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Have we been thinking about inflation all wrong?

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Re: Have we been thinking about inflation all wrong?

#321

Post by friedturkey »

colinmhayes wrote: post #286
friedturkey wrote: post #195

Earlier quoted context omitted.

Yeah, deflation is awful. Imagine our continuously increased production and efficiency resulting in goods becoming cheaper and the value of the working person’s dollar going farther. Horrifying.

There will not be many working people if the economy is deflationary. Please read a macro book so you at least understand what you're arguing against before spouting nonsense.

Japan says its economy has been in deflation since the 90s.[1] Everybody is working. Sure, the numbers aren't going up and there aren't constant booms of new companies being valued at 100 billion and exploding (which draws ire from economists and billionaire investors), but quality of life has been consistently high for normal people. Homelessness is barely present and people who want a job can find one quickly.

If the books say it's wrong, maybe it's time they get updated.

[1] https://www5.cao.go.jp/zenbun/wp-e/wp-je03/03-00102.html

Re: Have we been thinking about inflation all wrong?

#322

Post by scottiebarnes »

colinmhayes wrote: post #298
scottiebarnes wrote: post #165

Earlier quoted context omitted.

No, money is supposed to be good at storing value as well. That's why gold evolved as the world currency over the last 8000 years, and that's why central banks still hoard it in bunkers. You can't easily devalue it by creating more of it. You're failing to understand that treasury bond markets have an important function in the macro economy; ideally, a safe way to save and store value with low risk. And they are larg…

good store of value just means its value is predictable. Fiat currency actually make money a much better store of value, because monetary policy can be used to control inflation. Using intrinsically valuable goods as currency is horrible for store of value because people will always be worried that a new use or way to produce the good will be found.

Store of value means value is not easily eroded.

Fiat money is not a good store of value because it is the easiest to erode (central bank changes a digit in a database, and new money exists). Tell me which country's fiat currency you'd be willing to hold for 100 years, and how much buying power you expect it to retain.

Re: Have we been thinking about inflation all wrong?

#323

Post by colinmhayes »

friedturkey wrote: post #321
colinmhayes wrote: post #286

Earlier quoted context omitted.

There will not be many working people if the economy is deflationary. Please read a macro book so you at least understand what you're arguing against before spouting nonsense.

Japan says its economy has been in deflation since the 90s.[1] Everybody is working. Sure, the numbers aren't going up and there aren't constant booms of new companies being valued at 100 billion and exploding (which draws ire from economists and billionaire investors), but quality of life has been consistently high for normal people. Homelessness is barely present and people who want a job can find one quickly. If t…

Japan isn't a very good example because their economy has absolutely tanked because of their horrible monetary policy. Japan was in a liquidity trap caused by their low inflation for literally decades which caused their economy to grow barely 1% annually. The reason their unemployment rate is low is because they've been stuck in this rut for literally 30 years, so people have adjusted. That doesn't mean it isn't causing immense harm though. Real wages are literally lower than they were in the early 90s. https://www.economist.com/finance-and-economics/2013/03/09/w...

Re: Have we been thinking about inflation all wrong?

#324

Post by cat_plus_plus »

Personally, I love the idea of not having to pay back what I borrowed to buy my house. But I also can't be so anti-social as to advocate screwing over everyone who doesn't have money for a downpayment and can't afford the risk of keeping their savings in the market. They really ought to be able to put some money in a savings account, or in a jar if they don't have access to banking, and have an idea of what their savings will be worth in a decade. Better educate people that they sometimes have to take a pay cut to stay employed than hoodwink them and leave them destitute down the road.

Re: Have we been thinking about inflation all wrong?

#325

Post by colinmhayes »

scottiebarnes wrote: post #322
colinmhayes wrote: post #298

Earlier quoted context omitted.

good store of value just means its value is predictable. Fiat currency actually make money a much better store of value, because monetary policy can be used to control inflation. Using intrinsically valuable goods as currency is horrible for store of value because people will always be worried that a new use or way to produce the good will be found.

