Last month, I wrote a post here titled “Even Inflationary Currencies Should Have Fixed Total Supply”, which wasn’t well-received. One problem was that the point I argued for wasn’t exactly the same as what the title stated: I supported both currencies with fixed total supply, and currencies that instead choose to scale supply proportional to the amount of value in the currency’s ecosystem, and many people got confused and put off by the disparity between the title and my actual thesis; indeed, one of the most common critiques in the comments was a reiteration of a point I had already made in the original post.
Zvi helpfully pointed out another effect that nominal inflation has that serves as part of the reason inflation is implemented the way it is, that I wasn’t previously aware of, namely that nominal inflation induces people to accept worsening prices they psychologically would otherwise resist. While I feel intentionally invoking this effect flirts with the boundary of dishonesty, I do recognize the power and practical benefits of this effect.
All that said, I do stand by the core of my original thesis: nominal inflation is a source of much confusion for normal people, and makes the information provided by price signals less easily legible over long spans of time, which is problematic. Even if the day-to-day currency continues to nominally inflate like things are now, it would be stupid not to coordinate around a standard stable unit of value (like [Year XXXX] Dollars, except without having to explicitly name a specific year as the basis of reference; and maybe don’t call it dollars, to make it clear that the unit isn’t fluidly under the control of some organization)
Last month, I wrote a post here titled “Even Inflationary Currencies Should Have Fixed Total Supply”, which wasn’t well-received. One problem was that the point I argued for wasn’t exactly the same as what the title stated: I supported both currencies with fixed total supply, and currencies that instead choose to scale supply proportional to the amount of value in the currency’s ecosystem, and many people got confused and put off by the disparity between the title and my actual thesis; indeed, one of the most common critiques in the comments was a reiteration of a point I had already made in the original post.
Zvi helpfully pointed out another effect that nominal inflation has that serves as part of the reason inflation is implemented the way it is, that I wasn’t previously aware of, namely that nominal inflation induces people to accept worsening prices they psychologically would otherwise resist. While I feel intentionally invoking this effect flirts with the boundary of dishonesty, I do recognize the power and practical benefits of this effect.
All that said, I do stand by the core of my original thesis: nominal inflation is a source of much confusion for normal people, and makes the information provided by price signals less easily legible over long spans of time, which is problematic. Even if the day-to-day currency continues to nominally inflate like things are now, it would be stupid not to coordinate around a standard stable unit of value (like [Year XXXX] Dollars, except without having to explicitly name a specific year as the basis of reference; and maybe don’t call it dollars, to make it clear that the unit isn’t fluidly under the control of some organization)