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Comment by lwat | Hacker News Reader

I used to be an Austrian but it's been almost a century now and it's become clear to me that the Keynesians are actually correct. Even after the GFC things bounced back very quickly. The power to inflate away old debt is too useful to sacrifice.

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Hm, it's interesting, would you care to elaborate: what do you mean by "too useful"? Too useful for whom?

Well let me put it this way:

If the USA kept the gold standard, I seriously doubt they'd be the number 1 economy in 2013.

But you're not explaining your claim. How can possibly printing money can make society as a whole richer? It can make certain individuals better off, for sure (the ones who receive the newly created money first while the prices are low). But how does it make the economy as a whole better off? No additional value gets created.

The well known part of Keynesian thinking is about the output gap. So if you give money to a formerly unemployed guy to dig a hole, you create the value of the hole in addition to all the other value the economy would create anyhow. This applies of course only if that guy is unemployed in the first place.

And as a rule of thump, every time I read a Austrian argument, I try to find the hidden assumption of markets working at full capacity. ( And every time I read a Keynesian argument I try to find the hidden assumption of an output gap.) Usually this is a nice way to understand the argument better.

I think the point is inflation increases the money supply, while debt remains the same. Individuals make more money with less buying power, but can pay off debt easier.

Well that's good for people with debts. It's bad for people without debts and those who loaned them money. Debtors are basically paying off their debts more easily at the expense of all the others (even those who are not involved in the deal of loaning).

as long as the inflation rate is expected, the inflation rate is always adjusted up/down to compensate for the inflation.

In the mean time the average real salary has been dropping since 1969, because of inflation, and because the government and companies didn't bother to increase the minimum and average wages to keep pace with the inflation.

So I really doubt most of the population benefits from inflation.

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