Deflation bad?

>during times of deflation interest rates go negative
>banks start charging people to hold their money
>people pull money from banks
>banks cannot loan money so housing/auto market crash

the ideal situation is 1.5-2% inflation per year

what they usually mean by deflation is a deflation in demand whi h is bad. what deflation actually means is a deflation in supply.

they purposely use misleading terms to brand deflation as a bad thing.

Seems like you’re fucked if you do, fucked if you don’t.

The ride will only end once we create a post scarcity society.

And no, I’m not advocating for socialism/communism

The idea at least in theory is not to create inflation. It's to preclude excessive deflation that would discourage further investiment. Lets say you have a first wave of investors who make huge profits by investing in a booming economy. The second wave would then be subjected to higher interest rates when borrowing money. To offset that the central bank lowers interest rates so it would even out. The short term effect of that is inflation, since money is more easily available. But then as the economy continues to yield higher returns, the currency will get more valuable.
You could just manipulate rates to keep inflation unchanged, but then you would have to make weekly if not daily adjustments to the IR.
This is all due to the fact that this is a debt based economy, in which we boost productivity by borrowing money from the future generations.

So what? Is GDP seriously a good metric for economic health?

That's only the prevailing conventional wisdom since it's how things work now. If you had 0% or small deflation, the banks still provide the utility of safe storage and mitigate the risks of having your cash lost or stolen.

It also wouldn't stop loans completely. Right now loans are made with a price that is the interest + enough to offset risk of default. It could work the same in a deflationary economy, except you'd charge anywhere from a slightly positive rate, to zero rate, or a negative rate that is still higher than the rate of deflation so that you are still offsetting loses and retaining more value.

There is a big difference between predictable steady decrease in prices (not deflation) caused by fixed supply of money combined with economic growth, and a deflationary shock caused by evaporation of credit (1929, 2008). The first promotes long-term planning and benefits savers. The second is a consequence of inflation driven by central banks and causes depression, unemployment, revolutions.

Also, let's clear up the terminology. Inflation is increase in the stock of money, increase of prices can be the consequence. Keynesians, governments and media started calling the increase in prices inflation, because it obfuscates the increase in money stock. If people realize that new money was created, they might start asking questions like who created it, who got it first before the markets adjusted their prices etc.
Before the invention of Bitcoin, all money was inflationary (even gold increases it's stock by roughly 1.5% a year).

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Perpetual inflation leads toward malinvestment, accumulation of debt and increase of asset prices now used as store of value (real estate, stocks) because the currency is losing value. That is until the inevitable bust happens. The bad situation you are describing is a consequence of inflation

>Have $1 billion
>Store it under your couch
>Economy deflates 3% each year
>Get $30 million more purchasing power every year doing nothing

What a productive society

Imagine the smell.

imagine.

>have $1 billion
>invest in cutting edge tech like Facebook, Netflix, Snapchat, Twitter
>people turn into media zombies
>get fat stock market gains

What a productive society

All of you need to learn the lesson of the Baby Sitting Parable

en.wikipedia.org/wiki/Capitol_Hill_Babysitting_Co-op

So essentially you want to find the inflation level where banks breakeven?

If economy shrinks and the stock of money stays the same, the prices go up. What you said makes zero sense.

>Have $1 billion
>Economy inflates 3% each year
>Must store all wealth in companies and assets in order to not lose purchasing power
>Literal con men and speculators take advantage of this and make meme companies and fundraisers
>Throw lavish parties and over consume since there is less incentive to save

Not any better.

If prices go up then there's no deflation, there's inflation.

OP wants deflation so the central bank would presumably target that.

Inflation != increase in prices. Inflation = increase in money stock. Deflation != shrinking economy. Deflation != decrease in prices. Deflation = evaporation of credit. Read

No, you moron. Inflation is the general increase in the price level.

Fiat infaltionary systems are just systems where the money masters can steal the value of what you hold

Wrong. You are using misleading (albeit mainstream) terminology. That is also why you don't understand Bitcoin and are probably invested in shitcoins.

Hahaha, Pick up a textbook you absolute poser.

I'm not invested in any cryptocurrency. I'm an economist and work for the government. Just popping in to laugh at the terrifically bad and misinformed posts in here

>literal retard
Google "inflation" you moron

I would also suggest you pick up a book, maybe The Theory of Money and Credit by Mises.

>I'm an economist and work for the government.
That explains a lot.

>I'm not invested in any cryptocurrency
Let's hope those index funds work out for you.

