The thing that has nagged at you as it has me, is the simple fact that not only was “economics” conjured and molded by and for the interests of the upper echelon of society, to control the language and thoughts about its terms; but that at the core of it, it’s nothing more than fraud, deception, con artistry.
That’s all inflation is too, fraud that if you would commit it, e.g., you added filler to some product you delivered or forged signatures on delivery paperwork, you would be punished for.
You are given currency coupons in exchange for your work, and then more of those coupons are just forged than correspond to actual work having been done, thereby defrauding you out of the value of your work, also commonly called theft of service.
> You are given currency coupons in exchange for your work, and then more of those coupons are just forged than correspond to actual work having been done, thereby defrauding you out of the value of your work, also commonly called theft of service.
All currency is made up. Even gold, or bitcoin, or giant rocks:
The only thing that has "inherent" value to humans is air/oxygen, shelter, water, and food. Everything else is psychological projection for convenience.
See The Power of Gold: The History of an Obsession by Bernstein:
>>The only thing that has "inherent" value to humans is air/oxygen, shelter, water, and food. Everything else is psychological projection for convenience.
This isnt really true. If you put someone in solitary confinement for long enough they will go insane.
People commit suicide for a variety of mental health reasons.
Mental health is absolutely as important as physical health and it isnt obvious where to draw the line for required vs. convenient.
There is also health/medicine/medical care/sanitation.
There are also secondary requirements that enable the production capacity for the above stated requirements.
> All currency is made up. Even gold, or bitcoin, or giant rocks
Yes, but gold, bitcoin, and giant rocks can't be inflated at will, which is what the OP was complaining about.
Simulated pieces of green paper can.
Even with the formerly-used real pieces of green paper, there's a physical limit to how fast printing presses can run.
With simulated pieces of green paper, you can just type some numbers into a computer and suddenly there are twice as many of them as there were before. Or a hundred times as many. Or a trillion times as many...
Okay, but creating money at will is not a bug, its a feature.
I know there is this myth of the "no crisis ever during the gold standard era", but this is false. We had a crisis every ten years or so, sometime way bigger than the 2008 crisis despite the economies being less interconnected. And those crisis sometimes were entirely disconnected from production issues, unlike 2008 that is clearly linked with the conventional oil/gas peak. Because having liquidity that allow easy trading of ressources actually help recover faster and avoid made up crisis like the 1893 one in the US.
From my limited knowledge, I don’t believe hard money advocates would say there are never any crises, but instead that they are shorter lived and not as large.
The article presents two graphs of arguably manipulated/unreliable CPI rates, and that's somehow being using as evidence for whether crises are larger or smaller? The article from the beginning uses obviously incredibly biased language throughout, it's a pure opinion hit piece; the author isn't even attempting to present an impartial view on the topic.
It always amuses me how strongly people come out in opposition to the idea of the gold standard, when it demonstrably seemed to work for America, it powered the country from the time it was a collection of colonies to the time it had men driving buggies around on the moon. The country was on the gold standard for hundreds of years. Coming off the gold standard is the experiment, is the outlier. The gold standard obviously worked well enough for that vast majority of the country's history, yet it's somehow regarded by certain people as an obviously horrible idea which is gross, repugnant, "a barbarous relic that belongs in the dustbin of history". It just doesn't add up. If it's such an insanely horrible idea, how did it work so well for so long?
> The article presents two graphs of arguably manipulated/unreliable CPI rates […]
And you can tell this because… ?
> […] the author isn't even attempting to present an impartial view on the topic.
Neither would someone who was arguing the Earth was round.
> It always amuses me how strongly people come out in opposition to the idea of the gold standard, when it demonstrably seemed to work for America, it powered the country from the time it was a collection of colonies to the time it had men driving buggies around on the moon.
