Re:Modeling a Wealth Tax
by twblalock on Tuesday August 18, 2020 @07:55PM
(#24205714)
> And the reason that deflation is considered "worse" is because it lets people keep equity in unproductive assets instead of liquidating it and moving the money into more productive assets.
No, the reason deflation is considered worse is the possibility of a deflationary spiral.
The Fed is primarily interested in preventing a collapse of the banking system. They don't really care if people are spending their money on productive investments or hoarding it -- in fact, if everyone was spending their money on productive investments there wouldn't be any bank reserves, and the Fed would be very unhappy about that.
No, the reason deflation is considered worse is the possibility of a deflationary spiral.
The Fed is primarily interested in preventing a collapse of the banking system. They don't really care if people are spending their money on productive investments or hoarding it -- in fact, if everyone was spending their money on productive investments there wouldn't be any bank reserves, and the Fed would be very unhappy about that.