After a deep breath and an attempt to come up with something nice and/or constructive:
You are probably attempting to apply too much “common sense” and household finance to macroeconomics—this is very common. Lots of smart people get sucked in by those fallacies.
An economy needs both savers and consumers to function at full capacity: someone’s got to supply the capital that funds businesses to create goods and services, and someone’s got to buy those goods and services. There’s already a global savings glut—see Planet Money’s “global pool of money” series for details.
Emotional resentment of the seeming payoffs to the “undeserving” cloud the issues. I’ve always found wealth and “deserving-ness” mildly correlated at best (contrary theories have always smacked of just-world bias to me). [] Keep in mind that in many white conservative circles, deserving-ness is mentally (usually subconsciously but sometimes not) highly correlated with skin color. (Citation: growing up white, rural and poor) Living in Texas, your social circle may be inadvertently coloring your thinking this way (I saw plenty of that in rural Ohio).[]
In conclusion, make some models of international trading and see what effect “dollar debasement” has. Example: Take three countries that trade exclusively with one another, halve the values of all their currencies, you’ll find that nothing has changed (in real terms) at all. Another example: The USA generates the most manufactured goods in the world (by value). Pretty much every country out there does a lot of trade with the USA and/or processes a buttload of US dollars. Given that, attempt to construct a model where the US dollar loses a significant portion of its value relative to every other world currency, and it does not spring back given capital flows, trade flows, etc.
EDIT: Portion within [*] withdrawn as overly mind-killing, offensive and (worst of all) orthogonal to the topic. Apology issued downthread.
Investing in the productive economy hasn’t yielded a positive return for the last ten years, and yes, it’s fair to expect the market to compensate you for deferring consumption because society is decidedly not indifferent between whether you consume resources now or later. It would be one thing if investment opportunities did this while cash could not, but that is not where we are today.
(It’s fine if you want to toss out the concept of deservingness [though less so if you want to paint me as a racist], but you can’t get around how rewarded behavior will tend to happen more and less rewarded behavior, less. So unless you want all behavior to shift toward consuming all real resources immediately, including “seed corn”, you have just as much an interest in seeing an economy strike a balance between present an future consumption, no matter how much you hate rich people or deem them racist.)
And getting people to invest in productive enterprises under threat of their money withering away is pure Machiavellianism, not a system you’d come up with after careful consideration of how to best reach a Pareto optimum. It would be one thing if the market did compensate people for deferral of consumption (through positive real after-tax interest rates), in a magnitude that reflects society’s current willingness to move their purchases forward, but “noble” (and very non-secret, conspiracy-theory-not-required) manipulations of financial markets have prevented this from happening.
It is not an obviously superior economic system when people have to make haphazard, ill-considered loans just to have a chance at preserving purchasing power.
And finally, an inflationary currency doesn’t solve the problem of investors requiring positive real expected return; it just rearranges the problem. Nor is it some kind of boon to have exporters that are advantaged by cheap local currency. If that’s so great, why not debase the currency to nothing? We have a name for working for others for nothing, and it’s not something we generally aim for.
Investing in the productive economy hasn’t yielded a positive return for the last ten years
Given stock price trends I can’t see how this is true. Can you elaborate? Even Treasuries are yielding 3-odd percent in the face of 2-odd percent inflation.
unless you want all behavior to shift toward consuming all real resources immediately, including “seed corn”, you have just as much an interest in seeing an economy strike a balance between present an future consumption
The wealth of a nation is not some fixed quantity; it’s its aggregate production of goods and services. There’s not anything we can “run out of” that’s required for people to trade, barter, etc. Am I missing something?
Sure, there are finite resources we could run out of, like oil. But attempting to restrict the total size of the economy in an effort to conserve those particular resources seems awfully suboptimal. (It also seems doomed to fail in an economy consisting of humans). Better to attack those particular resource usages through taxation, policy, subsidizing alternatives, etc.
