With a fiat currency, we tend to "create" money of thin air. The money supply is intended to grow with the economy. Obviously the speeds of growth don't always match, you end up with inflation or deflation.
Factually incorrect. Golden Age Athens used silver coinage and extensively mined silver, as one of its chief sources of income:
Presuming that mining generates a consistent supply of new silver, wouldn't this actually be a fairly decent way of scaling the money supply in proportion to economic growth?
And if even if the money supply is fixed, wouldn't economic growth cause deflation, and just make each unit of currency worth more?
If we consider mining success as a function of investment AND natural deposits, then if the natural deposit goes to 0, investment can go to infinity without increasing the success rate.
A steady slow growth of the money supply has been proposed as a way to eliminate bubbles. No one has tried it, for all we know it is not much worse or better than what we have now.
Deflation gives everyone a great reason to save. This can turn into an economic death spiral. Exceptions do apply, as for example after a destructive war there can be strong enough demand to rebuild that the economy grows even with mild deflation.
Sure, but people are still mining silver 2500 years later. I don't know if the same mines are still in use, but so what if they're not? Economies adapt: a local mine going dry might incentivize exploration, which might in turn lead to even faster economic growth. People searching for new silver mines once ended up naming a whole country after the stuff.
> A steady slow growth of the money supply has been proposed as a way to eliminate bubbles. No one has tried it, for all we know it is not much worse or better than what we have now.
Isn't this precisely what we do have now?
This might be true in a modern commercial banking driven economy. But in the old days, the mines running dry usually resulted in a reduction in the local economy.
Now on a very large scale you could argue that it caused empires like Rome to push and push farther, all the way to the tin mines of the British isles.
Isn't this precisely what we do have now?
You could argue, modern day West (and then unified) Germany had it, and with its dominance of the ECB the EU might have it... for now.
But many other central banks are well beyond slow and steady, Zimbabwe comes to mind, but in a way also the BOJ.
http://www.straightdope.com/columns/read/611/what-happened-t...
I highly doubt the money supply was fixed. A better understanding of what is actually money might be gleaned by reading the first linked article above.
What I'd like to know is if the intent of posting this Socratic discussion on HN was to disparage profit or the other way round.
Are we still really arguing about whether profit is moral? Really?
Or is the theft and corporatism we see all around being once again confused with voluntary exchange between individuals?
Beside, anybody who saved in a deflationary environment benefit.
In Japan, the government so meddled in the economy that they caused the economic malaise; the same situation is currently occurring in the USA.
The difference should be obvious. Deflation is too loaded a term to be used without qualification or context.
However, in the government skewed markets of today where interest rates are forced artificially low these signals are not allowed to operate correctly and savers are penalized.
There is no "excessive incentive". People save when an incentive exists sure, but this represents future spending. At the moment there is little or no benefit to simple savings; why save when your money will be worth less over time? This is a result of not allowing interest rates to float with the market. Again, interest rates are manipulated by the government.
In the case where competition causes prices to decrease due to higher efficiency and quality, the money in your pocket becomes more valuable. What part of this is a negative consequence?
The difference is in fact that deflation is not always a negative result, which was my point in the first place.
What it leads to is that workers are accepting discounted price for their work because of the deflationary growth expectation. That is how I work.