No, it caused some huge boom and bust cycles, deflationary periods, and much suffering. It certainly made the Great Depression worse:
Gold-as-currency was useful when we didn't know better, but we've moved on. See The Power of Gold: The History of an Obsession by Bernstein for a good history:
The Atlantic article mentioned the necessity to abandon gold standard temporarily in order to fund WW1, however the American people did not want to enter the war and were unwilling to fund it directly.
An alternate telling would be that abandoning the gold standard allowed the government to circumvent the will of the people and enter a war there was no appetite to get involved in.
> […] circumvent the will of the people and enter a war there was no appetite to get involved in.
You may wish to re-examine that claim:
> Germany also made a secret offer to help Mexico regain territories lost in the Mexican–American War in an encoded telegram known as the Zimmermann Telegram, which was intercepted by British intelligence. Publication of that communique outraged Americans just as German submarines started sinking American merchant ships in the North Atlantic. Wilson then asked Congress for "a war to end all wars" that would "make the world safe for democracy", and Congress voted to declare war on Germany on April 6, 1917.[4] U.S. troops began major combat operations on the Western Front under General John J. Pershing in the summer of 1918.
They are even more wrong than i thought then. The longest crisis was caused directly by hard money, it lasted more than twenty years.
And it was NOT a production or energy crisis. That what people seems to not understand. Yes, 2008 was a bubble, but a lot of bubble bursted since the 70s and none of the burst created a depression like 2008. The only reason 2008 was this big is because it was an energy crisis, almost four time worst than the oil crisis of the 70s (which is also the first energy crisis). The gold/silver standard manufactured crisis (not helped with fractionnal banking tbh) that had no reason existing at all. Just made people poorer by design. This wasn't even caused by a famine or a war.
Here is my advice: unless the expert/advocate is an historian specialist of the 19th century (or even better: specialist of foreign trade or economics during the 19th century), do not believe anything he said. Don't believe me either, but "Those who cannot remember the past are condemned to repeat it", so look it up, just read on how interesting where the time of hard metal, how easy it is to raise interest rate without impairing trade when you have a gold standard. 19th century financial crisis in the western world despite the huge production boost from pillaging colonies workforce and ressources...
In reality, only 13% of our planet’s population is born into the dollar, euro, Japanese yen, British pound, Australian dollar, Canadian dollar or Swiss Franc. The other 87% are born into autocracy or considerably less trustworthy currencies. 4.3 billion people live under authoritarianism, and 1.2 billion people live under double- or triple-digit inflation. [https://bitcoinmagazine.com/culture/check-your-financial-pri...]
> With simulated pieces of green paper, you can just type some numbers into a computer and suddenly there are twice as many of them as there were before. Or a hundred times as many. Or a trillion times as many...
Yup, and that's how private banks create loans and mortgages:
Central banks do not create the money that the public uses in the economy, and the only money that the government creates is coins and bills via the their mints.
Also, have you ever asked what happens when there isn't enough money?
Governments can (and has!) "created arbitrarily without limit" metal currencies too. Given their monopoly on violence, they can just say "this coin now pays for ten pigs, not one, as you thought before". (Of course, they'd also decrease required tax payments correspondingly to maintain stable inflation.)
But haven't such debased currencies fallen out of favor, more often than not, in favor of those currencies that have not been debased, for example, the Florin https://en.wikipedia.org/wiki/Florin
> The thing that has nagged at you as it has me, is the simple fact that not only was “economics” conjured and molded by and for the interests of the upper echelon of society, to control the language and thoughts about its terms; but that at the core of it, it’s nothing more than fraud, deception, con artistry.
Yeah this true, but I wonder if it's as straightforwardly sinister as that. I'm sure there are a lot of economists, esp in the mid 20th century, who would have liked to turn economics into physics. Some of those ideas are of no real merit after further inspection, but are kept alive by political interests.
You do come across a lot of thought pieces by think tanks, which seem to be more political than science.
> You are given currency coupons in exchange for your work, and then more of those coupons are just forged than correspond to actual work having been done, thereby defrauding you out of the value of your work, also commonly called theft of service.
The problem with that is there are legitimate reasons for printing more coupons, they're just mixed in with less legit reasons.
