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Poll: New Currency Petition

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harmonic:

Accusing someone of lacking reading comprehension is the last refuge of someone who has no argument, and says nothing of substance.

Or it's what you do when someone has some batshit crazy idea that claiming that currency represents value means that people should be paid equally or some shit.

It's called inferring. The only practical application of your definition of currency is hours of labor = a static amount of currency.

No, maybe you can try to read where I said currency represents value and not work? Is that possible for you to do? Because my definition is simply that it represents something of value to society. Which is descriptive and is not asking for some kind of practical application in regards to payment. It describes how it is used.

Currency's ability to do work and a human being doing labor are not the same thing. If I invest a million dollars in a company, a lot of work just got done without any labor.

Nope, no work got done. Money doesn't do work.

You seem to be deluded into thinking that because I disagree with the notion currency is work that I must somehow think that it IS equal to a certain amount of work. Which is pretty stupid.

Dijkstra:

Nope, no work got done. Money doesn't do work.

You seem to be deluded into thinking that because I disagree with the notion currency is work that I must somehow think that it IS equal to a certain amount of work. Which is pretty stupid.

What do you mean no work got done? A new business is now possible. People got hired, equipment was bought, an idea was put into motion. Can you please clarify on your seemingly narrow definition of "work" ?

harmonic:

Dijkstra:

Nope, no work got done. Money doesn't do work.

You seem to be deluded into thinking that because I disagree with the notion currency is work that I must somehow think that it IS equal to a certain amount of work. Which is pretty stupid.

What do you mean no work got done? A new business is now possible. People got hired, equipment was bought, an idea was put into motion. Can you please clarify on your seemingly narrow definition of "work" ?

Considering that you're the one claiming work is done, why don't you define it? People getting hired, equipment being bought, those are not magically done when the money appears. It takes some work to hire someone, to buy equipment. Money is what motivates people to do those and makes it possible, but the money is not working.

Dijkstra:

harmonic:

Dijkstra:

Nope, no work got done. Money doesn't do work.

You seem to be deluded into thinking that because I disagree with the notion currency is work that I must somehow think that it IS equal to a certain amount of work. Which is pretty stupid.

What do you mean no work got done? A new business is now possible. People got hired, equipment was bought, an idea was put into motion. Can you please clarify on your seemingly narrow definition of "work" ?

Considering that you're the one claiming work is done, why don't you define it? People getting hired, equipment being bought, those are not magically done when the money appears. It takes some work to hire someone, to buy equipment. Money is what motivates people to do those and makes it possible, but the money is not working.

...The paper doesn't do the work itself. We know this. The paper is a representation.

The entire reason we're even arguing is because you actually backed up the point that sweatshop kids not being rich is the reason money doesn't represent work. You haven't really presented a reason why you believe this, and one can only infer that you don't recognize that a sweatshop kid's labor may not be as valuable as that of a surgeon.

harmonic:

Dijkstra:

harmonic:

What do you mean no work got done? A new business is now possible. People got hired, equipment was bought, an idea was put into motion. Can you please clarify on your seemingly narrow definition of "work" ?

Considering that you're the one claiming work is done, why don't you define it? People getting hired, equipment being bought, those are not magically done when the money appears. It takes some work to hire someone, to buy equipment. Money is what motivates people to do those and makes it possible, but the money is not working.

...The paper doesn't do the work itself. We know this. The paper is a representation.

Of value.

The entire reason we're even arguing is because you actually backed up the point that sweatshop kids not being rich is the reason money doesn't represent work. You haven't really presented a reason why you believe this, and one can only infer that you don't recognize that a sweatshop kid's labor may not be as valuable as that of a surgeon.

No, actually someone who wasn't so biased might infer that I do think one is recognized as more valuable than the other and is paid more because money is not a representation of work, it is a representation of value. And thus I don't try to conflate the words 'work' and 'value' and go batshit and make crazy accusations when others do not equate them. Value is relative, work is not. The former represents money better than the latter.

You both said similar things, so I will just respond to one.

Agema:

It's funny you should say inflation discourages investment/saving, because economists don't agree with you. The Western world has not been aiming for mild (2-5%) inflation rates in the whole postwar period out of a perverse sense of self-harm.

If you are going to call to authority, try not to use the absurdly indebted and financially mismanaged Western nations of the world. If anything, I would call this a point for my side.

Steady, mild inflation rarely hurts creditors, because creditors can set the interest rate on the loan to counteract inflation. It is a boon to investment, because it erodes the value of money "stuffed in mattresses", so makes it more attractive to put it out there as investment. The obvious way to illustrate this is the contrast with deflation: if you make money simply by having unspent money, you just stuff it in a safe to sit idle, and wait. Similarly, those who want to borrow capital to do economically useful things like start and expand businesses don't like borrowing money when their debt increases in size over time.

