Theft: an unlawful taking (as by embezzlement or burglary) of property.
Inflation: a continuing rise in the general price level usually attributed to an increase in the volume of money and credit relative to available goods and services.
There you go, proved you wrong.
> as by embezzlement
In definition 2:
> attributed to … volume of money and credit
We’d be able to conclude that “inflation is theft” from noting that inflation is driven by “printing money”, whether paper or credit, and that the benefits illicitly go to those in control of the financial system to the detriment of others — which the other poster would likely characterize as “embezzlement”.
So you proved that person right — at least to people who view the Federal Reserve and large banks as in a self interested cabal.
By embezzling the funds they print, eg giving special access to friends, they engage in theft towards society at large.
It's not. Or it can be, in the case of the linked article referencing Argentine hyperinflation. But what we're seeing right now isn't. The US government does not, as a rule, "print money" to create funds. That happens in the banking system. Like for example the government can sell a bond; existing holders of statically invested dollars (foreign governments who sold stuff here, say) give the federal government a bunch of cash in exchange for the promise of interest paid over time. Now the government spends that money (on a pandemic relief bill, say), putting it into circulation among a different demographic (poorer people and not money market investors) who do different things with it (buy consumer goods). Well, now demand for those consumer goods is higher than it would have been. If you're in a pandemic trying to keep the economy afloat, that's a good thing. But if you overshoot by a bit, then there's too much money for the goods available. Inflation! Despite no money having been created; it just changed hands.
Now do the same thing for a supply shock: if manufacturers scale back production (due to a pandemic) and then can't scale it back up fast enough (chip shortage!) then prices... go up! Inflation again!
Likewise trade goods can create supply shocks too. Maybe some product (Russian petroleum) can't be obtained anymore. Less fuel to go around, but all the existing consumers have the same requirements and start bidding against each other for it. Yup, inflation!
People who repeat this "bitcoin can't inflate because mining" idea are selling you a line, basically. And the proof is, in fact, that crypto has been basically flat vs. traditional currencies at this very moment where we're seeing global inflation. If you could ever see this effect, this would be the time to measure it. And it's not there.
In Venezuela the government implemented exchange rates controls which were much more favorable then market based rates. Those with privilege and connections could purchase dollars at the official rate and then sell them at market rates at 10x what they paid for them. By this method an immense measure of the nations wealth could be expropriated.
Commodities can be siphoned from producers with price controls and then liquidated at market rates. Eventually asset owners can be forced to sell when they can’t produce what is demanded at below market prices.
Those that are close to decision makers can front run markets as the everything degenerates into a command economy.
While not all inflation is theft inflation can facilitate theft on an epic scale. At some point all economic and political power shifts to those that benefit from inflation and it becomes politically impossible to “fix” inflation as power derived from it.
A high net worth individual may lose expected future income due to inflation but someone that is poor may not eat today because of inflation.
Eventually when inflation gets bad enough and real rates are negative producers will simply sit on commodities rather then distribute them. Leaving the oil in the ground maybe a better looking term wealth preservation strategy then pumping and selling the oil.
Savings can certainly be used to purchase securities, commodities, property, but then it’s no longer savings and is an investment.
Idle cash hurts the economy. That's why even in a savings account, idle cash isn't idle, it's collateralizing loans. A savings account is more of a bond than it is currency. As such, in your model, money in a savings account is an investment - not savings. In your model the only thing that would qualify as savings would be literal dollar bills stuffed under your mattress.
Liquidity is a different axis.
And as for myself, I hold more than 100% of my net worth in assets, the cash in my bank account is borrowed against my asset portfolio.
This is also an extremely common position for anyone with a mortgage to be in.
- https://www.investopedia.com/terms/s/savings.asp - https://www.wellsfargo.com/goals-investing/saving-vs-investi... - https://financial-dictionary.thefreedictionary.com/saving
I agree that fiat is intentionally lossy. I also have no problem with the idea of my idle money being, in fact, borrowed out at no risk to myself (and at recent interest rates there wouldn’t be much difference between sticking it my cushions except for the insurance provided by holding in a bank). From the saver’s perspective, it’s idle.
If you are holding more than 100% of your total net worth in assets, the cash in your bank account isn’t yours, nor is anything else above that 100%. As a borrower inflation is a great way to take advantage of that position. I have mortgage debt for exactly the same reason. Mortgage debt, however, is typically net worth positive (except for 2008-2014), so I doubt most people with mortgages are leveraged higher than their net worth. In most cases market value of a house is greater than mortgage debt a few years after the loan is made.
> From the saver’s perspective, it’s idle.
That's just a fun illusion, not a useful or meaningful distinction.
> If you are holding more than 100% of your total net worth in assets, the cash in your bank account isn’t yours, nor is anything else above that 100%.
Nope, it's mine - because the margin loan is collateralized by the contents of my portfolio. The cash that comes out is separate. Nobody has a claim on my cash but me - if there's a 90% drawdown across all markets my portfolio will be liquidated to cover, but the cash will remain mine.
According to investopedia the only real difference between savings and investments - as they view them - is liquidity, risk profile and time horizon. All of which you can achieve in a brokerage account by constructing your portfolio to meet your goals.
The thing is, saved currency will go down in value unless deployed because the point is to save your value. You can save your value in all sorts of ways, but currency ain't it. One keeps a small cash cushion in the event of emergencies, but you're paying a premium for that liquidity (inflation - interest).
