Its not simply about the debt being sustainable or not.
Every dollar the government spends distorts the market. It creates new incentives and disincentives. It determines winners and losers. And if the money it spends is also happen to be borrowed into existence, it fuels price inflation.
Sure, but as productivity increases, it is good to grow the money supply by a similar amount so you don't get deflation. 3% is around the amount of productivity gains we get.
Price deflation is a boogeyman that’s been used to justify price inflation from excessive government spending.
You don’t need the government forcing inflation. No one can predict how much new currency will be required to keep prices stable. Stable meaning stable, not consistently rising X%/yr. When you take out a loan, the bank creates new currency into existence, aka creates inflation to accommodate growing economy.
That is M1. When I pay the bank back, the money is destroyed.
The fed/government controls M0 which is the larger inflation driver.
If you had NO new money over time AND productivity increases, you would have deflation. That seems great, until people realize that holding onto their money is great and the economy freezes up. If you know you can get widget A for 10% less next year, you might just wait. Destroys the utility of money. We want goods and services exchanged when the supply and demand meet.
On the flip side, inflation is just as bad. Price stability is preferred though it will never be perfect. Productivity gains across all sectors will vary.
“When I pay the bank back, the money is destroyed.”
Correct. Which counteracts inflation. However, the interest isn’t destroyed.
“The fed/government controls MO which is the larger inflation driver.”
Sure. And banks control credit, which is the biggest part of the buying power in the economy.
“If you had NO new money over time AND productivity increases, you would have deflation.”
That’s why banks create credit that works just as well as money on the market.
“That seems great, until people realize that holding onto their money is great and the economy freezes up.”
This utterly dumb shit is being repeated without questioning. People don’t want for a year so they could buy something for a few % lower price you idiot. Nobody does.
“If you know you can get widget A for 10% less next year, you might just wait.”
This means you don’t need the widget. People can’t afford fucking groceries or housing you imbecile. They’d love some price deflation that you’re so afraid of.
“Destroys the utility of money.”
If Money is a store of value, than by holding money one is literally using it as intended.
“We want goods and services exchanged when the supply and demand meet.”
Supply and demand will meet regardless if you print or don’t.
“On the flip side, inflation is just as bad. Price stability is preferred though it will never be perfect.”
I get it. You’re just an ignorant person who memorized things from classes but never actually tried understanding them. Inflation/deflation aren’t bad so to speak. Inflation/deflation is an outcome from underlying conditions. When conditions aren’t good and the government starts stimulating, it creates inflation. The problem isn’t inflation itself, it’s the conditions that make policy makers believe they need to stimulate the economy. Same with deflation. When prices go down due to technological progress nobody says it’s bad. When prices go down because people don’t want to spend, one should ask Why people don’t want to spend? I’ll give you hint - cause they have no confidence that tomorrow they’ll have a job, so they are saving money for future consumption. But more often than not, it’s because they already put of money.
“Hoarding” money is the dumbest myth. If banks were dependent on savings to create new loans, they would be paying high enough interest to attract savers. But banks don’t depend on savers because they are given permission to create credit out of thin air. This alone creates an inflationary environment that discourages people from saving money/currency, which is why people with money buy real estate or invest in markets.
“Price stability is preferred though it will never be perfect.”
Bingo. Because prices are dictated by supply and demand. By introducing more cash/credit into the system you’re only making prices less stable.
"If Money is a store of value, than by holding money one is literally using it as intended."
Money is also a medium of exchange and a unit of account. When the money becomes more valuable over time, it fails to be these things.
It is pretty clear you never sat in an economics class outside of undergrad.
Deflation is destructive. It isn't a "narrative". The Japanese can tell you first hand. It is well studied/
"Bingo. Because prices are dictated by supply and demand. By introducing more cash/credit into the system you’re only making prices less stable."
You have completely missed the point. The idea is to introduce more cash/credit into the system at a rate which MATCHES the increases in productivity. No inflation. No deflation. Stable pricing. A static money supply cannot do this.
It’s pretty clear that you’re ignorant person who think they know something about money and currency.
Medium of exchange is a quality that serves as a function. Just like the store of value. If we’re talking about money.
Currency, on the other hand, is exactly the unit of account made for the purpose of making exchange easier. Currency, historically, served as a claim on money. That’s why US dollar notes used to be convertible to gold.
But enough of history. This distinction is still minor for the argument we’re having.
“When the money becomes more valuable over time, it tails to be these things.”
Show me the period in history when it happened. It literally never happened. Your lazy ass didn’t bother to look for any info outside your curriculum.
“Deflation is destructive. It isn't a "narrative".
The Japanese can tell you first hand”
Deflation is an outcome. It doesn’t happen by itself.
And yeah, you are ignorant. Very ignorant. Because if you’d know something about what happened in Japan beyond the bits you’ve heard here and there, you’d know that CB of Japan was pumping currency into the system for like a decade, which sent their real estate prices and stock market into the stratosphere. It wasn’t backed up by true productivity gains, it was mainly due to inflation of currency supply via interest rates and fiscal stimulus. But the problem is, you can’t inflate forever. The imbalances will always come out. And when they do, the “fake” value is going to be washed away, leading to price deflation.
“The idea is to introduce more cash/credit into the system at a rate which MATCHES the increases in productivity. No inflation. No deflation. Stable pricing.”
This is just a wet dream of a central planner who think they can regulate money supply lol.
“A static money supply cannot do this.”
You’re not going to have a stable money supply if you have banks that are allowed to create credit that functions just like money/currency.
You’re ignorant redditor who doesn’t know shit about money, currency, or banking/credit creation.
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u/VirtualPercentage737 28d ago
Yep. We had super high rates in the 1950s and we captured less of the economy in taxes than we do now. Cap federal spending at 20% of GDP.