

Post by unity1001 »

js8 wrote: post #350
ALittleLight wrote: post #257

Earlier quoted context omitted.

That doesn't make sense though. You can't create energy by printing money. You just redistribute the value of your money. Maybe that's good - not clear to me why it's better to use inflation, which risks destabilizing the currency and punishes people who saved money, rather than straightforward taxes.

The problem is that the world is at neoliberal capitalism's end, as predicted by Marx. Basically, in capitalism, you pay for continuing investment (of capital owners) with giving them more property, which is something that cannot continue indefinitely. That internally increases social inequality, and the money will eventually accumulate at the top (in the form of asset price rises). Capitalism's own solution so far w…

> The problem is that the world is at neoliberal capitalism's end, as predicted by Marx

Well. Its capitalism's end. Neoliberalism is just an attempt to return to actual capitalism that existed back at the end of the 19th century. Before those pesky regulations, antitrust laws, all those workers' movements and rights for the plebs...

Re: Inflation is at a 40 year high. What can history teach us?

#513

Post by WalterBright »

woodruffw wrote: post #244
WalterBright wrote: post #113

Earlier quoted context omitted.

> Of course, that is almost a tautology Inflation lags the money printing, so it isn't a tautology. > So what do you do to get that sweet spot of about 1-2% inflation? I'm amazed that propaganda of a sweet spot gets so heavily embedded into the popular wisdom. If there is a sweet spot for inflation, it's 0%. Note that the US had net 0% inflation from 1800-1914, while growing from subsistence farming to superpower.

> Note that the US had net 0% inflation from 1800-1914, while growing from subsistence farming to superpower. This is grossly ahistorical: in 1914, 2/3rds of the US lived in abject poverty[1]. Individual farming, including subsistence farming, didn't peak until the 1930s[2]. The US's ascent to superpower status can be traced, at the earliest, to lending programs begun during WWI (and repeated, to fantastic effect, du…

> in 1914, 2/3rds of the US lived in abject poverty[1]

Your cite doesn't support that. Besides, during the 19th century average height increased enormously (a sign of good and consistent nutrition), mortality rates dropped dramatically, life expectancy increased, and the growth of the middle class was spectacular.

When the US entered WW1, the German soldiers were shocked by how tall they were, and how well fed and well supplied they were.

I.e. your claim is completely false.

> The US's phenomenal ascent in international status and power is directly tied to its monetary policy

None of your cites support that, either.

See "Historical Statistics of the United States Colonial Times To 1970, volumes 1 and 2". I think you can download it from archive.org. It's a gold mine.

Re: Inflation is at a 40 year high. What can history teach us?

#514

Post by WalterBright »

colinmhayes wrote: post #477
WalterBright wrote: post #113

Earlier quoted context omitted.

> Of course, that is almost a tautology Inflation lags the money printing, so it isn't a tautology. > So what do you do to get that sweet spot of about 1-2% inflation? I'm amazed that propaganda of a sweet spot gets so heavily embedded into the popular wisdom. If there is a sweet spot for inflation, it's 0%. Note that the US had net 0% inflation from 1800-1914, while growing from subsistence farming to superpower.

0% inflation is incredibly dangerous. Deflation is just about the worst possible thing that can happen to an economy. It instantly kills money market liquidity as real interest rates rise as they hit the lower bond for nominal rates. People stop spending as much as they can since their money will be worth more in the future. So the question is how can we guarantee no deflation. And the only answer is target 1-2% infl…

> 0% inflation is incredibly dangerous.

Oh rubbish.

> By the way the us was in a recession for practically the entirety of the second half of the 19th century

Completely false. https://fraser.stlouisfed.org/files/docs/meltzer/cenlon66.pd...

Re: Inflation is at a 40 year high. What can history teach us?

#515

Post by colinmhayes »

WalterBright wrote: post #508
colinmhayes wrote: post #476

Earlier quoted context omitted.

Thousands of years of pre Adam smith history where the concept of macroeconomics did not exist. Obviously a naive implementation of monetary expansion causes price inflation, that doesn’t mean a well implemented monetary expansion does though.

The Law of Supply & Demand is there whether it is recognized or not. > that doesn’t mean a well implemented monetary expansion does though Then none of them are well implemented, because all examples of fiat money exhibit endemic inflation. The reason is straightforward - the whole point of a fiat money system is to inflate it.

The decade following 08 had exactly the goal inflation even though there was unprecedented monetary expansion.

Re: Inflation is at a 40 year high. What can history teach us?

#516

Post by suoduandao2 »

whoooooo123 wrote: post #473
gumby wrote: post #426

Earlier quoted context omitted.

Not even close.

What were the biggest? The MLK riots? How does one measure these things precisely anyway?

Relevant:

https://hwfo.substack.com/p/a-new-unit-of-measure-for-civil-...

Re: Inflation is at a 40 year high. What can history teach us?

#517

Post by WalterBright »

stopping wrote: post #348
WalterBright wrote: post #113

Earlier quoted context omitted.