If people want to exchange more, they need more coupons. Otherwise everyone would have to wait for their income to arrive before sending it on, and while they wait some of the opportunities will vanish. A little bit of creation isn't so bad.
> f people want to exchange more, they need more coupons.
thats a fallacy. nothing prevents you from exchanging more even if you had a fixed number of coupons. you would just have to consider that the value of each coupon becomes more, not less, over time, so you need to use subdivisions of coupons more.
Inflation, even at low levels, is ultimately value destruction over time.
Nonsense. Sure, deflationary shocks can be calamitous, like the Great Depression or the GFC. But steady deflation over time is logically the natural and good outcome of improvement over time—as technology advances and we get better at producing things, they should get cheaper, on average.
Instead, our savings are buying us LESS over time, so that government can buy votes, fund wars, bail out defense contractors, pharma companies, financial institutions, and other cronies, etc. Inflation via the printing press, which is now just considered by many a normal phenomenon, is actually legalized wealth transfer from the savings of ordinary citizens into the coffers of giant government bureaucracies and the large corporations that feed off them.
Devaluing in-the-mattress savings is a good thing, hence all the many government schemes to incentivise small scale productive investment. Here in the UK that's through tax free consumer savings accounts like ISAs, but also pensions. Savings that are invested do work in the economy fund businesses, promote economic activity and aid job and wealth creation. Stuffed mattresses are a boat anchor on the economy.
Having said that, deflation isn't always the awful spectre of doom it's sometimes made out do be, especially if it's due to technological improvements or increased supply. As the article we're all notionally discussing explains, inflation in a reasonably well managed economy is generally differential and reflects shifts in the structure of the economy.
That's basically saying u can't hold on to ur hard earned money after paying taxes. Give it to the government or some pension firm. And depend on the government and incompetent regulators to take care of you in your old age.
What is "in-the-mattress" savings exactly... besides one person's savings that another wants to spend differently?
Who should be the ultimate judge of how capital is saved and invested? You? The government? What about the person who actually did the saving?
Taken to it's logical conclusion, saying that "devaluing in-the-mattress savings is a good thing" sounds a lot like "let's soak the rich" to me.... and it's a very slippery road to serfdom.
In-the-matress savings are money that is not invested, such as cash stuffed in a matress.
This is the opposite of soaking the rich. The well-off generally have a very large proportion of their wealth invested in productive economic activities, with returns well above inflation.
You haven't convinced me. After all... what about short-term bills? Are they considered savings or investment? What about FX accounts? What about operating capital? In other words... what is "not invested"? An axiomatic definition is imperative... not turtles all the way down.
Savings and investment are largely synonymous so I stand by my initial statement. How can one expect to buy a house if they're precluded from putting savings "in-the-mattress"? I'm not suggesting they'd be better or worse off using leverage... I'm saying it is solely for them to determine since they're the ones who are most familiar with their own circumstances.
If someone enjoys wiping their rear with $100 bills that's up to them.
As I can tell, the best definition for "in-the-mattress savings" is capital that is deemed a bad investment by any/every one except the person who managed to create the savings itself.
Your argument leads to a slippery slope... what would stop me from taking your assets because they don't fit my definition of "investment"?
Short term bills are serving a useful economic function and pay interest, because they are useful to people. When I was saving for a deposit on a house I kept the money in savings accounts and ISAs, again those serve a useful economic function and pay interest.
The basic fact is that money is a financial instrument created and managed by a government for their own purposes. They create it and therefore obviously they control the supply of it. It's value is therefore based on the degree to which people trust that government to manage it effectively, as with a bond or equity or any other financial instrument.
Useful is in the eye of the behold... that's largely the point. No one can judge what or how "useful" something is besides the rightful owner of the asset. That includes cash (under a mattress), bonds, stocks, options, toilet paper, apples, bananas, etc.
