it helps if you de-abstract money back to what it really is: food.bartering is commerce.
currency is a merchant abstraction of bartering.
people won't do work if it doesn't feed them enough to live (and indeed, when the food cost for an average person is over half their work day the country autodestructs.)
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Exactly, when you say "de-abstract money back to what it really is: food" you are really just saying "wealth"... so yes, when you stop viewing the number of dollars you are having as meaningful and instead look at how much **wealth** you have then slow healthy inflation is good
inflation reduces the amount of food i can get from the same amount of abstractions.
No it doesnt.. your employer pays you the same wealth as inflation happens... Thus the amount of food people can buy as inflation happens remains stable (assuming there are no other effects at play).
Price of food goes up but as I showed the average hourly wage of the population also goes up by an equal amount. So you can buy the same amount of food post-inflation.
you added more postulates.if i put 100$ in a crate and come back in 2 years, i get less apples than in the timeline i didn't wait two years.
this means my standing wealth (what money is supposed to store) decreases over time.
the market ultimately raises all of the rates to counteract the state diluting the currency. so your minimum wage goes up, but the effective apples-per-hour does not go up, but your stored previously-earned-apples goes down.
@melovida @clacke
> if i put 100$ in a crate and come back in 2 years, i get less apples than in the timeline i didn't wait two years.
1) No responsible person puts a large amount of wealth in a crate for 2 years, first thing anyone who learns money management learns is you do not keep any more than a small emergency fund as cash, the rest should be in investments, at a minimum a mutual fund.
2) We dont **want** people keeping money in crates for long periods of time. That is devastating to the economy as it causes economies to go stagnant as no one is using money to advance knowledge or build newer, better, and cheaper things.
3) Money is **not** and never was intended to be a long-term store of wealth, it is intended to be a short-term store of wealth.
Therefore inflation is good on the above counts, it discourages people hoarding large piles of cash, ensuring a healthy economy, and ensuring everyone benefits from the growing economy.
They dont need to be bankers, they just need to know some basics, including not keeping large quantities of cash over long periods of time.
@freemo @clacke @melovida
Meanwhile people with reserves are deterred from hoarding cash and motivated to use it to build companies by investment.
This pressure gets stronger the lower the interest rates (they're low) and higher the inflation are (it's high).
That (along with "wait the world isn't actually completely ending" relief) is the reason the stock market surged after the lockdowns.
Similarly negative interest rates.
https://blogs.imf.org/2021/03/03/the-evidence-is-in-on-negative-interest-rate-policies/
And as in the below thesis (which was demonstrated effective in the "Wörgl Experiment") stamp scrip...
https://www.silvio-gesell.de/the-natural-economic-order.html
We are talking about inflation, not negative interest or even necessarily printing new money. These can be related concepts but need not be.
They are all leavers that can be pulled that have a similar stimulating effect on economic activity.
@freemo @icedquinn @melovida @clacke
>Therefore inflation is good on the above counts, it discourages people hoarding large piles of cash, ensuring a healthy economy, and ensuring everyone benefits from the growing economy.
Your story is the standard Keynes / Krugman interpretation, but it is by no means uncontested.
For starters assumes there is no upper-bound on the amount of “investments” which are positive sum propositions. Yes, Inflation drives money out of savings into stocks, but it also fuels the boom-bust cycle by inflating bubbles (oic what I did there) with excess demand for inflating-beating investments. By punishing savings, especially among the lower and middle class, it also has a destabilizing effect on the workforce.
> Your story is the standard Keynes / Krugman interpretation, but it is by no means uncontested.
Keynes is a very common interpritation, so you will hear them say a lot of things that are common to other models.. Those models still have nothing to do with whats being discussed.
@freemo @icedquinn @melovida @clacke ??except that your premise is based on aggregate ‘investment’ in a C + G + I + NX formula. It ignores the role of entrepreneurship or risk in the investment process, it just assumes all dollars put in the stock market are a net positive to the economy. There’s a bit of a conflict of interest in the people who stand to gain the 2% of gdp pushing this story despite the many counter factual episodes in history.
No it doesnt assume all stocks are net interest.. any investment will do doesnt have to be stocks really.
Let's just assume you're right, and the paradox of thrift is a looming danger to the economy. Why would sneaky monetary monkeying be the optimal way to curb savings instead of a savings tax? Certainly the tax is a lot more flexible, can be Taylored to specific situations, staggered progressively? Interesting that the federal reserve doesn't have a taxing power but does have a money printer, and they say printing money is super critical to a smooth functioning economy...... and also there's been more volatility in the economy since they started monkeying than their was prior. How curious 🤔
Who said anything about sneaky monetary monkeyings. Inflation can occur completely naturally, no monkeying needed, no printing of money needed. It happens naturally when the wealth of a country increses and its monetary supply stays fixed as well. Printing money can accelerate it of course, but not needed.
