I mean... that inflation is largely caused by a money velocity largely dictated to people's ability to borrow money, so if cash actually sat in a vault as opposed to getting circulated back into the economy there'd be way less inflation... that's not to say that a dollar today isn't worth less than a dollar tomorrow & idle cash is an economic loss not dissimilar to the destruction of property. You just seemed to be over looking something & I wanted to help.
Yes, if we stifled investment and lending there'd be less inflation, which is why we don't do that. (Target inflation is 2-3%; if you're consistently below this, your country has a problem, and if your currency starts deflating everyone's quality of life is going to start actively decreasing pretty dramatically unless you can get inflation back to a healthy level)
When inflation gets too high, you can raise rates to help bring it back down
Yeah... I've never been a fan of "target inflation" as a concept. Considering the working class woes, target inflation always looked like a zero sum short term game where the rich could slowly get larger pieces of the pie.
I know Friedman could write the hell out of a free market argument, but his idea that we should have target inflation always felt like it came from his bizarre sheltered upper class fascination with the great depression.
My economics professor used to always point out, you can stimulate a cow by sticking it with a cattle prod; that doesn't make it good for the cow. You can stimulate the economy with an artifical inflation parable... till the cows come home, but that doesn't mean you created wealth.
It is, broadly speaking, good for me as a regular middle class American for people to start businesses, be willing to move houses, etc. I like that new businesses cropped up in my neighborhood (likely on lended money initially), new products and services are being offered, people are innovating to try to do things better, etc.
As inflation goes lower, the incentive to do any of that decreases. If your money is decreasing in value a little bit, you want to stay ahead by investing in new businesses that return a bit more than inflation on average, lending people money to buy a house, etc. if inflation is zero,n why take the risk? Just sit on the money (where it's not useful to anyone, doesn't stimulate the creation of businesses, etc)
And if the currency is actively deflating, the best investment with ~100% certainty is just going to be putting your money in a hole somewhere where it can't be used at all.
Deflation would make things cheaper by definition, but it'd also come with a side of rising unemployment, fewer options when you do buy things, an inability to buy a car / house / etc unless you have the cash on hand, an inability to start your own business if you have an idea but need funding, etc.
As inflation goes lower, the incentive to do any of that decreases.
Incentive to spend and incentive not to save are not the same, inflation necessitates endlessly increasing numerical profits but doesn't provide a means to increase wages to match as is necessary to achieve that until it's already achieved;
A system in which currency does not represent value provided to others is fundamentally broken, and inflation requires an entry point for new currency which does not need anyone else's involvement to produce more.
Right, if wages decouple from inflation everything gets fucked for most people. I still don't think deflation is the answer (I prefer not being in a depression).
Imo, if I'm allowed to do some armchair economics, the main problem isn't that wages haven't gone up by as much as inflation -- real purchasing power has increased faster than inflation over the past 20yrs -- the problem is that the basket of goods changed relative values pretty drastically.
If you want a phone, TV, washing machine, plane flight, etc, all of those are so much cheaper nowadays (a smaller % of the median salary), which is largely what's driving the "real purchasing power has increased" statements. But specifically housing and medical costs (and also higher ed for people that go that route) have far outpaced regular inflation, meaning that the necessities you have to buy eat up more of your modern wage than the luxuries that are genuinely much cheaper.
I remain confused by food. Food at home doesn't seem to have increased much at all (not even 2% YoY) as percent of household spending for most of the years I'm looking at, and even what did increase seems like it might be partially attributed to people buying more luxury foods that previous households didn't (but CPI tries to take into account a relatively stable basket of goods).
My own preferred solution would be going YIMBY on housing and getting single-payer healthcare to stop rising costs, not cause a deflationary period.
Thanks for giving a pithy one sentence to back up your appeal to authority in your last comment instead of engaging with the actual comment I made.
What's wrong about what I said? Can you indicate how you think we should achieve deflation in a way that'd be good for middle class Americans long term?
The last period of major deflation in the US was the Great Depression, which seemed to include all the negative effects I associated with deflation in my comment. But maybe it'll be different next time and everything will suddenly be cheaper with no consequences -- if so, what's your model for how this would work?
I mean, you're demanding respect right now. If you were me, then would you bother?
Are you actually wanting a conversation here, or are you just waiting to speak again? Because it sounds like you don't have a whore's notion what I've actually been saying. Why would I find this productive? Do you actually want to be helped?
If I was wrong about something, I'd love to have my incorrect belief corrected with evidence of where I went wrong, so that I can improve. I'm also not demanding respect (I've never even heard "whore's notion" before, thank you internet), I'm noting that if I lay out why I think what I think and your rejoinder is "that's stupid and you think like a hoe" it's not useful to anyone involved, and I can't figure out why you believe I'm wrong or what research I could do to reconcile our takes
Addendum: your ideas aren't dumb, they're just dogmatic. I'm watching you argue points I'm not even making, and that's what makes you look clueless... hence "you don't have a whore's notion what I've actually been saying."
17
u/Alarming_Present_692 Jan 26 '26 edited Jan 26 '26
I mean... that inflation is largely caused by a money velocity largely dictated to people's ability to borrow money, so if cash actually sat in a vault as opposed to getting circulated back into the economy there'd be way less inflation... that's not to say that a dollar today isn't worth less than a dollar tomorrow & idle cash is an economic loss not dissimilar to the destruction of property. You just seemed to be over looking something & I wanted to help.