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0 pointshumanrebar9y ago0 comments

> If you want to get in on it, buy Treasuries.

Let them eat cake?

> ...they desire to avoid deflationary spirals.

I've never really understood this. Dropping prices (see the recent changes in oil prices) are really good for the impoverished, at least in the short run. If we are really talking about a post-scarcity economy, wouldn't deflation indicate efficiency and be a good thing?

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cdash9y ago

Debt is the problem. The majority of Americans have a large amount of debt and if income goes down, which is what will happen in a deflationary spiral, how are they going to afford to pay off their debt?

It also encourages hording of money and doing nothing with it as it becomes more valuable over time.

humanrebarOP9y ago

Debt is a good point, but I'm not sure it's the government's job to pay off all debts. If the original contracts are untenable, that seems to be the source of that problem.

As for hoarding, what's the argument? That people will make Scrooge McDuck bank vaults and take baths in their gold coins? People will still need to buy things eventually, right?

pgwhalen9y ago

I'm the last person you would call an expert, but in a deflationary economy, people tend to hold money rather than spend it, which is bad news.

ww5209y ago

Deflation in the entire economy is bad. Deflation in asset is ok as long as there are more cash offsetting the asset deflation. Basic income is one way to get more cash into the economy.

humanrebarOP9y ago

Wouldn't across-the-board efficiency gains look like across-the-board deflation? That is, wouldn't automation in and of itself cause hoarding? Why buy a TV this year if the one next year will be better and cheaper?

Also, hoarding would theoretically only be a problem for the middle and upper classes since the working classes can't afford to save. But the middle and upper classes already hoard, more or less, when they buy and hold real estate.

So what's the risk exactly?

ww5209y ago

Well, money is supposed to enable economic activities; hoarded money not used is money wasted.

Yes, increased productivity and efficiency are deflational in nature. You can create N more things now with the same cost. The extra N things push price down if the amount of money in the system stays the same. That's why central banks inject more money into the system to "soak" up the extra economic activities, to maintain a constant and slightly upper price pressure.

When people see the price is not decreasing despite increased efficiency, they will spend the money since it worth less tomorrow.

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cdash9y ago

It also encourages hording of money and doing nothing with it as it becomes more valuable over time.

humanrebarOP9y ago

Debt is a good point, but I'm not sure it's the government's job to pay off all debts. If the original contracts are untenable, that seems to be the source of that problem.

As for hoarding, what's the argument? That people will make Scrooge McDuck bank vaults and take baths in their gold coins? People will still need to buy things eventually, right?

pgwhalen9y ago

I'm the last person you would call an expert, but in a deflationary economy, people tend to hold money rather than spend it, which is bad news.

ww5209y ago

Deflation in the entire economy is bad. Deflation in asset is ok as long as there are more cash offsetting the asset deflation. Basic income is one way to get more cash into the economy.

humanrebarOP9y ago

So what's the risk exactly?

ww5209y ago

Well, money is supposed to enable economic activities; hoarded money not used is money wasted.

When people see the price is not decreasing despite increased efficiency, they will spend the money since it worth less tomorrow.

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