Inflation is not an instantaneous process. When new money is artificially injected into the economy (I don't have a problem with natural inflation), interest rates fall until the new money is dispersed into the economy. During that discrepancy, savings decline due to a lack of replenishment from the low interest rates while existing savings are consumed in malinvestment. This causes a short term appearance of growth while actually eroding real savings, distorting the production structure, and hurting the economy.

As for the "mattress" issue, why does it matter if someone DOES leave their money under the mattress? That's just a form of savings. If the money is kept out of the money supply for long enough, then the value is redistributed and there is no long term effect. If the money is only taken out for the short term, then it is just a form of safe savings. Why is the assumption that an individual doesn't know how to use his own money, or alternatively, that he must sacrifice his own self-interest for the greater good?

And the poor are most certainly not the hardest hit by inflation. You see, the poor (like, the bottom quintile) don't usually have any significant assets whatsoever, including saved money. They lead a hand-to-mouth existance. And in fact, as wealth increases, almost no-one has much of their assets in money. It tends to go into pensions and houses, then various investment schemes, with most people merely holding enough back for emergencies or to blow on the yearly holiday; but it's a tiny proportion of their wealth being subjected to inflationary devaluation.

First, of course nearly all poor people have SOME savings, even if it is just a few hundred dollars in the bank account. And if poor people wish to better their lives and "move up," the best way to do so is to save their money. Second, again inflation is not an instantaneous process. Imagine water being poured onto a table. The water doesn't instantly spread out across the entire table, rather, it starts in the place it is poured and spreads out from there. Inflation works the same way. The money enters the financial system so Wall Street spends new money at old prices. The money spreads out from there, losing value along the way as prices rise. Where does the money go to last? The people who are farthest away from the financial system (AKA poor people).

Klepto:

If you are going to call to authority, try not to use the absurdly indebted and financially mismanaged Western nations of the world. If anything, I would call this a point for my side.

That is just a straw man. This has little to do with the financial management of countries, individually or collectively, it's about the intellectual discipline of economics. The financial management of countries does involve some economics, but also an awful lot of other things.

Inflation is not an instantaneous process. When new money is artificially injected into the economy (I don't have a problem with natural inflation), interest rates fall until the new money is dispersed into the economy. During that discrepancy, savings decline due to a lack of replenishment from the low interest rates while existing savings are consumed in malinvestment. This causes a short term appearance of growth while actually eroding real savings, distorting the production structure, and hurting the economy.

You cannot simply declare as an article of fact that investment during periods of low interest rates is "malinvestment".

Malinvestment will be driven whenever the available credit exceeds the available good investment oportunities (thereby driving investment to chase worse/riskier ones). In many cases, low interest rates will be coupled with plentiful investment opportunities, in which case there is not a problem.

As for the "mattress" issue, why does it matter if someone DOES leave their money under the mattress? That's just a form of savings. If the money is kept out of the money supply for long enough, then the value is redistributed and there is no long term effect. If the money is only taken out for the short term, then it is just a form of safe savings. Why is the assumption that an individual doesn't know how to use his own money, or alternatively, that he must sacrifice his own self-interest for the greater good?

Nice try at injecting some political ideology, but he's not sacrificing his self interest, is he? It's simply whether the system works so it is in his best self-interest to save via investment rather than save by hoarding. The theoretical assumption of a rational, self-interested actor exists in both.

When you say "no long term effect", this is very dubious. The redistribution in the value of money you are talking about is deflation. Deflation has a whole host of negative affects associated with it; for simplicity let's limit it to suppressing consumption (because it's beneficial to defer buying) thus recession-inducing, and also that it can drive malinvestment by suppressing investment in good opportunities.

First, of course nearly all poor people have SOME savings, even if it is just a few hundred dollars in the bank account. And if poor people wish to better their lives and "move up," the best way to do so is to save their money. Second, again inflation is not an instantaneous process. Imagine water being poured onto a table. The water doesn't instantly spread out across the entire table, rather, it starts in the place it is poured and spreads out from there. Inflation works the same way. The money enters the financial system so Wall Street spends new money at old prices. The money spreads out from there, losing value along the way as prices rise. Where does the money go to last? The people who are farthest away from the financial system (AKA poor people).

You don't need to patronise me about how inflation works, thanks. I'm well aware it's not instantaneous.

If poor people wish to save money, they can do it efficiently (i.e. a form that maximises the return) or inefficiently (a form that doesn't) like everyone else. No-one stops poor people saving what they can in a "good" means, and there are no shortage of public or private entities who can advise them. The problem is more that they lack the income to effectively save.