Try to bear with me; and I will try to remember where I am. This is the first time I’ve met a hard-money advocate on the Internet who also [presumably, given our venue] cares about map-territory correspondence.
Investing in the productive economy hasn’t yielded a positive return for the last ten years,
It depends on what you measure. Risk-free returns, maybe. Risky investments tend to do very well in expectation.
and yes, it’s fair to expect the market to compensate you for deferring consumption because society is decidedly not indifferent between whether you consume resources now or later.
It would be nice to see an argument for this.
([U]nless you want all behavior to shift toward consuming all real resources immediately, including “seed corn”, you have just as much an interest in seeing an economy strike a balance between present an future consumptio[n])
It seems that the economy is striking a sensible balance right now, with risk-free assets yielding about zero return and risky assets possibly yielding more. You’ll not see any consumption/depreciation of capital, because if willingness to save falls then rates of returns will rise.
And getting people to invest in productive enterprises under threat of their money withering away is pure Machiavellianism
It’s not. Currency “withers away” because it is effectively a risk-free asset which can be exchanged on demand for real resources (i.e. it has zero maturity) and its returns are standardized over large time-spans, including episodes of distress such as financial crises (whereas other assets are priced by the market and their returns might fall in such circumstances). This is pretty much the highest possible quality you could ask of any asset, and returns are adjusted accordingly. Bank accounts and money-market funds also have some of these qualities, but they have countervailing issues, and the interest they pay is meagre anyway.
I apologize; that was not my intent. Even here one must be very careful about any statements involving race, and I was not nearly careful enough.
The entire concept I was trying to get at is one I think worthy of discussion. Let’s see if I can unpack it non-offensively:
1) [Economic] conservatives generally consider poor people an out-group (often even when accountancy would consider said person poor)
2) Said conservatives are almost universally white
3) Everybody on Earth considers people of other races an out-group
4) Everyone on Earth wishes to help their in-group before their out-group, if they wish to help out-groups at all
5) In the USA, poverty is highly correlated with being black and/or Hispanic, for a variety of reasons, including failure to choose the proper parents
As far as I can tell none of those statements are controversial, or paint you (or any other) individual person in a negative light. Please correct me if I am wrong about that.
It seems to me that #2-5 could have a large influence on the apparent paradox in #1 (the “why do poor white folks often favor upwards redistribution?” problem).
Edit: Upon reflection, I’ll withdraw the entire sub-topic as “too mind-killing”. Besides that property, it’s orthogonal to the question under discussion: “Is a hard quantity limit on a medium of exchange a feature or a bug?”
1) [Economic] conservatives generally consider poor people an out-group (often even when accountancy would consider said person poor) 2) Said conservatives are almost universally white 3) Everybody on Earth considers people of other races an out-group 4) Everyone on Earth wishes to help their in-group before their out-group, if they wish to help out-groups at all 5) In the USA, poverty is highly correlated with being black and/or Hispanic, for a variety of reasons, including failure to choose the proper parents
7) Well off White Liberals consider Poor Whites an out-group. They do not consider well off Blacks an out-group.
(the “why do poor white folks often favor upwards redistribution?” problem).
Poor working class White Males don’t really have much to gain from the modern mainstream left. They don’t have much to gain from the modern mainstream right either to be honest, but the left is blatantly enough hostile to them that its easier to figure out. It is easy to dislike those who look down on you. It is much harder to see through displays of religion and false patriotism.
To expand, whenever you think of “dollar debasement”, ask yourself “relative to what?”
Gold: Exactly how important is gold to everyday commerce and life?
Oil: Check the oil price in other currencies to get an idea of how much of the change is because of the value of the dollar vs. the supply of and demand for oil.
Other commodities: see “oil”. If the commodities are produced in the USA (or China, as long as they peg their currency, the RMB, to the USD), then fluctuations in the value of the dollar can’t affect their prices. (Edit: Yes, everything needs oil, and almost everything has at least some “foreign” component, so there can be second-order effects).