Austrians have their own definitions for things that the rest of the world ignores. Similar to Marxists actually.

I'm not desperately poor and ill-educated trying to get lotto 100x gains on hacky internet coins.

What word do you use for governements expropriating purchasing power from currency holders?

GDP is SERIOUSLY retarded.
GDP goes up when a hurricane destroys a city.
If you own your house (no mortgage), the government pretends you pay rent to yourself and counts it toward the GDP.

You are very generous for leaving the 100x gains for others to pick up. I take it you will buy in when Bitcoin is at $1000000 per coin?

GDP on aggregate is an excellent measure.

GDP is literally the sum of incomes. By extension GDP per capita is the average income of people in a country. You don't think people's incomes going up is a good thing?

You are a delusional. Grow up

That's a nice impression of pic related.

Let's talk hypothetically, at what Bitcoin price will you start questioning your beliefs and education?

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Get a real job tax sponge.

Not if the cost of living increases in comparison.

That's why you can look at Real GDP! Amazing, huh

>didn't read your comment but I love GDP!

its almost like the whole economy is build around questionable investments and unnecessary excess consumption or the whole system would collapse in a heartbeat.

strange

GDP is SERIOUSLY retarded.
GDP goes up when a hurricane destroys a city.
If you own your house (no mortgage), the government pretends you pay rent to yourself and counts it toward the GDP.

if you think deflation can't happen you are wrong

deflation itself is not bad. it just implies some sort of tax to implement which is difficult to do without creating bad side effects. for example, in order for a currency to be inherently deflationary the supply has to be reduced. only way for a government to do this with paper currencies is though taxes which incentives tax evasion and causes all sorts of questions about what/ who gets taxed. it's easier for a government to print money than tax it back.

if a currency's supply is not decreasing but there is inflation, that must be because production has decreased, and so the deflation is a side effect not the cause. in cases where capital is not being efficiently allocated, increasing the money supply can encourage investment. but so can taxing idle capital. but that is much much harder to implement.

tldl its easier for the gov to print money than tax

Deflation is bad in a debt-based monetary system because it causes the whole system to implode.

Pfff ahahahah oh wow

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growth forever!

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trained in bullshit, gtfo you non-scientist
>citing paul krugman
hang yourself please

cheaper stuff = lower profits = lower salaries

it doesn't matter if things are getting cheaper if your salary is also getting smaller

deflationtards can't even into basic economics

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So?

You could make the same argument in reverse for inflation. It doesn't matter if your salary increases if things get more expensive.

the difference is if deflation continues you wont just get lower salary, you will just lose your job. 0 salary = 0 purchasing power

Companies could hand out pay cuts. If they don't it's effectively giving you a raise.

With inflation, they can sneakily cut your pay just by keeping it the same over a period of time.

you still dont get it.. they will not just give pay cuts, they will layoff people. Unemployment is infinetely worse than increasing prices

If wages go down why would they lay people off?
If labor is cheaper, then who is getting fired?

because thats not how businesses work. Its more efficient to fire 10% of your labour than lower everyones salary by 10%

>inplying hyperinflation doesn't have the exact same outcome

So deflation is one guy making 100k a year by himself in an empty factory?
How exactly did China make all its money again?

when did I say hyperfinlation is good? both hyperinflation and deflation are bad. this is about normal inflation vs deflation

exactly, China made all those money by inflating their currency. Their devalued currency made their products the most competitive in the world

It encourages saving instead of buying things on credit.

You have to choose between
>instant gratification
and
>my money will be worth more in the future
>should I invest my money in this business and will the returns be better than the value increase of the money

You can buy bullshit today with Bitcoin, so why don't people do so a lot? Simple, it's deflationary. They'd rather hold and buy MORE things later.

Translation: Things would be priced at the their actual value rather than having debt-ridden retards buying up everything.

This is so wrong it beggars belief. Money is a CLAIM on value, it's not value itself. The value of money is not guaranteed. It's backed by the productivity of the users of the currency it's expressed in.

In effect this means
>inflation
>the value claimed by individual units of currency goes down
>you need more units of currency to buy the same thing you bought earlier

>deflation
>the value claimed by individual units of currency goes up
>you need less units of currency to buy the same things you bought earlier

There's really no need to complicate things further. Inflation can occur naturally when demand for goods/services goes up. For example, a population grows but the currency supply does not and productivity stays the same somehow. You could artificially create this through subsidizing the unproductive and taxing the productive members of your society.

