Re:Ask HN: Lost Economic Theories: Printing Inflation-Free M...
by johbjo on Friday November 06, 2020 @05:32AM
(#25006604)
You're assuming inflation in wages, but not in prices. And there are relative differences in price inflation. Nowadays, assets typically inflate first, then wages and consumer prices. Prices can move faster than wages, so wages would inflate/deflate last.
So you have to imagine that your wage is fixed for the year, while your prices change every month or week.
Imagine 100% inflation. You're going to get paid 100k in 2020 but 200k in 2021. Working in 2021 is more lucrative than working in 2020 but since you have to live through 2020 to get to 2021 you will keep working through the entire period and you will never stop because each year is better than the next.
Now imagine the opposite. 50% deflation. In 2020 you get 100k and in 2021 you get 50k. Working in 2020 is more lucrative than in 2021.
When you consider that food has to be grown every year then the second scenario is a disaster. People will work a lot in the beginning and then they work less or not at all because the 100k+ in your bank account are worth far more than the 1k per year salary in 2026. If nobody is working then where is all the food and all the other products supposed to come from?