Comment by timtadh | Hacker News Reader

Comment by timtadh | Hacker News Reader

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>> I can't see a problem with a currency gaining value by the hour. If you hold a currency that keeps gaining value, then your purchasing power keeps increasing. Why is that a bad thing?

> It is bad for several reasons. The easiest to grasp is that people tend to keep their money in their hands (hoarding) if that money is acquiring value by itself. If people don't spend their money, or lend it, the economy suffers.

What I have never understood about this argument is people can't eat money, they can't sleep under it, they can't do any number of things with it. What they can do is buy things, like food, which allow them to do the things they desire. Having a deflationary currency is pro-citizen, it is pro-poor, and pro-middle class.

These classes are primarily uninterested in "investing." What they are interested in is saving. Saving to go to college, to buy better accommodations, to go on a vacation, to stop working two jobs, etc... They have no interest in complex inflation protection vehicles.

You may say: you are being silly, you don't understand how the financial system works! Maybe I don't, but neither does a large percentage of the population. Shouldn't our default policy always be about protecting those most vulnerable? Those most likely to be exploited? Are we doing that now? Would a deflationary economic system be to their benefit? I think so and so did the creator of bitcoin.

Having a deflationary currency is pro-citizen, it is pro-poor, and pro-middle class.

People who have a high amount of debt relative to income (generally the poor, the middle class, governments) benefit from inflation, not deflation, as they can spend full value money today and pay it back with diminished value money later.

Your concept of the poor as savers benefitting from deflation because they save money and stick it in the bank directly conflicts with the core definition of "poor".

Well, why are we in this current situation? Because at the margin at very low income levels it makes more sense to borrow than save. However, in a deflationary system it makes more sense to save than borrow. QED

You make it look like poor people are not saving because of ill will. In my experience, poor people don't save because they don't have any discretionary income, as in, you need to eat, have a shelter and clothes, and your income barely meets those needs.

Even when there is surplus income in an inflationary system it makes zero sense to save it outside of an inflation protected vehicle. It makes more sense to simply spend it and borrow when you are short. This isn't "ill will." It is a natural consequence of inflation.

It only makes sense to save when there is enough income that the risk of losing savings from a) bad investment or b) inflation is lower than the expected payoff.

You're right, it doesn't make sense to keep $BIG_BUCKS lying around on an account somewhere, losing value to inflation. It's a better idea to seek a return on that kind of money.

But saving makes sense even just to prepare for unexpected expenses. We're not talking about hundreds of thousands of dollars here, in most cases, it's not even tens. Barely scraping by might be a bit of an alien concept to someone pulling in $250K/year from programming.

> People who have a high amount of debt relative to income (generally the poor, the middle class, governments) benefit from inflation, not deflation, as they can spend full value money today and pay it back with diminished value money later.

But they keep having to pay more for Stuff. In other words, their purchasing power keeps decreasing, unless their wages rise to compensage for inflation. Deflation "means" an increase in purchasing power, which means getting more stuff for your money, which is.. good? What's not to like?

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