The opposite can also happen. Natural deflation happens for example when there are limited savings available and loads of companies competing for customers. They'll naturally lower their prices to make their products more attractive, or they'll find ways to increase the value offered. Either way you're getting more for your currency spent. You can artificially cause deflation by taking money out of the market through taxation and not putting it back in. Money becomes more rare so you see firesales everywhere. The central banks call it a crisis, but they cause it. Either through increasing inefficiency through easy money or shrinking the money supply.

What do you think a business does when it has seen 10 years of continuous artificial growth? It prepares for more growth. Think of what that means for stocks.

You are basically agreeing with me, but are confused, because you have adopted the misleading definitions of inflation and deflation used by keynesians and chartalists.

But that's ok, the important thing is that you know central banks are causing inefficiencies in the market by money printing and interest rate manipulation.

deflation is a good system if you want to allocate wealth efficiently and prevent waste in literally every field; if you think it's bad you've been brainwashed by dying old boomer

in a deflating economy you can still invest and make more, money have actual value. which is the main thing they don't want you to realize even though you need over 70 iq for it

>print money during deflation

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source mises org/library/economic-freedom-and-interventionism/html/p/123

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GDP shows how much weamth is being transfered, not how much is being created. It's a shitty metric.

Deflation means if you borrow money, the purchasing power of your debt goes up *and* the dollar amount will go up thanks to interest. Your income drops and while each dollar is valuable, your debt is not tied to inflation/deflation. Business becomes harder to start as borrowing to fund an idea becomes near impossible, and businesses in general stop borrowing to expand as it's difficult to remain profitable.
Deflation kills your economy and your ability to grow. Borrowing is great, and the ups/downs of the economy aren't due to inflation but due to group psychology and euphoria vs panic.
People stop spending since their dollar will be worth more in a week than it will be today, so you can get more food/water/gas/etc by postponing expenditure, further hurting corporations and their revenue, damaging jobs.
Not necessarily, malinvestment is due to financial euphoria and easier money, not due to inflation. The rise of the stock market makes sense considering the economy (and actors within the economy, namely corporations) continues to advance due to an increase in aggregate productivity (either due to population growth, or technological advancement).
Based and Bigbrainpilled, although on the last sentence, the hope is typically that productivity/income will be higher in the future making borrowing reasonable.
Retard. What happens when money in use grows faster than the "money stock", thanks to fractional reserve banking?
Sorta on track, the problem is that you don't take the last point to the full extent: with more deflation investing becomes less attractive as holding provides its own growth while corporations suffer and give lowered growth.

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Keynesians will say war is good for the economy because it increases GDP too, and it doesn't matter to them if people's standard of living goes down considerably. They are just court-intellectual cock suckers. In pic related, Krugman unironically argued this.

mises.org/library/government-bloat-not-growth-real-gross-domestic-private-product-2000–2011

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What I don't understand is how anyone can believe in this kind of nonsense. I mean, many of the flaws are glaringly obvious to any half intelligent layman, yet these PhDs in the field swallow it all down uncritically? How is this even possible?

See, this is what doesn't make sense to me.

You act like jobs and the economy are seperate entities from what we need to consume.

No matter how much I'd prefer to save, I still need somewhere to live and something to eat. I'd also still want things like a computer and phone, I'd probably just spend less on them or be more likely to repair or buy used ones instead always buying new and throwing out old ones.

I also don't see why businesses couldn't be invested in still and turn a profit. You would just be more discerning in order to beat the deflation rate.

Deflation is not bad, governments just want an excuse to print money and cause inflation.

Redpilled.

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the ideal situation is not having a debt based monetary system dumdum

don't waste your time on this; how can you argue with a low IQ like this, if they don't have the IQ to realize that they're stupid or controlled in the first place? it's biologically impossible

leave the inflationists low IQ in their own struggle, waste of time to help them

Retard
You may need to do basic stuff, but luxury and other spending isn't needed. Why buy a nicer car now if you can wait 3 months and get an even nicer car? What about debt? You haven't mentioned that problem. I discuss investment as suffering because businesses would suffer- less room to grow and expand, reduced ROI, and by extension reduced incentive to invest.

you should probably consider doing something else than thinking about this; it's not for you, you can't understand, which is why you're asking questions. do something else, stop bothering.

So there is less expense on luxury. That sounds like an upside. More stoic minimalism and less mindless consumer culture could be a positive change.

There would still be some incentive to invest. It's not like selling goods or services would become unprofitable across the board, it would just set the bar higher for what could profit vs just saving your money. Sounds like a good way to conserve resources and be efficient.