Store of value means value is not easily eroded. Fiat money is not a good store of value because it is the easiest to erode (central bank changes a digit in a database, and new money exists). Tell me which country's fiat currency you'd be willing to hold for 100 years, and how much buying power you expect it to retain.

Fiat money isn't supposed to be held for long periods of time. That's literally the point. The government is incentivizing you to invest/consume it, otherwise we're in a liquidity trap. It's just supposed to allow people to to make transactions and be confident that the thing they are selling won't be worth 20% more tomorrow.

Re: Have we been thinking about inflation all wrong?

#326

Post by djohnston »

colinmhayes wrote: post #323
friedturkey wrote: post #321

Earlier quoted context omitted.

Japan says its economy has been in deflation since the 90s.[1] Everybody is working. Sure, the numbers aren't going up and there aren't constant booms of new companies being valued at 100 billion and exploding (which draws ire from economists and billionaire investors), but quality of life has been consistently high for normal people. Homelessness is barely present and people who want a job can find one quickly. If t…

Japan isn't a very good example because their economy has absolutely tanked because of their horrible monetary policy. Japan was in a liquidity trap caused by their low inflation for literally decades which caused their economy to grow barely 1% annually. The reason their unemployment rate is low is because they've been stuck in this rut for literally 30 years, so people have adjusted. That doesn't mean it isn't caus…

Real wages for Americans also haven't grown in decades: https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us...

What's the harm?

Re: Have we been thinking about inflation all wrong?

#327

Post by colinmhayes »

djohnston wrote: post #326
colinmhayes wrote: post #323

Earlier quoted context omitted.

Japan isn't a very good example because their economy has absolutely tanked because of their horrible monetary policy. Japan was in a liquidity trap caused by their low inflation for literally decades which caused their economy to grow barely 1% annually. The reason their unemployment rate is low is because they've been stuck in this rut for literally 30 years, so people have adjusted. That doesn't mean it isn't caus…

Real wages for Americans also haven't grown in decades: https://www.pewresearch.org/fact-tank/2018/08/07/for-most-us... What's the harm?

Your chart shows that real wages are up 10% over the last 2 decades. Japan's are down. This doesn't even account for benefits, which have grown at an incredible rate due to health insurance costs. And that's not inflation, health care has gotten better, maybe unnecessarily so.

Re: Have we been thinking about inflation all wrong?

#328

Post by pashamur »

dnautics wrote: post #263
BitwiseFool wrote: post #203

Earlier quoted context omitted.

There's this really weird dichotomy where whats "good for the economy" is often bad for you as an individual, and vice versa.

Sure because the people who decide what is "good for the economy" have different interests than pretty much every other individual in it.

It’s a real thing:

https://en.m.wikipedia.org/wiki/Paradox_of_thrift

You get ahead by saving, but everyone can’t do that all together or the economy collapses.

Re: Have we been thinking about inflation all wrong?

#329

Post by karpierz »

stale2002 wrote: post #319
imtringued wrote: post #215

Earlier quoted context omitted.

No, they completely miss the point. The fundamental problem with money is that you can delay your spending indefinitively thereby breaking the concept of supply and demand. Imagine an economy where you are self sufficient and sell but never buy anything ( cough germany). You keep accumulating more and more money and you could in theory spend it all, thereby cause a huge amount of inflation. That is the core of the de…

> Imagine an economy where you are self sufficient and sell but never buy anything ( cough germany). > Selling and selling isn't a free market, it's not even a market. You are not describing much of a problem. What you are asking is "What if there was an entity, that provided the rest of the world with lots of goods and services, and the only think they accepted for that is green pieces of paper". That sounds pretty…

The issue isn't the first part; it's what happens when they cash in their green pieces of paper.

Re: Have we been thinking about inflation all wrong?

#330

Post by GeekyBear »

colinmhayes wrote: post #307
GeekyBear wrote: post #43

Earlier quoted context omitted.

The enormous increase in money creation is very real, but it started in the last year of the Trump administration. https://fred.stlouisfed.org/series/M1SL

Posting the m1 graph after they changed the definition is incredibly bad faith.

The data is the data.

However, the graph certainly does show another inflection point after the start of the Biden administration, that has nothing to do with the previous change.

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