If you take an individual who earns $15,000 a year and has $500 hoarded, 2-3% inflation means he has lost just $10-15 (salaries, by and large, are raised in line with inflation). I'm sure he'd prefer to have that $10-15 than not, but on the other hand the notion that it makes a remotely significant difference to his financial situation is absurd. Add to that, that there is available money sloshing around the financial system which helps keep them a $15,000 job is far more valuable to them.

dwharmon:
This is why I didn't provide any specifics in the beginning. I put my ideas out there, and everybody seems more interested in tearing them down and arguing semantics than in actually providing their own ideas and solutions.

That's because currency is a closed system, it evolved in this form for a reason, and tampering with it turned out to be disastrous each time.

For instance any attempt to create currency results in inflation, and the amount of purchasing power stays the same. You can't create wealth out of thin air in that way. If that was possibly, poverty would've been resorted ages ago.


Same goes for you. What if I want you to 80 hours worth of work for me, and promise you 4000 zimbabwean dollars for that? Would you do the work? That's 50 dollars per hour.

Dijkstra:

harmonic:

...The paper doesn't do the work itself. We know this. The paper is a representation.

Of value.

The entire reason we're even arguing is because you actually backed up the point that sweatshop kids not being rich is the reason money doesn't represent work. You haven't really presented a reason why you believe this, and one can only infer that you don't recognize that a sweatshop kid's labor may not be as valuable as that of a surgeon.

No, actually someone who wasn't so biased might infer that I do think one is recognized as more valuable than the other and is paid more because money is not a representation of work, it is a representation of value. And thus I don't try to conflate the words 'work' and 'value' and go batshit and make crazy accusations when others do not equate them. Value is relative, work is not. The former represents money better than the latter.

An amazing job of all of you arguing out the first line I left and never touching the rest of my post. Thank you for giving another example that people do not respect the product of other people's work.

How do the vast majority of people come by the money they possess? Do they use the vast majority of that money to purchase the products of other peoples work? Is there any LARGE market segment (greater than 5% of the population) that vastly out earns (hundreds of time the money) and out produces the lowest legally-paid fulltime worker? As far as I can tell most college graduates are only in the 3 - 10 times range which mean we consider work very equal.

Yes, there are perversions of this in place which make people think of money as something other than work. Things like the stock market which is based on the premise that you can get money without working for it which appeals to people's base greed. Here is an EXCELLENT recent example from our former Vice President Al Gore where he has gone and bought stock shares at a price not available to the public. He bought 60,000 shares of Apple at $7.48 a share which he can turn around and sell to the public for $500 a share for a profit of $29.5 million with no work added. But this is just further evidence that places like wall street need to be fixed and returned to a "venture-capital-only and all established companies must pay off their stock" state.

http://finance.yahoo.com/news/al-gore-nets-another-fortune-164510966.html

The other perversion is government inflating the total money supply to control the flow the products to the marketplace but it does too many huge gushes which do not get to the marketplace but rather get "absorbed" up by the banks and redirected to places like wall street. I believe the government should stick to only small controlled spurts that are channelled directly into the market through it's own government spending on goods and are limited in volume to reflect the growth of the total work of the country.

Just to address this one quick..

Vegosiux:

micahrp:
Money is the physical representation of work. You receive money for work or products of work that are considered valuable by other people. The break down in the system is when we don't respect that work side and start feeling entitled to other people's work/money.

Really? Why aren't the sweatshop kids running the world then? And the people who work two jobs to make ends meet yet barely manage to support their families? Why aren't they getting their due then?

Why did you respond to my first line and then use an example addressed in my last line without quoting my last line? (I fixed it above for this post). This is disrespecting me (see how easy disrespecting something someone else produces is?).

A sweatshop is the next best example of not respecting someone else's work (the best being slavery). Are those sweatshop countries known for respecting human rights? Does the country you live in have laws in place to prevent this?

micahrp:

Why did you respond to my first line and then use an example addressed in my last line without quoting my last line? (I fixed it above for this post). This is disrespecting me (see how easy disrespecting something someone else produces is?).

Apologies, I got too hasty there.

As for minimum wage laws, that's the thing, there have been threads on escapist about how those hurt business and how an employer should be allowed to pay the workers as little as they want...which I suppose contributed me to drop into "not this again" and messing up up there a little.

Agema:

That is just a straw man. This has little to do with the financial management of countries, individually or collectively, it's about the intellectual discipline of economics. The financial management of countries does involve some economics, but also an awful lot of other things.

On the contrary, the fiscal and monetary management of these countries are intrinsically linked by the modern academic dominance of Keynsianism-Monetarism, which themselves are just two sides of the same coin. For years we've all been told that deficits aren't too bad, that government spending grows the economy, that we'll pay it off later because the magical money printing machine has our backs. If your argument is that the mainstream agrees with you, than I concur, but considering how terrible the mainstream is and has performed, that is not a point in your favor.

