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Comment by dragontamer | Hacker News Reader

> Every accumulation of wealth is countered by an equal loss of wealth somewhere else.

This fundamentally contradicts mainline capitalist theory.

People only trade / exchange money when they believe the service (or goods or whatever) is worth the money.

IE: someone pays $20 for X because they believe X is worth $30, $40, or $100 to them. If X were only worth $19, then they would reject the deal and walk away.

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Case in point: if gasoline doubled in price, would you still drive? How high would gasoline prices have to get before you stopped driving?

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Wrt the capitalist theory:

the (paraphrased) quote of "don't expect someone to understand something, if their paycheck depends on them not understanding it" is very much on point here as well.

The accumulation of wealth really does impact the economy negatively - as it's (by definition) not being spend, otherwise it wouldn't accumulate.

The reason why the theory is generally correct is because money that has been spent isn't gone, so it's once again available for the next trade. But in today's economy it's effectively false because the accumulated wealth is instead funneled into property acquisition and similar expenditures, which effectively becomes rent seeking that's ultimately just syphoning wealth from the population/damaging the economy at scale

Accumulation of wealth is simply trading today's money for promises-of-tomorrow's money.

You fight the over-accumulation of wealth by making an inflationary environment (ie: create policies that explicitly make tomorrow's money worth a little bit less than today's money). Or use wealth taxes (or other forms of taxation: promise to take away money in the future if it is not spent today).

> You fight the over-accumulation of wealth by making an inflationary environment

Inflationary environments are actually positive for these people, because it makes it easier to justify ever increasing rents.

The people that are actually harmed by inflation are employed and not particularly rich, so they keep their savings in cash, essentially. (Both their wages and their savings get devalued every year, making large purchases to get out of these toxic spirals ever harder)

For the same reason wealth taxes don't really work either... unless you revamp the entire tax system and somehow found a way to make rent seeking unviable (I.e. exponentially increasing property taxes by quantity owned). I'm honestly not sure how that's gonna be possible however, it's too ingrained into our markets and the consequences of such changes would likely be extremely unpredictable

> Inflationary environments are actually positive for these people, because it makes it easier to justify ever increasing rents.

No. Deflationary is better, because they keep the same price but get more and more wealth anyway.

Its the lack of competition that's the problem in any case. If someone is not contributing well or giving a good deal, shop somewhere else. If you're unable to shop somewhere else, then its a known flaw in capitalism (called Monopolies). You only have a good capitalistic system if competition can be assured.

Deflation is good for people that have most of their net worth in cash and bad for people that ... don't

Think a little about it: if the money gains in value it would mean their property loses value, because it's price would go down (as the money will be worth more).

Rent seekers mostly have their net worth in assets such as properties and shares, and for those people, inflation is good - because these effectively become more valuable - because they're suddenly worth it's purchasing price + inflation. (That's the definition of inflation, you need more cash to purchase the same product vs deflation where you can buy the same product for less cash).

If every wage etc increased at the same rate as inflation, the difference would probably be academic... But it's not, most employees didn't get a total 30% wage increase within the last 4 years after all, which means that the total purchasing power of (for example) the American people has decreased.

This will ultimately reduce their ability to spend money on products, which means less trades that happen... And more accumulation of wealth, because the people that actually captured that value invested it in things that will effectively become rent seeking, ultimately furthering the spiral

> Deflation is good for people that have most of their net worth in cash and bad for people that ... don't

I don't think the poor or middle class have much net worth in anything.

In particular, my mental model is that the middle class will get wrecked by their student loans or car loans if you purposefully deflated the dollar.

The rich have enough money to prepare for all circumstances, be it inflation or deflation. It's a loss if you're trying to prevent them from gaining more money by simple means like this. In times of deflation they will hoard cash (even international trades like the the carry trade: taking advantage of the difference of inflation between national currencies and economies).

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In any case: increasing the cost of everyone's debt burdens is almost obviously the wrong move.

You're right, they don't have a lot of savings - but doesn't that make it even worse for them, because that means their income is basically all their wealth. And this is objectively even more impacted by inflation as I said before, because it keeps getting worse with every year, because most workers do not get raises equivalent to inflation.

And I think you'd agree too that assets become more valuable by inflation (because that's kinda the definition of the term), and that consequently means that if your net worth is mostly assets, as every rent seekers portfolio is - you really do like inflation.

Even if you're right that the people heavily in debt also gain by having it devalued via inflation: I don't think it'd have enough impact to offset their depreciated wage and the additional cost of living though - but that's just my personal expectation

Yes, but the gas money went to someone else. That spending ability is now lost from the consumer and equally gained by the producer. Extracting a valuable resource is adding value out of thin air (literally with gas at times), but you could argue that we’re reaping efficiency’s gains again by making that resource more useable.

> Yes, but the gas money went to someone else.

If you spend $40 to fill up your car (but you were willing to pay as high as $120 to fill up your car), then $80 of value was created out of nothingness. You got $120 of value (given that you _would have_ filled up your car at a much higher price anyway), but only paid $40 to get it.

This is fundamental to the theory of capitalism. The trade isn't grounded at the paid price (ie: $40 in this case), the trade is grounded in the price _YOU WOULD HAVE PAID FOR_ vs what you actually paid.

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If you are paying above the price what is comfortable for you, then you must stop paying for the system to work.

Now obviously: capitalism stops working in cases where you'd pay any amount of money (because now the opponent would choose any price and force you to pay). This happens in monopolies and health care. (There's no limit to the price you'd pay to stay alive).

However, I still posit that in the vast majority of cases, that capitalism works. Negotiating for a lower price is assumed to happen on both parties.

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