If short term bills are serving a "useful economic function" and "in-the-mattress savings" does not... then there must be some asset that serves "the most useful economic function". No? Are you suggesting to know the true intrinsic value of all assets?
So, to assert that "Devaluing in-the-mattress savings is a good thing" one needs to assume that this objective way to measure value exists. Otherwise how can we [de]value things if we can't objectively valuate them?
Unfortunately, since the value theory of labor fails in so many ways where the subjective theory of value does not, it's hard to see your rational as anything but an appeal to authority.
Continuing a mindless appeal to authority just leads to tyranny. And therein lies the slippery slope.
There’s no appeal to authority or need for me to know the ‘intrinsic’ value of things. It’s up to individual people what they will pay for things, or sell them for. That’s what a market is.
Short term paper pays interest because it’s issued by people who need short term money and are willing to pay for it. There’s no central authority setting its value, no objective criteria, no law of physics, just actual people choosing to pay for something they need. Same with equities, same with bonds. Same with money itself.
As I said even central governments don’t set the value of money, only it’s supply, people set its value. That’s why the currencies in Venezuela and Zimbabwe collapsed. The people selling things chose how many ZB$ they wanted to sell things for, and buyers decided how much they would pay, and it turned to be a lot because there was so much around.
Nobody needs you to keep money in a mattress. It doesn’t benefit anyone, so they won’t pay you to do it no matter how useful you think it is to you. An economy with a significantly appreciating currency is set up to incentivise not engaging in economic activity, not investing and not lending isn’t going to work very well because those incentives have to be paid by someone somehow. Why would they do that?
To win me you need to consider the difference between a free market vs. a coerced or highly regulated one; the dynamics likely change.
> even central governments don’t set the value of money
And the difference between real and nominal rates? I'd say your statement is largely true but that doesn't mean a central bank doesn't try to manipulate real rates. That's actually their charter... price stability.
However, there is a strong argument to be made that they're not very good at it and can make things worse. The last year of exceptionally high inflation is a rather obvious real-world example.
> Nobody needs you to keep money in a mattress
Maybe true, but the question isn't what do others need... it's who gets to allocate my capital? I contend it should be me, you seem to think otherwise. Why should the government actively try to de-value people's savings? Is it a good thing to squeeze elderly retirees back into the work-force?
This is what you're implying when you say "Devaluing in-the-mattress savings is a good thing". It could be a bad thing; again esp. for pensioners and people who don't have better investment opportunities.
It's not just a question of "does the theory hold water" but also one of morality. This is why I think the phrase "in-the-mattress savings" is loaded and full of hooey. It just sounds like you're telling me I'm an idiot and can't be trusted to spend my own money wisely? It's not convincing and quite insulting to boot! Lol
I believe savings is always a good thing and it's up to the individual to determine their own preference in terms of allocation; some under a mattress and maybe some in a shoebox or some short General Dynamics puts.
The point is it's up to the individual. Why should someone else have a say when they haven't been entrusted? That is the very gist. Why should someone else have a say when they haven't been entrusted?
Freedom and liberty vs. tyranny. That's it... you're going to have a hard time convincing me that financial repression is the moral high ground.
> Why should the government actively try to de-value people's savings? Is it a good thing to squeeze elderly retirees back into the work-force?
I don’t want to devalue their savings. I’m in my 50s and looking forward to retiring myself. I want them to have productive savings that grow and provide them with a retirement income. Savings accounts, ISAs, pension funds, stocks and bonds, even property are all productive savings that grow and can provide income in retirement. They help the economy and help savers.
> who gets to allocate my capital? I contend it should be me, you seem to think otherwise
Not at all, it should absolutely be you, we just talking about incentives. The question we’re debating is what should happen to the value of cash you keep in your pocket. Literal cash. Should it appreciate in value or depreciate? Is there a benefit to society either way?
If money itself appreciates in value that’s because someone is paying a cost for that to happen. I don’t think that’s a reasonable expectation. Beyond that, it benefits society if savings are put to economically useful purposes, such as savings accounts and investments. A small amount of inflation incentivises this.
