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Comment by xorcist | Hacker News Reader

> If your money goes up in value, you have a huge incentive to stockpile it and not buy pizza

A lot hinges on this being true, but being deflationary is not unique to gold. It is also true for a lot of other things, including stocks. Yet we think it is good that regular people spend their earnings on stock, and it is generally considered to be one of the things which made American economy uniquely strong. So much so that other countries seek to mimic it.

The argument should cut both ways: A strong stock market which is deflationary should lead to economic stagnation. Why buy a pizza today when you can buy S&P500 and buy two pizzas tomorrow?

Reality seems to disagree here. People buy what they need and want, today, and whether the rest is stored in fiat currency, stocks, or gold seems to matter very little for economic productivity.

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> Yet we think it is good that regular people spend their earnings on stock, and it is generally considered to be one of the things which made American economy uniquely strong

I...don't think you know what stocks actually are. Your argument doesn't make sense because stocks are the literal exact opposite of a deflationary good lol.

Companies issue stock to raise money. If you buy stock from a company, you're giving them that money in exchange for a small stake in ownership.

It gets more complicated with stock markets and all the other stuff, but the heart of it is taking money that would normally sit for decades doing nothing and giving it to those who can use it right now.

> Reality seems to disagree here.

It only does if you don't know how things work and don't want to learn lol

> Companies issue stock to raise money

There is certainly some misunderstanding here, and I am unsure about where it is. Perhaps another example could have been more clear.

When you "buy the S&P500" you do not buy stock from companies. No S&P ETF takes part in private placements or IPOs. They buy "used" shares on the open market, with the single intention of selling it on the open market to someone else.

When you buy the S&P, at no point do you give money to any of the S&P companies (except perhaps a small fee to the ETF issuer, most of which are public companies, but let's not split hairs about that).

There are of course other methods of buying the S&P500, such as tracker certificates, but they only add layers of indirection to the above, they do not change the fundamental facts about it.

> you don't know how things work and don't want to learn

I am not sure how to respond to this.

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