Other currencies: If capital flows in and out of the subject countries are relatively free, then exchange rate changes mean something real about the respective economies. (China restricts capital flows and buys a shitload of USD, that’s how they can keep the exchange rate constant. It also means domestically they have ugly inflation they can’t do anything about).
[] Keep in mind that in many white conservative circles, deserving-ness is mentally (usually subconsciously but sometimes not) highly correlated with skin color. (Citation: growing up white, rural and poor) Living in Texas, your social circle may be inadvertently coloring your thinking this way (I saw plenty of that in rural Ohio).[]
Couldn’t help rolling my eyes. Obvious status signalling is obvious.
Note: I am not disputing humans are basically ethnocentric and this biases their thinking.
After a deep breath and an attempt to come up with something nice and/or constructive:
You are probably attempting to apply too much “common sense” and household finance to macroeconomics—this is very common. Lots of smart people get sucked in by those fallacies.
An economy needs both savers and consumers to function at full capacity: someone’s got to supply the capital that funds businesses to create goods and services, and someone’s got to buy those goods and services. There’s already a global savings glut—see Planet Money’s “global pool of money” series for details.
Emotional resentment of the seeming payoffs to the “undeserving” cloud the issues. I’ve always found wealth and “deserving-ness” mildly correlated at best (contrary theories have always smacked of just-world bias to me). [] Keep in mind that in many white conservative circles, deserving-ness is mentally (usually subconsciously but sometimes not) highly correlated with skin color. (Citation: growing up white, rural and poor) Living in Texas, your social circle may be inadvertently coloring your thinking this way (I saw plenty of that in rural Ohio).[]
In conclusion, make some models of international trading and see what effect “dollar debasement” has. Example: Take three countries that trade exclusively with one another, halve the values of all their currencies, you’ll find that nothing has changed (in real terms) at all. Another example: The USA generates the most manufactured goods in the world (by value). Pretty much every country out there does a lot of trade with the USA and/or processes a buttload of US dollars. Given that, attempt to construct a model where the US dollar loses a significant portion of its value relative to every other world currency, and it does not spring back given capital flows, trade flows, etc.
EDIT: Portion within [*] withdrawn as overly mind-killing, offensive and (worst of all) orthogonal to the topic. Apology issued downthread.
Investing in the productive economy hasn’t yielded a positive return for the last ten years, and yes, it’s fair to expect the market to compensate you for deferring consumption because society is decidedly not indifferent between whether you consume resources now or later. It would be one thing if investment opportunities did this while cash could not, but that is not where we are today.
(It’s fine if you want to toss out the concept of deservingness [though less so if you want to paint me as a racist], but you can’t get around how rewarded behavior will tend to happen more and less rewarded behavior, less. So unless you want all behavior to shift toward consuming all real resources immediately, including “seed corn”, you have just as much an interest in seeing an economy strike a balance between present an future consumption, no matter how much you hate rich people or deem them racist.)
And getting people to invest in productive enterprises under threat of their money withering away is pure Machiavellianism, not a system you’d come up with after careful consideration of how to best reach a Pareto optimum. It would be one thing if the market did compensate people for deferral of consumption (through positive real after-tax interest rates), in a magnitude that reflects society’s current willingness to move their purchases forward, but “noble” (and very non-secret, conspiracy-theory-not-required) manipulations of financial markets have prevented this from happening.
It is not an obviously superior economic system when people have to make haphazard, ill-considered loans just to have a chance at preserving purchasing power.
And finally, an inflationary currency doesn’t solve the problem of investors requiring positive real expected return; it just rearranges the problem. Nor is it some kind of boon to have exporters that are advantaged by cheap local currency. If that’s so great, why not debase the currency to nothing? We have a name for working for others for nothing, and it’s not something we generally aim for.
I do, and this probably clouds my judgement.
Now to get to the actual economics:
Given stock price trends I can’t see how this is true. Can you elaborate? Even Treasuries are yielding 3-odd percent in the face of 2-odd percent inflation.