I’m not telling anyone what to do. But on the flip side you can’t tell people what to do either. You can’t tell them what they will or won’t pay you to do, and they’re not going to pay you to keep your money in your pocket, mattress, whatever by inflating the value of cash.
Cash is a financial instrument. You own the notes, but can’t set its value. We all do that collectively, so other people have a say in it. That’s just the nature of it.
I don't see how I can concede a point I never contested, but ok.
>> I don’t want to devalue their savings.
>Hallelujah! I do presume this means the /kind/ of savings or /where/ it's held is immaterial.
It's absolutely material, but it's their choice not mine. If they choose to invest unwisely then that can have unfortunate consequences (assuming no crime was committed, that's a different question). Can I guarantee the savings of people who unwisely invest in swamp land? No. Do you think I or anyone else should? So of course the choices people make matter, and have consequences.
That is true but also feels somewhat circular. “The set of people who are prone to make optimal choices with their money is correlated with the set of the people who have more money today.”
It’s not clear the direction of the causal link and it’s almost surely a bit of both. Having more money affords the luxury of making (and time to research or money to outsource) better decisions. Making better decisions leads to having more money.
If the predominant economic paradigm were one that favored in-mattress-saving (such as persistent deflation might be), would the “rich” still be as inclined to invest in today’s productive-given-inflation assets or would they pivot to being heavy in-mattress savers? The ones that didn’t adjust would presumably become relatively less rich over time.
The value of a worker 50 years ago is surely far less to me today than it was to his employers back then. Yet if we had deflation his work would be worth more today than back then. Why should I value a road builder’s work today when that road has been tore up 10x over since then?
you say "I don’t want to devalue their savings" yet above you say
"Devaluing in-the-mattress savings is a good thing".
Either your thinking has changed or, you're trying to cause confusion or, maybe confused yourself, or are trolling. At this point I suspect I may even be chatting with an ELIZA... so what else is there for me to say? Think whatever you want.
There's a difference between decreases in the price of specific goods that comes about due to technology, and deflation that comes about due to monetary policy.
That I can think of, the obvious difference is that the second one almost definitionally means a steady decrease in nominal wages. This seems like a perverse incentive - if I sock away my first paycheck flipping burgers under my mattress and do nothing with it for 50 years, a deflationary regime means I can take it back out and buy a lot more with it than someone with their first paycheck flipping burgers today.
> the obvious difference is that the second one almost definitionally
People said similar stuff about negative interest rates, yet they were rolled out and kind of worked around the world. I'm not buying this defense of inflationism.
The prevailing consensus is that interest rates and inflation are inversely correlated, so "negative interest rates worked out fine" isn't a rebuttal to that.
> if I sock away my first paycheck flipping burgers under my mattress and do nothing with it for 50 years, a deflationary regime means I can take it back out and buy a lot more with it than someone with their first paycheck flipping burgers today.
Thats still true with inflation too. No idea what your point is.
How is that true with inflation? Under the exact same scenario but with an inflationary monetary policy, any money you sock under your mattress dwindles down to a fraction of its purchasing power over the course of many decades if it is not invested into a vehicle that generates returns. That could be equities, bonds, housing, or even an interest-bearing savings account. The point is that an inflationary regime incentivizes investments as a means of wealth preservation.
So you would have to assume that investments would be worthless in a non inflationary state which is a big stretch of the imagination. You think there were no tech revolutions and investments going on while everyone was at the gold standard?
Non-inflationary and deflationary are different terms, with my point strictly referring to the latter, so it would help for you to specify.
Deflation means what it sounds like - goods, assets, wages generally trending downward over time. Yes, I posit that this has a chilling effect on recirculating money into investments, because you get worse odds on a positive return on any investment you make vs. just doing nothing.
If the impact is sinister, then debating the motive just extends the duration of the pain experienced.
Motives matter at the time of trial - when the action and pain are over. Until then, debating motive is just a distraction from stopping the unjust activity.