Income is not limited to money, you can do something and be paid in physical goods. Either indirectly by being paid in them or directly by at making them ex: canning tomatoes you grew.
Where investments differ is the possibility of returns above what was saved. A pound of gold is still going to be a pound of gold in 1,000 years, but land can provide rental income so you still have land but now you also have money or what or whatever.
What muddled the water is people used to have savings accounts that provided interest above inflation.
>. At least in the US inflation is the result of decoupling dollars from gold and the direct theft of gold and silver from the citizens by the government.
No, it is caused by ignoring the fact that labor cannot be stored. Gold is just a token, it is like an entry in a balance sheet but harder to forge. It doesn't actually store anything other than itself. You can't store labor by turning it into gold. Gold was already in the ground and was dug out by labor. There is no way to get that labor back. People age. They can't be stored like gold. The inherent mismatch between gold and people is what causes inflation. The only difference is that due to its limited supply gold then swings back to deflation and then inflation again but simply introducing a gold standard doesn't solve the inflation problem, it is the origin of the inflation problem. Fiat currency is just a stretched gold standard. They are still tokens, they are easier to forge and more importantly fiat money doesn't age either. So inflation must still happen as a consequence.
> It is, however, an obscured tax on savers, a transfer of wealth from borrowers to debtors.
By this logic aging is a tax on savers. Defaulting on debt is also a tax on savers. Savers deceiving themselves is a tax on savers.
The US literally stole gold from the population in 1933. A $20 bill was literally a certificate for an ounce of gold.
I’m not advocating a gold standard or any other monetary peg, just saying that removing a peg and moving to fiat is never in the benefit of those holding the fiat and always in the benefit of those printing.
I’m not sure I follow the last sentence. Inflation requires time, so sure, aging and holding fiat results in lost value. Borrowers are on the positive side of inflation, so except for the literal tax that may be incurred by debt forgiveness the repossession of property by the lender is approximately neutral. That’s really the point of fiat currency, the printer is the borrower of real property and the note is a promise of repayment, ultimately in real property, securities, or labor.
What's the difference between a borrower and a debtor?
A ton of the discussion of inflation ties it in a 1:1 way to money printing. Like the government says "I'd like some more money please", prints money, and this evenly inflates the price of every good and "steals" from people's bank accounts. While this can be a component of inflation, the truth is much more complex.
Looking at the published CPI numbers it becomes extremely clear that inflation is extremely varied. Natural gas way way up. Medical commodities up only a small amount. Prices can rise for an absolutely enormous number of different reasons and the price of a good going up obviously cannot be considered "theft" in the abstract. The people who insist that governments are unjust if they allow any inflation above 0% are being unreasonable, in my opinion.
That said, it is also the case that public policy, especially public policy in authoritarian or failed states, can cause a currency to collapse and wipe out any wealth their citizens hold in that currency. But I'm not even sure I'd call this "theft". It is a different sort of abuse entirely and it comes in many more forms than just devalued currency.
Money is a claim on people's time and we haven't invented cryogenic chambers and demanded that the unemployed enter those cryogenic chambers during their time of unemployment to prevent them from aging, ahem, I mean stealing the value of your money.
As it stands right now, labor cannot be stored. Your money must age at the rate people age if nobody is hiring the unemployed for investments. What I personally find particularly amusing is that there are so many branches of economics (I could Marxism as one) that postulate that money is just a medium of exchange and thus can't be harmful.
Yet internet forums are filled with angry savers that want to use their money for anything other than a medium of exchange.
> Right now I'm looking at Turkey - I honestly can't tell whether Erdoğan is just a trickster, or actually fucking retarded. Likely both.
If he introduces a debt brake then lowering interest rate for government bonds is the right strategy. The interest that you don't have to pay can be used to pay down the principal and reduce debt faster than paying interest could ever achieve. The problem is that he isn't doing a debt brake at all.
The other way is to consider it as an abstraction of value independent of these tokens. But who then pays to maintain the system, prevent counterfeits, and issue replacements for used tokens etc? It’s the government that issues these tokens and as such the loss of value over time is simply a payment for use of the system. You might disagree with how large the fee is, but it’s a medium of exchange so you can trade your tokens for something else.
What I honestly can't comprehend is that people somehow want this but then they twist their brain somehow into wanting something even more contradictory. Humans are loss averse, so the first thing they do when they hear of a loss is to shoot the messenger. In economics that messenger is the interest rate. The price signal known as the interest rate isn't allowed to fall into negative territory. The price signal that tells everyone in the economy that there is too much financial capital is now gone. People will now accumulate financial capital i.e. money and money like assets (bonds) above and beyond what debtors actually want because the debtors have been silenced. Their opinion doesn't matter. Only the opinion of the saver who wants to shove the losses and risks onto someone else is being listened to. At the end, people are surprised to hear that they have accumulated way too much financial capital than the economy can handle and that their financial capital is actually worth much less than they thought.
Why didn't anyone warn them that this is occurring? Oh right, they shot the messenger. An interest rate below zero means that there is too much financial capital, nobody wants your bloody money rich guy, and that the biggest savers should reduce the amount they are saving, yes, that means the rich must spend off a greater portion of their savings than the poor which decentralizes money into the hands of those who need it the most.
I am honestly tired of this. Conservatives and hardcore capitalists shout "central planning!?!" or "price controls!?!" at everything but the moment you point out that a 0% interest rate is an artificial price control they will fall silent or think they are genuinely owed the enslavement of the young.