You cannot simply declare as an article of fact that investment during periods of low interest rates is "malinvestment".

Malinvestment will be driven whenever the available credit exceeds the available good investment oportunities (thereby driving investment to chase worse/riskier ones). In many cases, low interest rates will be coupled with plentiful investment opportunities, in which case there is not a problem.

An *artificial* expansion of credit will automatically produce more malinvestment for two reasons. First, any expansion of credit will automatically reduce in second rate projects receiving funding, since the first rate projects were already funded before the expansion. This problem is greatly exasperated when credit is perpetually expanded as it is in the US and much of the Western World today to keep their credit systems afloat. Second, and more importantly, artificial credit expansions are not backed by real savings and therefore new investment projects are often almost purse waste. This massive distortion of the production structure in the economy is the very worst thing about inflation.

Take the 2000s for example, where millions of homes were created on the premise that low interest rates means a high rate of savings and therefore potential purchases of new houses in the future. But the savings never existed in the first place! So instead of building things we may actually need, like a mixture of short run and long run projects, the economy focused on long run projects for the sake of phantom demand.

Nice try at injecting some political ideology, but he's not sacrificing his self interest, is he? It's simply whether the system works so it is in his best self-interest to save via investment rather than save by hoarding. The theoretical assumption of a rational, self-interested actor exists in both.

Clearly the same rational actor doesn't exist in both cases. In my case, individuals know what best to do with their money. In your case, central bankers know what best to do with other people's money. On top of that, you make a common leftist fallacy of claiming to have the ability to objectively determine personal utility. Even if some guy does get a lower return by "hoarding" his money, he could still prefer to do so due so for safety or convenience reasons.

When you say "no long term effect", this is very dubious. The redistribution in the value of money you are talking about is deflation. Deflation has a whole host of negative affects associated with it; for simplicity let's limit it to suppressing consumption (because it's beneficial to defer buying) thus recession-inducing, and also that it can drive malinvestment by suppressing investment in good opportunities.

As long as deflation is natural, it is not harmful in the long run. I don't see how the TV, computer, or cell phone industries (all of which are relatively unregulated) have been harmed by their falling prices over the last thirty years. Yes, it can discourage consumption, which is exactly what an economy needs during a downturn, but that is also partially offset by time costs (ie. now is better than later). But since this is a much bigger issue, I am willing to push this aside if you are.

If poor people wish to save money, they can do it efficiently (i.e. a form that maximises the return) or inefficiently (a form that doesn't) like everyone else. No-one stops poor people saving what they can in a "good" means, and there are no shortage of public or private entities who can advise them. The problem is more that they lack the income to effectively save.

Same problem I mentioned above: how can you say one form of savings is better than another here? Why is higher returns with more risk better than lower returns with less risk? That's up to an individual's evaluation. And yes, there is something stopping poor people from saving their money is at least one "good" form, and that is in safety form. Because their money gets eroded every year, they must necessarily invest it to maintain even parity. With low risk bonds, they won't maintain inflation, so they necessarily have to incur more risk. Even TAPS are pretty weak since they underestimate inflation.

You don't need to patronise me about how inflation works, thanks. I'm well aware it's not instantaneous.

Tat wasn;t my intention, but then how come you make the same exact mistake below?

If you take an individual who earns $15,000 a year and has $500 hoarded, 2-3% inflation means he has lost just $10-15 (salaries, by and large, are raised in line with inflation). I'm sure he'd prefer to have that $10-15 than not, but on the other hand the notion that it makes a remotely significant difference to his financial situation is absurd. Add to that, that there is available money sloshing around the financial system which helps keep them a $15,000 job is far more valuable to them.

On the first part, you are misleading via omission. No, the effects of inflation on one year aren't very significant, but what about after ten years when little Tommy's college fund has lost thirty percent of its value? For the rest of it, you make the "instantaneous assumption" error. As I explained in last post, the money moves outwards from the financial system, and therefore these poor people are the last group to get the new money. Even if they new money does completely distribute throughout the economy (which is extremely unlikely), they will still be hurt in the interim as they pay higher prices with an older salary.

You mention the automatic salary mark ups, which are pretty common, but by no means everywhere, and certainly less present in lower wage jobs. But even where the mark-ups exist, where do they get the data from? The CPI? An aggregation which is vastly misleading and inaccurate, especially today. As many have pointed out, by the CPI measurements of the 1970s, inflation in the US today is about 7%. Part of this is because of the uneven affects of inflation. For instance, since January of 2009, crude oil prices have more than doubled. While there are certainly many factors affecting the price, undoubtedly a huge factor is the flood of new, artificial money flooding the oil markets due to the actions of the Fed. Do you think a 2% wage increase will cover that?

