Inflationary money IS better than deflationary money though. Deflationary money encourages hoarding, and discourages investment in value-producing ventures. Inflationary money does the opposite.
If society ran on deflationary money, that would act as a massive brake on the economy, and financial institutions would become risk-averse to the point where loaning money would be nigh on impossible.
Deflationary money is only better from a hoarding perspective, and I'd argue that perspective is counter productive for society as a whole.
Inflationary currency benefits the wealthy though.
If you are rich, you can get loans easily, and it's better to invest your liquid cash and get cheap money on loan, while everybody else has a constantly deflating account. So you get even wealthier.
A loan can be seen as a short on the currency. When you take out a loan, you bet that the currency tomorrow will be worth less than today. Which is what happens in an inflationary world. It would not be a problem if everybody could get a loan, but usually loans are directly proportional to wealth.
tl;dr: inflationary = good for wealthy people, accumulates money in the hands of the few. Spending is encouraged.
Deflationary = good for regular people, companies are loath to invest. Saving is encouraged.
The current inflationary economy only works for the wealthy. I’d extend this to say it works for the upper middle class and anyone who owns a house, which is an increasingly shrinking class of people.
Inflation entrenches and widens the wealth gap. A deflationary currency works for everyone. People still need things like food, housing, and so on — so they will spend the currency to get those things. When a good investment opportunity arises, one that outpaces the deflation, it will still be worth investing. You just have to be wiser about investments.
Age implicitly has more buying power in a deflationary economy. This is fine, and true anyway because age tends to have more deflationary assets now anyway (houses, investments, etc.). The difference is with a deflationary currency, they have access to a liquid deflationary asset — they don’t need to have a house or investments in order to maintain buying power. This is a good thing. That means people who NEED a house can have one; if the deflationary currency makes more money than holding on to a house, houses as investments make no sense anymore. This means houses become houses again, for people. This makes a more vibrant community of people when people can actually afford to live in places.
I can go on, but the benefits of an inflationary economy seem to me to be illusionary. Big number go up, wealthy people wealthier, poor people poorer, human condition significantly worse. Deflationary economy seems to me to remedy most of this.
> When a good investment opportunity arises, one that outpaces the deflation, it will still be worth investing. You just have to be wiser about investments.
> if the deflationary currency makes more money than holding on to a house, houses as investments make no sense anymore.
These can't both hold at the same time. Either the currency deflates faster than investments, in which case investment funding dries up, or it deflates slower than housing, in which case it doesn't help the cost-of-housing problem.
(As bad as the housing market is, concluding that it would be a good idea to make access to money work the same way is pretty backwards IMO; rather the right conclusion is that we need to legalise building homes).
> Deflationary = good for regular people, companies are loath to invest. Saving is encouraged.
You've explained why inflationary is bad but not why deflationary is good.
The starting point has to be history, where deflation has been accompanied by a lack of economic growth and high unemployment.
During the Great Depression, the dollar became a deflationary currency and the slowdown in spending certainly didn't make the economy serve regular people any better.
That's the canonical example of deflation you have to explain away.
Historically, we have not had worldwide light speed communication available to all, and deflationary currency transmissible at lightspeed absent any central authorities. I think we can take history with a grain of salt here.
While I agree that the internet has a huge impact on the economy, I don't think there's reason to believe it changes it in the way you seem to imply. In the absence of any very convincing argument to the contrary, the historical view seems very likely to be correct.
Pray tell, how do you mean the internet would make deflation favour the poor? I fail to see any mechanic or theory that would support the notion.
Unfortunately, the history of an inflationary economy not backed by any scarce asset is extremely short. Given our technological level and the amount of poverty, I would say it has been an abject failure. Society moves forward in spite of it, not because of it.
I can only share my opinions with you. If you need more, I’d recommend taking a walk through the poorest neighborhoods of your nearest big city and report back on how well an inflationary economy is working for those people. In an age of lightspeed comms, automated industry, a machine economy, etc., it is an embarrassment and gross negligence that any poverty exists anywhere on Earth, let alone at the mass scale it currently exists. At this technology level it is very difficult to have the level of poverty we have, but our inflationary economy somehow manages to make it happen.
If you can’t see it with how obvious it is, not much I can say to you. I’d recommend psychedelics to get started on the path towards having basic eyesight.
I fail to see how a deflationary system favours the rich any less than a inflationary system. We seem to agree that a deflationary system favours those with money in their savings account.
You know who has lots of money in their savings accounts? Rich people!
If you want the rich to share their wealth, a deflationary currency won't help you: you need socialism, or at least some policies that leans towards it. But that's an entirely different discussion, and completely unrelated to the effects of inflation Vs deflation.
The key phrase is "As a store of value". I'm not debating if this is good or bad for the overall economy.
If you have the exact same fungible asset, and you have a choice to inflate or deflate the supply, deflating is always going to be better for its value because there is less of it.
If society ran on deflationary money, that would act as a massive brake on the economy, and financial institutions would become risk-averse to the point where loaning money would be nigh on impossible.
Deflationary money is only better from a hoarding perspective, and I'd argue that perspective is counter productive for society as a whole.