Why is inflation useful as opposed to deflation? If money were to be gaining in value rather than losing value people would be incentivized to do a few things
1. Hold on to money because it would increase in value over time
2. Not make purchases because the object being purchased will require fewer units of money over time.
3. Not invest in starting new businesses because the investor would be losing out on the guaranteed income from holding onto the money along with the fact that whatever the business sells will be worth fewer units of money over time
4. Disincentivize individuals to take out loans to start businesses because the value of the loan will increase in price over time.
However when money loses value over time there are a few nice properties
1. The burden of debt decreases over time
2. People are incentivized to invest their money into business
You seem to believe that secondary markets (namely wall street) are bad things. The secondary market is a good thing because it gives individuals that initially put up capital for new businesses to be created a way to realize the return on their investment without having to wait for dividends. This is good because people that are successful in choosing which businesses should have capital (because their product is valuable) and which businesses don't deserve that capital will be able to take their money and invest it into other businesses which would presumably create products that add value to the world.
Of course there are bad things such as advisors charging excessive fees to ignorant people, corporate raiders, fraudsters, etc.
> 1. Hold on to money because it would increase in value over time
"disincentivize poor people from saving"
> 2. Not make purchases because the object being purchased will require fewer units of money over time.
"push poor people into consuming"
> 3. Not invest in starting new businesses because the investor would be losing out on the guaranteed income from holding onto the money along with the fact that whatever the business sells will be worth fewer units of money over time
"Benefit rich people who seek to invest in venture capital"
> 4. Disincentivize individuals to take out loans to start businesses because the value of the loan will increase in price over time.
"make it easier for people to sell themselves into debt slavery"
> 1. The burden of debt decreases over time
"make it cheaper for leveraged investments, de facto restricted to a small class of investors, to exist"
> 2. People are incentivized to invest their money into business
"push middle class people into subsidizing risky behavior by capitalists"
The reason why I am reframing your statements in this way is because a general policy of inflation affects everyone, and by and large the rich (good for them!) already have ways to escape, if not profit from, the generalized effects. The rest of us do not.
There are additional problems to the "perpetual growth mentality", that I don't want to bring up too heavily, like incentivising continued erosion of the environment, natural resource depletion and less conservation.
> You seem to believe that secondary markets (namely wall street) are bad things.
No. Secondary markets are great. What is not great is forcing people to participate, as in, socializing risk while while allowing the rich and politically connected to enjoy the fruits of the casino capitalism with golden parachutes and fail-upwards scenarios. The traditional left/liberal argument is that we need to add regulation to fix that and protect the investment of general public, which, being anti-state-socialist, I am vehemently against (besides which the long history of added regulations seems to only have the effect of ensnaring more of the middle class into the system of socializing risk and paying off the privileged). The only solution is to not have these insidious little pushes that force the general public into these dangerous activities.
Inflation is like proto-matter from star trek II. You think you know what you're doing, harnessing this praeternatural force that can bend and shape society to what you think are "good things", but the cost is you're really making things unstable because of the fallacy of the unseen.
You can save by investing in the stock market or bonds which is what everyone should be doing
>"push poor people into consuming"
You can save (investing is saving)
>"Benefit rich people who seek to invest in venture capital"
The majority of people starting businesses aren't rich venture capitalists and more venture capitalists fail more often than succeed.
>"make it easier for people to sell themselves into debt slavery"
Getting into debt is definitely slavery, I'm sure the millions of people that have used debt to their benefit agree with you.
I'm done reading your comment, it's filled with unreasoned hyperbolic language that doesn't reflect the truth. Look inward and realize that at some point in your life you became radicalized to the point where you can't even think rationally
And it is a puzzling thing. Where did those jobs go? How is personal income so stagnant? And one of the things I note that is different now than was different before, was that by accumulating capital, large companies remove from circulation large chunks of money. It gets trapped by companies demanding it be 'cash or cash equivalents' so you aren't seeing it invested in long term projects. What you see are lots and lots of T-bills and other dollar denominated investments which can be liquidated on short notice. In January of last year the New York Times reported at $1.9T![1] and that has only gotten worse over the last 12 months. Nearly a $1.4T of this held by 50 US companies[2]. It is hard to get a handle on a trillion dollars, but if you take $60,000 a year as a "nice" middle income job in most of the country, half that $1.4T or $700B dollars circulating around in the economy is nearly 12 MILLION jobs!
I assert that because those trillions are sitting there in T-bills they have taken all of the oxygen out of the middle class. Many people when they have a bit more money in their pocket month to month spend at least some of that on things they wouldn't have spent on otherwise. Whether its a new car, or eating out, or vacations, or new furniture, or repainting the house. All of that spending then is going to companies that are hiring people to paint or sell you stuff or serve you stuff or make stuff for you to buy. And those people who doing all this stuff are also spending money and buying stuff etc.