Currency is a method of placing a figure on the value of production. This way it is possible for two people to exchange the value of their work or labour without needing a double coincidence of wants for the respective goods or services they provide.

In other words, it means a chicken farmer and a carpenter do not have to trade houses for chickens in order to do business with one another. Why would a carpenter need 100,000 chickens or what would a chicken farmer do with a 3 inch high and 1 foot long brick wall? Money allows the chicken farmer to hire the carpenter to repair his chicken sheds without needing to pay him in chickens. Money allows the carpenter to purchase only one chicken from the chicken farmer without needing to travel to the farmer's farm and repair half a step to his office.

As for the sweatshop children: that is how much their labour is worth to their employer. Their labour is the supply and the demand for it, while high compared to the rest of the world, is low compared to the sheer supply of labour in China. So the value of that labour is low (in China) and that is reflected in how little pay they are given. Money is a representation of the value of a person's work.

Do not be deceived into thinking this means that trust fund kids who have fortunes invested and make enough in interest to earn 10x that of a worker do 'work'. The return on an investment is simply the reverse of interest for a loan, when you have enough wealth - something earned by your work being incredibly valuable - it can simply be used to make more wealth. The 'work' they do is risking their funds for other people to start their own business ventures. An investor is simply a money lender who has middle men take care of the actual business of lending money. If he did the actual lending business himself he would earn far more on his investments but at the same time he needs the skill, time and knowledge to perform that function without terribly high risk.

Klepto:

On the contrary, the fiscal and monetary management of these countries are intrinsically linked by the modern academic dominance of Keynsianism-Monetarism, which themselves are just two sides of the same coin. For years we've all been told that deficits aren't too bad, that government spending grows the economy, that we'll pay it off later because the magical money printing machine has our backs. If your argument is that the mainstream agrees with you, than I concur, but considering how terrible the mainstream is and has performed, that is not a point in your favor.

This is merely the petty Austrian rhetorical description of Keynesian / monetarist / neoclassical economics, which bares no meaningful relation to what they actually call for. Erroneous ideological smears are not a useful substitute for analysis.

An *artificial* expansion of credit will automatically produce more malinvestment for two reasons. First, any expansion of credit will automatically reduce in second rate projects receiving funding, since the first rate projects were already funded before the expansion.

Were all the first rate projects funded before? How do you know?

You would be describing "first rate" in such a model as "what has been already invested in within the limtiations of the credit supply" (with the assumption these are the most profitable investments). However, this is no way precludes the possibility that the quantity of profitable investments outstrips the credit supply: in which case it is advantageous to increase the credit supply. Or, to go back to what I said before, credit excess, when it outstrips the available good investments, is the problem.

Second, and more importantly, artificial credit expansions are not backed by real savings and therefore new investment projects are often almost purse waste.

As long as the investments are (on aggregate) not loss-making, it should be fine.

Clearly the same rational actor doesn't exist in both cases. In my case, individuals know what best to do with their money. In your case, central bankers know what best to do with other people's money. On top of that, you make a common leftist fallacy of claiming to have the ability to objectively determine personal utility. Even if some guy does get a lower return by "hoarding" his money, he could still prefer to do so due so for safety or convenience reasons.

In both cases, the individual knows what best to do with his money, and in both cases, they can do something contrary to maximum returns if it pleases them. It is just that what is the best thing to do with money is dictated by circumstance. Whether the circumstance is central bankers fixing inflation or a collapse in the gold supply inducing gold-standard deflation is neither here nor there. Why do you think a collapsed gold mine knows what I should do with my money better than I do?

As long as deflation is natural, it is not harmful in the long run...

Deflation via increasing productivity is indeed not the issue.

Yes, it can discourage consumption, which is exactly what an economy needs during a downturn, but that is also partially offset by time costs (ie. now is better than later). But since this is a much bigger issue, I am willing to push this aside if you are.

"Discourage consumption" equates to "people lose jobs and can't get new ones". Do you think that is consequence-free?

Tat wasn;t my intention, but then how come you make the same exact mistake below?

You should not confuse a time-limited frame of reference with an assumption of instantaneity.

On the first part, you are misleading via omission. No, the effects of inflation on one year aren't very significant, but what about after ten years when little Tommy's college fund has lost thirty percent of its value? For the rest of it, you make the "instantaneous assumption" error. As I explained in last post, the money moves outwards from the financial system, and therefore these poor people are the last group to get the new money. Even if they new money does completely distribute throughout the economy (which is extremely unlikely), they will still be hurt in the interim as they pay higher prices with an older salary.