So you seem to be adding your voice in support for the article which, er, directly contradicts your views about money printing and current inflation.
Right now we know for a fact that current inflation is a genuine global shortage of actual stuff. Crude oil, cooking oil, wheat, Chinese products. Plus American government overspending, to be fair, but that's just a US phenomenon.
Of course that's inconvenient if you really desperately want to complain that you specifically are being cheated. After all if you have less, it must be because somebody else has more, right?
If we're all screwed, who do you blame? Putin and Xi are far away and broadly hated already, so there's no satisfaction to be had blaming anything on them.
> Plus American government overspending, to be fair, but that's just a US phenomenon.
That's not true. US spent the most, but Europe spent €3.2 trillion. US spent $12 trillion but they had to "shore up" a lot of global banks because that's just what they do. About half went into asset purchases and liquidity measures.
I take a simple approach. What would you expect to happen if you just created trillions out of thin air and distributed it? Arguing nothing would happen is the economic equivalent of a perpetual motion machine. It just doesn't pass the smell test to me because you can just create global wealth from changing some numbers in a computer with no repercussions. It's alchemy. Can I "prove" that there are negative consequences that in the long run outweigh the benefits? No. But I can say that I cannot find a single case of high inflation that did not coincide with government printing money. Printing a lot of money doesn't always cause inflation, but any time there is inflation there has been a lot of money printing.
Sure what happens may not be predictable, but its obvious that you're messing with a complex system and effects aren't instantaneous or uniform. That's why you see things like product X is going up 50% while product Y is going up 5%. And the people that point this out think they're debunking something.
With complex systems its best to keep things simple. You can get lost in the data from all the noise and overconfidence will bite you in the ass. Which is why it's not a smart idea to increase the money supply by 30+% in a year and dump it into the market.
> Printing a lot of money doesn't always cause inflation, but any time there is inflation there has been a lot of money printing.
In fact, you can even argue that inflation causes a lot of money printing! When the government has trouble affording things that have gotten more expensive, they have to print more money to be able to buy the services they need!
(Of course, any responsible government would then also provide a drain for the corresponding amount of excess money -- e.g. tax it back out of existence shortly thereafter -- but somehow it's much easier to get elected when you promise to buy things, and not so much when you promise to tax the money away again...)
The excess inflation in the US (above that in Europe) isn’t due to pandemic spending or increased money supply, it’s demand driven due to the Biden infrastructure bill. The supply side can’t meet the increased demand, leading to excess inflation.
Look, I’d have voted for him too given the options, and probably still would, but his economic policy is ill advised.
My current thesis, from a position of absolute agnostic ignorance, is economics is what filled the void in society vacated by religion after the enlightenment.
They’re functionally indistinguishable, with mythology replaced by mathematics, and God replaced with GDP. Similarly, they’re both arbitrary rules; conjured, imposed, and protected from scrutiny by the ruling class.
That’s not to say it’s not useful, but I find it baffling that an imaginary concept is unquestionably granted veto over tangible and visceral phenomena.
the difference between economics (or science) and religion is that economics is used to predict the future. When economics fails to predict the future, the models are changed until they can predict the future.
religion tells you what goals you should have and how you should live a life, passing judgement and establishing morality.
I've used to think the Reagan-era political coalition (persisting to this day) made no sense: the values and worldviews of evangelicals and economic libertarians have terribly little in common. Then it clicked, the common belief that united them: https://en.wikipedia.org/wiki/Just-world_hypothesis
Also, note that mainstream monasteries are at Harvard, Yale, Princeton, Stanford, etc. That's where these secular priests 'corrupt'/preach the next generation of elites.
That’s all inflation is too, fraud that if you would commit it, e.g., you added filler to some product you delivered or forged signatures on delivery paperwork, you would be punished for.
You are given currency coupons in exchange for your work, and then more of those coupons are just forged than correspond to actual work having been done, thereby defrauding you out of the value of your work, also commonly called theft of service.