The wealth of a nation is not some fixed quantity; it’s its aggregate production of goods and services. There’s not anything we can “run out of” that’s required for people to trade, barter, etc. Am I missing something?
Sure, there are finite resources we could run out of, like oil. But attempting to restrict the total size of the economy in an effort to conserve those particular resources seems awfully suboptimal. (It also seems doomed to fail in an economy consisting of humans). Better to attack those particular resource usages through taxation, policy, subsidizing alternatives, etc.
Try to bear with me; and I will try to remember where I am. This is the first time I’ve met a hard-money advocate on the Internet who also [presumably, given our venue] cares about map-territory correspondence.
It depends on what you measure. Risk-free returns, maybe. Risky investments tend to do very well in expectation.
It would be nice to see an argument for this.
It seems that the economy is striking a sensible balance right now, with risk-free assets yielding about zero return and risky assets possibly yielding more. You’ll not see any consumption/depreciation of capital, because if willingness to save falls then rates of returns will rise.
It’s not. Currency “withers away” because it is effectively a risk-free asset which can be exchanged on demand for real resources (i.e. it has zero maturity) and its returns are standardized over large time-spans, including episodes of distress such as financial crises (whereas other assets are priced by the market and their returns might fall in such circumstances). This is pretty much the highest possible quality you could ask of any asset, and returns are adjusted accordingly. Bank accounts and money-market funds also have some of these qualities, but they have countervailing issues, and the interest they pay is meagre anyway.
I apologize; that was not my intent. Even here one must be very careful about any statements involving race, and I was not nearly careful enough.
The entire concept I was trying to get at is one I think worthy of discussion. Let’s see if I can unpack it non-offensively:
1) [Economic] conservatives generally consider poor people an out-group (often even when accountancy would consider said person poor) 2) Said conservatives are almost universally white 3) Everybody on Earth considers people of other races an out-group 4) Everyone on Earth wishes to help their in-group before their out-group, if they wish to help out-groups at all 5) In the USA, poverty is highly correlated with being black and/or Hispanic, for a variety of reasons, including failure to choose the proper parents
As far as I can tell none of those statements are controversial, or paint you (or any other) individual person in a negative light. Please correct me if I am wrong about that.
It seems to me that #2-5 could have a large influence on the apparent paradox in #1 (the “why do poor white folks often favor upwards redistribution?” problem).
Edit: Upon reflection, I’ll withdraw the entire sub-topic as “too mind-killing”. Besides that property, it’s orthogonal to the question under discussion: “Is a hard quantity limit on a medium of exchange a feature or a bug?”
7) Well off White Liberals consider Poor Whites an out-group. They do not consider well off Blacks an out-group.
Poor working class White Males don’t really have much to gain from the modern mainstream left. They don’t have much to gain from the modern mainstream right either to be honest, but the left is blatantly enough hostile to them that its easier to figure out. It is easy to dislike those who look down on you. It is much harder to see through displays of religion and false patriotism.
To expand, whenever you think of “dollar debasement”, ask yourself “relative to what?”
Gold: Exactly how important is gold to everyday commerce and life?
Oil: Check the oil price in other currencies to get an idea of how much of the change is because of the value of the dollar vs. the supply of and demand for oil.
Other commodities: see “oil”. If the commodities are produced in the USA (or China, as long as they peg their currency, the RMB, to the USD), then fluctuations in the value of the dollar can’t affect their prices. (Edit: Yes, everything needs oil, and almost everything has at least some “foreign” component, so there can be second-order effects).
Other currencies: If capital flows in and out of the subject countries are relatively free, then exchange rate changes mean something real about the respective economies. (China restricts capital flows and buys a shitload of USD, that’s how they can keep the exchange rate constant. It also means domestically they have ugly inflation they can’t do anything about).
Couldn’t help rolling my eyes. Obvious status signalling is obvious.
Note: I am not disputing humans are basically ethnocentric and this biases their thinking.
Edit: Obviously this post is also signaling.