[0] https://en.wikipedia.org/wiki/Net_international_investment_p...
What do you think happens if the debt goes up? Do you think the government is gonna go bankrupt? That’s literally not how it works.
Do you think inflation is gonna happen? Again, literally not how it works. In fact, too low public spending means you get deflation which is even worse than inflation.
> means you get deflation which is even worse than inflation
2. People regularly come up with this theory that prices dropping is a terrible thing. An extraordinary claim for which I've never seen an argument I accepted and the evidence is as thin as a rake. Typically the countries that experience the horrors of deflation go on to be unusually wealthy and prosperous - I'd like to see more of it. But it is easy to see why the governments would believe deflation is bad that since they are typically enormous debtors and inflation favours debtors.
Frankly I suspect that if prices go down all else equal most people will be better off and able to afford more stuff. Wild take, I know.
Especially given that "prices always up"="good" is counter-intuitive and I can't find anyone with a clear argument in favour of inflation. There is lots of gobbledegook and occasionally people who make arguments equivalent to holidays being bad because they reduce economic output. Which is an argument but not very persuasive, I'd prefer to optimise towards an end state where I get to live out a permanent comfortable holiday; even if the economic metrics go down. I like comfort.
EU - Still to see the long term consequences, but it isn't obvious the deflation was the bad thing in the story.
Hong Kong - Jewel of Asia.
Ireland - Very high HDI and GDP ppp per capita.
Japan - Economic success story.
UK - Can't argue that they're a success! But their problems after WWI wasn't the deflation.
US - Some good some bad, lots to debate, but the latest episode (Great depression in the 1930s) set them up to conquer the world and establish the Not-An-Empire they have now. If that is a bad outcome I fear the good ones.
I'm not seeing the Zimbabwe equivalent. In fact it looks a lot like deflation is associated with - if not a precursor to - long term economic success and prosperity.
'prices dropping' often includes labor as well, since currency is primarily a medium of exchange.
If you go through the arguments, inflation/deflation are both mostly neutral because people just adjust their expectations by whatever they think the rate will be. In practice though inflation policy is typically masking money printing projects or policies that destroy wealth. And by reversing that, deflation is usually positive but only because it suggests that the political leadership at the time was interested in honest market signals rather than seizing an opportunity to conduct handouts.
> 'prices dropping' often includes labor as well, since currency is primarily a medium of exchange.
Inflation or deflation, by definition, doesn't impact how much someone can buy in real terms. Because wages and goods are theoretically changing at the same rate.
If you’re arguing a fringe point of view please make that clear up front. If I knew you think deflation is good I wouldn’t have ever replied.
And by the way, you say Japan is an economic success story because of deflation, but I guess you never bothered looking up their 300% debt ratio that they have been running for decades, exactly because they didn’t want deflation to ruin their economy.
Well, this comment is off to a bad start. What about a very small economy of 1 widget that can be produced and sold for $2 per unit time, then a technological change that causes the equilibrium to move to 2x widgets for $1 apiece in over the same time? The real production of the economy has doubled, and experienced 50% price deflation. The same basic scenario can be developed at any economic size and complexity. No unemployment. No standard of living drop. Just people affording more stuff.
Deflation, in fact, is literally not the economy shrinking. It is a systemic reduction in prices.
> And by the way, you say Japan is an economic success story because of deflation, but I guess you never bothered looking up their 300% debt ratio that they have been running for decades, exactly because they didn’t want deflation to ruin their economy.
This is pretty typical of anti-deflation comments in my experience - what are you trying to say here? Countries manage to overwhelm themselves with high debts with inflationary monetary policy too; the problem - if there is one - is the borrowing of money. It is hard to end up in debt without borrowing money and investing it unproductively. That decision is independent of monetary policy.
And I didn't say Japan was an economic success because of deflation. There wasn't a "because".
From your earlier post: > Frankly I suspect that if prices go down all else equal most people will be better off and able to afford more stuff. Wild take, I know.
As you mention above, this isn't likely to actually be that different.
But:
>In practice though inflation policy is typically masking money printing projects or policies that destroy wealth
Inflation rewards moving money into goods, and deflation rewards moving money out of goods. Generally, an economy where money moves around is better than one where it sits idle. Yes, it does penalize saving cash (), which offends many puritan mindsets (including mine), but it rewards risk-taking and committing your currency towards capital, both of which tend to make the economy more productive.
() - So, if your 'wealth' is in currency, then inflation does devalue your wealth. But if your wealth is in capital, that capital should fluctuate with the currency, and inflation doesn't devalue that.
That was why I said "prices go down" instead of "deflation" - because the measure in practices is a price basket which doesn't directly include wages.
> But if your wealth is in capital, that capital should fluctuate with the currency, and inflation doesn't devalue that.
In the abstract, yes. In practice, after you factor in the interactions with capital gains tax it actually means there is a wealth tax (transaction tax? Extra tax on the principle, anyway) which is relatively punishing to anyone trying to save for their old age.
EDIT [0] With benefit of 24 hours hindsight, it would have been more proper to say "consumer prices" to distinguish the CPI from inflation.
I will admit that I don't understand economics, but infinite free money hacks seem too good to be true.
The government wants the economy to operate at close to full capacity, so it creates money and spends it into the private sector.
Eventually that money makes it to individuals, who want to save some of that money. There’s also foreign agents that might want to hold on to your currency, and trade happening that means some of your money leaves your country.
If the government maintains steady spending, this money supply slowly dwindles, which leads to a shrinking economy.
So governments issue debt to offset that dwindling money supply. The catch is that spending that doesn’t create real resources is inflationary, so you have to spend money on things that eventually earn you more money.
At the end of the day, that’s the idea of macro economics. Spend enough to get your economy growing, while making sure inflation doesn’t go up too much. Which is why people that complain about debt have no idea what they’re talking about.
We're sending in the young guns to save on government spending because trump won partly on "Biden ruined the economy". The government spending leads to the increase of government debt. Or is the debt coming from a separate source?
But all of this has nothing to do with the debt.
You're the one that has no idea what hes talking about.
Debt uncontrollably going up without something to balance it means exactly that. If the debt exceeds the GDP, which is where the US is clearly going, we are looking at a collapse of the US dollar and its global influence. Theres no telling what will happen after that because its unfathomable
This is also why the techbros are staging a coup on the US, so the US doesnt come for the billions when it goes bankrupts
My understanding is that the reason the USD is unusually resistant to inflation is that there's artificially high demand due to international demand for the currency as the global reserve currency.
But yeah, if that effect weakens (and the BRICS are trying to challenge the USD as reserve currency), then I think you'll see the USD weaken/inflation spike in response to large deficits.