I believe it is entirely possible that this has nothing to do with socialism or capitalism and everything to do with economic capital becoming trapped and stripped of its agency by companies who hoard it for no reason.
[1] https://www.nytimes.com/2016/01/24/magazine/why-are-corporat...
[2] http://money.cnn.com/2016/04/14/news/tax-us-companies-offsho...
If so, we simply need to increase the rate of inflation and the cash will start flowing.
True, some prices have risen. But, if I may, here are some fun equations to ponder.
1996 (Florida)
Minimum wage $4.25 Gallon of milk $2.73 Gallon of gas $1.26 Dozen eggs $1.31
2017 Minimum wage $8.10 Gallon of milk $3.31 Gallon of gas $2.41(was almost $4.00, if I remember correctly a few years ago?) Dozen eggs $1.59
1996
Electronics (to do work, using one's natural talents, for example) Expensive.
2017 Electronics: Much cheaper. Adjusting for inflation: much, much cheaper.
Of course, with electronics, there are too many intricacies to list, but here's a specific one. I bought a 512MB compact flash card in 2001, which set me back $249. I think the last one I bought was 2 years ago, or so. It was $60 for 16 GB. I make my living taking pictures. What would 16 GB worth of pictures have cost me in 2001?
I'm happy with these numbers. Simply put, let's think very carefully before using absolutes.
The WHOLE POINT of inflation is that it screws over wageearners:
https://krugman.blogs.nytimes.com/2010/02/13/the-case-for-hi...
"even in the long run, it’s really, really hard to cut nominal wages. Yet when you have very low inflation, getting relative wages right would require that a significant number of workers take wage cuts. So having a somewhat higher inflation rate would lead to lower unemployment, not just temporarily, but on a sustained basis."
How much can the government be stealing from you if you have no money? The government is in a position to help you, by providing you with social services, with financial benefits, by providing police to protect you, not to mention debt forgiveness (you mentioned your family is in bankruptcy). None of these things come from free market capitalism; they come from socialist policies intended to help those at a disadvantage. And there should be more of that -- health care, education, etc. Of course, corruption and inefficiency in government exists and is a problem, but the ones stealing money from you are those at the top who are constantly seeking to pay less in taxes, do less to protect to the environment, lobby or contribute (aka bribe) to profit at the expense of public good, outsource or automate away their labor, etc. You mentioned the negative impact of common practices of bankers and Wall Street -- those kinds of things are natural consequence of free market activity.
John Oliver did a good breakdown of how municipalities do pretty nasty things when you can't pay your tickets.
http://www.academia.edu/6681088/Washing_Away_the_Sins_of_Deb...
Inflation is a mechanism to prevent the rich from hoarding cash. The flipside is that people who aren't putting their money to use lose value.
Without inflation, the rich would hoard with impunity.
As "mechanism to prevent hoarding" by the rich it's pretty shitty. The rich know how to protect their net worth from devaluating currency (e.g. real estate), and can more easily partake in leveraged investment vehicles which would not be possible with higher interest rates and non-inflationary base currency. You don't see the guy on the tenderloin buying leveraged etfs. For that matter neither does the middle class, who mostly are locked into managed find situations which provide low yield (if you look through to trough, the real value of the stock market has been static for 25 years)
> That doesn't make any sense. If the rich hoard money the velocity of money goes down, and that causes the value to go down too.
'Velocity' of money is a shitty concept, but regardless what it means is that with higher velocity, goods and services are in higher demand relative to cash (more transactions over time). This increases price levels but reduces the value of cash.
So velocity going down decreases demand for and the value of goods and services (price levels), increasing the relative value of cash.
Capitalism (in the free markets sense) is great. The problem is that gobs of money are stolen from poor people like me by the government through various processes, the biggest of which is inflation. This money is largely redistributed to cronies - the easiest of which to see are the big contractors. Less obvious are the banks and directly profit off of low-interest loans by flipping them to higher-interest borrowers, and even less obvious is wall street (whose coffers are filled by middle class people pushed into protecting their assets from inflation).
This is Capital-ism (in the marxian sense) -- the philosophy deciding that the pursuit of capital is a good unto itself. Unfortunately, the state has decided to attempt to 'harness' capitalism for its own idea of 'social good' which of course basically taints the non-zero-sum nature of free exchange with the zero-sum game of political hierarchy. The more this happens, the greater there will be inequality. It's a direct consequence of the first principles, and is unavoidable.