> Of course, that is almost a tautology Inflation lags the money printing, so it isn't a tautology. > So what do you do to get that sweet spot of about 1-2% inflation? I'm amazed that propaganda of a sweet spot gets so heavily embedded into the popular wisdom. If there is a sweet spot for inflation, it's 0%. Note that the US had net 0% inflation from 1800-1914, while growing from subsistence farming to superpower.

Dismissing a contrary position as "propaganda" only stifles debate, and you haven't presented an argument against "sweet spots". It's a good mental model for many situations. What makes you think there doesn't exist an optimal inflation rate? 0% inflation is generally not a safe target. In an economy you want to avoid deflation at all costs. If consumers expect future price drops, demand can dip significantly and ind…

This is all unsupported by any evidence. The "deflationary spiral" theory is as wrong as its sister, the "inflationary spiral".

Inflation benefits borrowers, hurts lenders. Deflation hurts borrowers, benefits lenders.

The sweet spot is 0.

The reason everybody believes that inflation is good for you is because of persistent government propaganda to sell that idea, because what inflation really is is a tax on your money. That's right, a tax.

Now, if you want to argue that the inflation tax is a reasonable way for the government to raise revenue, ok, but be realistic as to what it is. Inflation isn't good for you any more than taxing you is good for you.

Re: Inflation is at a 40 year high. What can history teach us?

#518

Post by woodruffw »

WalterBright wrote: post #513
woodruffw wrote: post #244

Earlier quoted context omitted.

> Note that the US had net 0% inflation from 1800-1914, while growing from subsistence farming to superpower. This is grossly ahistorical: in 1914, 2/3rds of the US lived in abject poverty[1]. Individual farming, including subsistence farming, didn't peak until the 1930s[2]. The US's ascent to superpower status can be traced, at the earliest, to lending programs begun during WWI (and repeated, to fantastic effect, du…

> in 1914, 2/3rds of the US lived in abject poverty[1] Your cite doesn't support that. Besides, during the 19th century average height increased enormously (a sign of good and consistent nutrition), mortality rates dropped dramatically, life expectancy increased, and the growth of the middle class was spectacular. When the US entered WW1, the German soldiers were shocked by how tall they were, and how well fed and we…

> Besides, during the 19th century average height increased enormously (a sign of good and consistent nutrition), mortality rates dropped dramatically, life expectancy increased, and the growth of the middle class was spectacular.

Growth is good, but it's a delta: it doesn't mean that the average life was particularly nice by modern standards. The fact that things improved over time is not evidence that they were good at any instant (and indeed, nobody questions that things improved: they clearly had to in order to get to where we are now).

In 1914, the average male life expectancy was 52[1]. That's over 20 years shorter than our current life expectancies.

> When the US entered WW1, the German soldiers were shocked by how tall they were, and how well fed and well supplied they were.

This is a comparative error: the US's military population didn't need to be well fed by objective standards; they only needed to be better fed than the peasants who were press-ganged into the German army.

Nobody is saying that the US was uniquely impoverished by contemporaneous metrics; the claim is that the US was impoverished on an absolute and modern scale, and that said impoverishment declined as the US established domestic and international policies that are inextricably linked to its monetary policy.

[1]: https://u.demog.berkeley.edu/~andrew/1918/figure2.html

Re: Inflation is at a 40 year high. What can history teach us?

#519

Post by autoexec »

KptMarchewa wrote: post #485
autoexec wrote: post #438

Earlier quoted context omitted.

Demand doesn't disappear. People still want the things they want. They just might not be wiling to pay as much as others would like them to. Lower the prices, and suddenly those people can justify (or even simply afford) satisfing the demand that never went away. People spending leads to more jobs.

>Lower the prices, and suddenly those people can justify (or even simply afford) satisfing the demand that never went away. Or they can wait more to buy cheaper. Sure, they won't do that if you sell carrots, but they will do if you sell cars.

As if prices are going to come down. If the companies who have been making record profits refuse to accept making a little less profit and won't lower prices how long will you have to wait to buy something cheaper.

Re: Inflation is at a 40 year high. What can history teach us?

#520

Post by WalterBright »

tsimionescu wrote: post #298
WalterBright wrote: post #80

Earlier quoted context omitted.

Since you know all the obvious answers, try these on: 1. Where does all the money come from to pay for increased gas prices? 2. When gas prices go down (and they often do go down by multiples), why doesn't deflation happen?

1. There's no extra money - poorer people just consume less. 2. Because companies just take all of the difference as extra revenue, and prefer to increase salaries (if not just keep everything as profit) rather than reducing prices. Note that I'm not claiming that increased money supply doesn't cause inflation. It obviously does. I'm claiming it's not the only cause of inflation. It's sufficient, but not necessary fo…

When people consume less, prices drop. Again, it's the Law of Supply & Demand.

In physics, when momentum is not conserved, I don't have to work through the math to show it is wrong. I know it is wrong. When conservation of energy is denied, I know it is wrong. When someone claims a perpetual motion machine, I know it is wrong.

Analogously, when a theory requires denial of the Law of Supply & Demand, I know it's wrong.

This thread is chock full of weird economic theories of every description. The LoS&D is a wonderful tool to easily diagnose false economic theories.

Post reply on HN