And you can make loans with negative or zero rates you know. Just take the negative deflation rate and add a price that accounts for the risk of default and there is the market price of your loan. There is still incentive to lend money.

It's bad for the rich. The poor know how to scrape by.

Do you not understand the concept of a rhetorical question? I'm not asking for my own info, I'm using the question to highlight your guys' lack of understanding. You have no understanding of how corporations work, and you're acting as if you can just have debt become an instant burden and almost entirely unusable as a method of growth without problems.
You're used to being able to throw out opinions, receive no backlash, and assume you're right. You're not right. You're a fucktard. Trying working in a real corporate environment or a real market. Losing all your money on crypto doesn't count as "experience" in financial markets.
You're almost certainly a Jow Forumslack who thinks fiat is demonic and debt needs to be avoided at all costs, ignoring the concept of opportunity costs and so forth.
>conserve resources
Conserve resources means saving you money, deflation isn't conserving resources it's shitting on any borrowing/lending.
>There is still incentive to lend money.
Inflation HELPS the borrower, deflation helps the lender. You think student loans are bad? Just wait until deflation makes any sort of borrowing financial suicide. It's not that lenders would be afraid to loan, it's that borrowers couldn't borrow.
>So there is less expense on luxury. That sounds like an upside. More stoic minimalism and less mindless consumer culture could be a positive change.
You're conflating ideology and finance. Less expenditure means less jobs in the related industries.
>There would still be some incentive to invest. It's not like selling goods or services would become unprofitable across the board
I'm not saying business would be inherently unprofitable, but that expansion would slow since you'd struggle to fund expansion. Deflation slows, if not stops, expansion and therefore crushes incentive to invest. Businesses would need to use stock offerings to raise money for expansion (rather than debt), meaning continual devaluing of existing stock.

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inflation good cuz numnum up
deflation bad cuz numnum down

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You didn't address the fact that you can make a loan to someone with negative interest.

And the minimalism vs consumer thing isn't just ideology. You say less jobs in a certain industry, but less jobs doing what? Making luxury items?

In the long run that would mean more manpower allocated towards essentials, or perhaps political manuevers to reduce working hours so more people partake in but are not overburdened by the nescassarry functions of society instead of doing what is effectively busy work for a pay check. Jobs for purpose of jobs is stupid.

Negative interest is done to cause inflation. I didn't think it'd be necessary to state that. Higher interest reduces inflation as the velocity of money decreases (with fractional reserve banking, the more a dollar circulates, the more money is created) since people save money rather than spend. Low interest rates create inflation as spending/investing is more desired over holding onto something that doesn't gain much. You're asking me to address deflation, with inflation-causing practices introduced.

I'm taking the point of view of someone giving out a private loan in a deflationary economy, not the FED or a central bank controlling rates.

Why would you hurt your bottom line as a lender? You're creating a private entity in a profit driven economy that acts without profit motive, to assert that this would happen everywhere. If every lender did it, then you'd get inflation again. It's not about the FED "controlling rates" (fed rate is just loan rate between banks to shore up reserves, making your argument pointless), the loans you see in public are privately determined. The government or federal reserve isn't stepping in there to change interest rates.

If lenders compete with negative interest rates, you go back to inflation.

Jesus imagine how hot that room must be. Probably a good 120.

I've seen folks like you hundreds of time already on Jow Forums and all your kind is achieving is wasting everyone's time. you've been brainwashed by your dying boomer professor or dying boomer articles into thinking that waste is a good thing. waste is the definition of a non efficient system. and you do all that while thinking you're smart, or that economy is some kind of science. anyone believing this really have a problem. your task is to make the world more simple and more efficient, not more complex and less efficient. there's no point talking with you, see how I wasted my time, and yet you don't have the biological requirement to understand what I said. proven by how you think non efficience is good. short term thinking indicates low IQ. do something else.

Yeah, good point. I suppose there is no incentive to lend.

Though is there any reason this would nesscarrily lead to disaster other than our economy now depends so much on lending and debt?

I learned from him.

Deflation is actually good.

it's all meaningless and petty blabbering, don't forget his outdated beliefs and will to waste. your time is worth more than this.

The other dude is a conspiracy theorist. Think it through based on what I said, at the very least the general principles. What happens with deflation, what happens to borrowing, to interest rates, etc.

fuck man I wanna go to a lan party like that, looks awesome

>The other dude is a conspiracy theorist.

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