You mention the automatic salary mark ups, which are pretty common, but by no means everywhere, and certainly less present in lower wage jobs. But even where the mark-ups exist, where do they get the data from? The CPI? An aggregation which is vastly misleading and inaccurate, especially today. As many have pointed out, by the CPI measurements of the 1970s, inflation in the US today is about 7%. Part of this is because of the uneven affects of inflation. For instance, since January of 2009, crude oil prices have more than doubled. While there are certainly many factors affecting the price, undoubtedly a huge factor is the flood of new, artificial money flooding the oil markets due to the actions of the Fed. Do you think a 2% wage increase will cover that?

I do not think poor people generally leave a static $500 in an account for 10 years as a means of saving for the future. It is more useful to debate what people usually do than abstract theoretical constructs. And again, it's still insignificant: over ten years they have lost $167, but in the same period they earned $150,000.

It is far from clear to me that "poor people" are necessarily last to get the money, or not significantly so. If the government prints a load of money in January, a bank can have lent it to an employer in February, and someone poor can be employed in March. Barely enough time for inflation to scratch the surface. But then, that poor person pays his taxes and his bank loan with that money. It's all in constant circulation. You can't arbitrarily pick poor people as an end user as if the money evaporates once they've spent it.

The general rule is that there are salary markups for inflation. In the short term there may not be, and other pressures (more labour than demand for jobs) may suppress it occurring. But the general rule is what matters most.

It doesn't strike me as an intrinsic problem that oil is rising in price, no. Someone's using oil, which means someone's doing work and getting paid for it. Which is a great improvement on them not having a job. Of course people might be speculating on it too, but let's leave that aside as a separate issue.

If you wish to remove natural deflation from the debate, you also must remove natural inflation. I note you make a half-hearted attempt to do so, but you can't really throw around banner numbers like 7% when the vast majority is not due to monetary policy. There are estimates for the effect of quantative easing (or whatever they might call it in the USA), which can be looked up. It's not much at all.

Agema:

This is merely the petty Austrian rhetorical description of Keynesian / monetarist / neoclassical economics, which bares no meaningful relation to what they actually call for. Erroneous ideological smears are not a useful substitute for analysis.

Who's the one who lead off with, "everyone important in the world disagrees with you"?

Were all the first rate projects funded before? How do you know?

You would be describing "first rate" in such a model as "what has been already invested in within the limtiations of the credit supply" (with the assumption these are the most profitable investments). However, this is no way precludes the possibility that the quantity of profitable investments outstrips the credit supply: in which case it is advantageous to increase the credit supply. Or, to go back to what I said before, credit excess, when it outstrips the available good investments, is the problem.

I don't disagree with anything here; the degree to which this factor matters depends on the initial amount of savings, the amount of various investment grades, and the amount of new currency. However, I would say that artificial currency injections virtually always fly past the threshold of good investments and into bad investment territory. Of course, this is a relatively minor argument, especially compared to the one below it.

As long as the investments are (on aggregate) not loss-making, it should be fine.

Yes, that's true... but the whole point of what I said is that these investments won't pay off because they are built on non-existent foundations. Hence why we have millions of unoccupied houses in the US today. This is why crashes always occur after big credit expansions (2000's housing bubble, 90s dotcom crash, Great Depression, etc.).

In both cases, the individual knows what best to do with his money, and in both cases, they can do something contrary to maximum returns if it pleases them. It is just that what is the best thing to do with money is dictated by circumstance. Whether the circumstance is central bankers fixing inflation or a collapse in the gold supply inducing gold-standard deflation is neither here nor there. Why do you think a collapsed gold mine knows what I should do with my money better than I do?

Really? You don't see a difference between a gold mine accidentally collapsing and the Federal Reserve Chairman choosing to lower interest rates? A collapsing gold mine (which I must pedantically add would have little to no effect on a gold standard economy since reserve ratios have most of the control of the money supply in a free economy) is an act of nature, while a Fed Reserve Chairman choosing to lower interest rates is a purposeful act by an individual to alter the behavior of many others. And even if, theoretically, a consortium of bankers in a free, gold standard economy got together to collude interest rates down, that would still not compare to a Central Bank. This is because a central bank is not a market actor, it exists above the market with a government empowered monopoly on money production.

Deflation via increasing productivity is indeed not the issue.

Even if it deflates via a decreasing money supply, as long as it is natural, it is not harmful.

"Discourage consumption" equates to "people lose jobs and can't get new ones". Do you think that is consequence-free?

Laying off workers is exactly what is needed during an economic downturn, which is when it almost always naturally occurs. That way capital assets can be put back in the credit market so that they can be reassembled into the production of goods that people actually want (as opposed to say, instead of millions of unoccupied houses).

I do not think poor people generally leave a static $500 in an account for 10 years as a means of saving for the future. It is more useful to debate what people usually do than abstract theoretical constructs. And again, it's still insignificant: over ten years they have lost $167, but in the same period they earned $150,000.

Whatever they put in, whatever amount over whatever time period, it will lose X percent per year. It is baffling that you cannot see the detrimental effects of this. They WILL have less money in the bank account, and WILL have a harder time making a big purchase to improve their lives, whether that is a new house, new car, or a college education. And that doesn't even account for the multitude of other negative effects.

It is far from clear to me that "poor people" are necessarily last to get the money, or not significantly so. If the government prints a load of money in January, a bank can have lent it to an employer in February, and someone poor can be employed in March. Barely enough time for inflation to scratch the surface. But then, that poor person pays his taxes and his bank loan with that money. It's all in constant circulation. You can't arbitrarily pick poor people as an end user as if the money evaporates once they've spent it.

The general rule is that there are salary markups for inflation. In the short term there may not be, and other pressures (more labour than demand for jobs) may suppress it occurring. But the general rule is what matters most.

When money is put into the financial system, where does it go first? Which banks get the new money? Is it local banks with $10 million in assets. Or is it Goldman Sachs, Morgan Stanley, and the like. Where do those banks lend it to? To Mcdonald's or Walmart to pay bottom line salaries? How about to the owners of a Mom and Pop store in a small town? Or a dairy farmer in upstate New York? Or does it go to corporate bonds, currency exchanges, IPOs, a dozen other financial instruments which deal in quick money exchange at the high ends of business? The answers should be pretty obvious.

It doesn't strike me as an intrinsic problem that oil is rising in price, no. Someone's using oil, which means someone's doing work and getting paid for it. Which is a great improvement on them not having a job. Of course people might be speculating on it too, but let's leave that aside as a separate issue.

No, there is nothing intrinsically wrong with it, but we are talking about the effects on poor people, and rising oil prices have tremendous effects considering the portion of one's devoted to it. But no, the "speculation" should not be pushed aside. It is not random coincidence that while the US economy has increased in size by about 1% each year since 2009 (a number I believe to be laughably inflated) and the money supply has about doubled, the price of oil has doubled as well. That is the speculation (or at least the vast majority of it). All this new money has to go somewhere.

If you wish to remove natural deflation from the debate, you also must remove natural inflation. I note you make a half-hearted attempt to do so, but you can't really throw around banner numbers like 7% when the vast majority is not due to monetary policy. There are estimates for the effect of quantative easing (or whatever they might call it in the USA), which can be looked up. It's not much at all.

I call BS. Why on earth would natural inflation be that high. Natural inflation at this time, and for the last few years should probably be negative, or at most, nonexistent.

Klepto:
Who's the one who lead off with, "everyone important in the world disagrees with you"?

If you are going to use quotation marks, either get the quotation right, or state you are paraphrasing. I said economists don't agree with you. On overwhelming consensus, they do not. What the Austrian School developed that was useful to economics has already been adopted into the mainstream, the rest varies between junk and unproven theory. Austrians today are a miniscule clique within the field of economics; they derive their clout almost entirely from the libertarian wing of US politics because their model preaches governmental inactivity which is so attractive to people who fear and hate the power of government.

I don't disagree with anything here; the degree to which this factor matters depends on the initial amount of savings, the amount of various investment grades, and the amount of new currency. However, I would say that artificial currency injections virtually always fly past the threshold of good investments and into bad investment territory. Of course, this is a relatively minor argument, especially compared to the one below it.

...

Yes, that's true... but the whole point of what I said is that these investments won't pay off because they are built on non-existent foundations. Hence why we have millions of unoccupied houses in the US today. This is why crashes always occur after big credit expansions (2000's housing bubble, 90s dotcom crash, Great Depression, etc.).

Major credit gluts are usually trouble. However, this says little about the general state of affairs, as such gluts are rare.

When you say "virtually always fly past the threshold of good investments", this is something that can be evidentially identified, and you should do so. The fact of steady, mild inflation for decades (bar the odd blip) suggests that 'artificial credit' has been consistently pumped into the system in the postwar period. And yet, as said, credit gluts have been really quite rare.

Really? You don't see a difference between a gold mine accidentally collapsing and the Federal Reserve Chairman choosing to lower interest rates? A collapsing gold mine (which I must pedantically add would have little to no effect on a gold standard economy since reserve ratios have most of the control of the money supply in a free economy) is an act of nature, while a Fed Reserve Chairman choosing to lower interest rates is a purposeful act by an individual to alter the behavior of many others. And even if, theoretically, a consortium of bankers in a free, gold standard economy got together to collude interest rates down, that would still not compare to a Central Bank. This is because a central bank is not a market actor, it exists above the market with a government empowered monopoly on money production.

The goldmine collapsing is just figurative to represent some sort of major disruption to the gold supply.

You seem to be heading towards a naturalistic fallacy here: something is not 'better' because it is natural. A man is not better off naturally catching smallpox than he is from human action deliberately infecting him, and substantially less better off than human action vaccinating him against smallpox. Much of human development has been an attempt to protect ourselves from nature's caprice.

The second issue is that your argument here seems political, not economic. In essence, that no-one should have the right to guide your behaviour. Human actors purposefully alter our behaviour all the time: one need merely consider what it is to be employed. It is frequently done beneficially - to tie back to the preceding paragraph, management is frequently beneficial for efficiency and optimalisation than none. Why should a currency be any different from any other of the countless structures that benefit from management?

Even if it deflates via a decreasing money supply, as long as it is natural, it is not harmful.

Repetition. This is questionable and rarely held by economists, as discussed in previous posts.

Laying off workers is exactly what is needed during an economic downturn, which is when it almost always naturally occurs. That way capital assets can be put back in the credit market so that they can be reassembled into the production of goods that people actually want (as opposed to say, instead of millions of unoccupied houses).

When I say consequences, I mean that unemployment tends to mean real hardship for real people. It's not just an economic abstraction.

In a downturn, workers will be laid off and savings reallocated under any circumstance. Almost nothing will stop this.

The point of making credit available is to speed the allocation of resources into better investments more swiftly and get people back into work more swiftly in those new, better areas. Losses prevent such new investments, which credit can alleviate. Individual humans, corporations and so on can determine where those better investments are. If a sector overinvested-in has turned out to be a bust, people will be very unlikely to invest more in it with their new credit, will they?

There's only a problem if no better investments do exist: that's the point where the pain just has to be sucked up. But that's hardly the case every time there's a burst bubble or recession as you imply.

Whatever they put in, whatever amount over whatever time period, it will lose X percent per year. It is baffling that you cannot see the detrimental effects of this. They WILL have less money in the bank account, and WILL have a harder time making a big purchase to improve their lives, whether that is a new house, new car, or a college education. And that doesn't even account for the multitude of other negative effects.

I've quite clearly said it has detrimental effects. What I have stated is that they are insignificant.

The poor do not have the income to meaningfully save for "big purchases". How many people do you think can buy a house without a mortgage? Anyone who can does not qualify as poor, that is sure. What they need for the things they desire is borrowing, and borrowing is facilitated by inflation.

And like I said, anyone doing heavy-duty saving - including the poor - will not be using an ordinary bank account or their mattress. They'll be using a high interest account or low-risk investments that mitigate most if not all inflation loss, or even surpass it.

When money is put into the financial system, where does it go first? Which banks get the new money? Is it local banks with $10 million in assets. Or is it Goldman Sachs, Morgan Stanley, and the like. Where do those banks lend it to? To Mcdonald's or Walmart to pay bottom line salaries? How about to the owners of a Mom and Pop store in a small town? Or a dairy farmer in upstate New York? Or does it go to corporate bonds, currency exchanges, IPOs, a dozen other financial instruments which deal in quick money exchange at the high ends of business? The answers should be pretty obvious.

This is simply restating your point, not countering mine.

If I wish to expand my business, and can borrow to do so at 4% interest instead of 5% because government made credit available, that's more beneficial to me than the disadvantage of fractions of a percent inflation on a small part of my hoarded money. In the case where the loan is only viable because of the reduced rate, it means I'm also employing people who wouldn't otherwise be employed without, so more beneficial to them too.

No, there is nothing intrinsically wrong with it, but we are talking about the effects on poor people, and rising oil prices have tremendous effects considering the portion of one's devoted to it. But no, the "speculation" should not be pushed aside. It is not random coincidence that while the US economy has increased in size by about 1% each year since 2009 (a number I believe to be laughably inflated) and the money supply has about doubled, the price of oil has doubled as well. That is the speculation (or at least the vast majority of it). All this new money has to go somewhere.

Speculation is not specific to inflation, or quantitative easing, or whatever else. That is why it is not relevant.

I call BS. Why on earth would natural inflation be that high. Natural inflation at this time, and for the last few years should probably be negative, or at most, nonexistent.

Two major factors - because of how much is spent on them - that heavily influence the inflation rate are food and fuels. Food prices have risen dramatically since the mid 2000s due to increased demand and supply decreases (competition for biofuels, climate-related production loss). Fuels dipped during the recession and decreased demand, but have recovered to pre-recession levels. In comparison to these, the fact that electronics and stationary etc. may have got a bit cheaper is small fry.

Many inflation measures remove food and fuel because they tend to be extremely volatile and hopelessly distort short-term measures. The 'official' US inflation rate is around 2%. If you state it is effectively 7%, you might see for yourself where the discrepancy possibly arises.

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