Is it wrong if I hld my Fiat-euro's in cash instead of bidding up the price of bread at the supermarket? Am I hurting anyone else if I decide to keep physical money in my pocket instead of lending it out to the bank against interest? Kind of, but with all the money printing not enough people will do it to the degree that it stops inflation for very long, so you are mainly hurting yourself. Why would hoarding individuals be thieves if everyone has the exact same opportunity to enjoy the benefits of the appreciating money? Just because everyone can steal doesn't mean it's not stealing. I would call it a tax because it would be legal and fairly predictable, but then a lot of people here don't differentiate between taxing and stealing, so stealing it is. If hoarding becomes a problem, it is individuals reacting to bad influences from the outside (usually: government policies).
Hoarding is will suppress the economy, and I think that's bad. If someone thinks having a deflationary self regulating currency is more important than having an economy that is as strong and flourishing as possible that's an opinion they are entitled to, but I disagree with it. |
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No one here believes that but you (and maybe a couple of others).
I would expect nothing else on a forum which has a deflationary currency as topic. |
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Again, there's no reason to expect that most people would stack "almost all the money in a safe for later."
Let's just ignore the fact that that's exactly what's happening in the Bitcoin economy. I've got to head out in a few minutes so I don't have time to respond to everything right now, but I think I addressed your point above in comment #86 of this thread. Not really. If the deflation was lower there would be less incentive to save, but as long as there is deflation the effect would still be there. It would suppress people's wish to trade, just like inflation would encourage it. See, I can used loaded words as well. |
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Voluntary exchange is what produces growth because both parties benefit -- not just lots of trades. In contrast, printing new fiat money (aka counterfeiting) is a form of involuntary exchange or theft. As I said, this is just hypocritical. If you call inflation theft then you are inconsistent when you don't call deflation an involuntary theft from those who invest to those who put the money in the safe. I don't buy the argument that the latter is needed to encourage the former. You just said that it will, even though you for political reasons call it involuntary to give it a negative spin. Again, there's no reason to expect that most people would stack "almost all the money in a safe for later."
Let's just ignore the fact that that's exactly what's happening in the Bitcoin economy. Whoah, lighten up, dude. Anytime I'm engaged in a debate about anything, I try to keep in mind two possibilities: (1) I might be wrong; and (2) that might be ok. I'd encourage you to do the same.
I most certainly do. While I agree that it's very practical for people like me who like to save to be able to just put all my money in a safe and still reap most the value that other people's trade adds to the economy, that effect is clearly bad for the economy as a whole. I am not going to rationalize that fact away just because it doesn't fit what I ideally would like to be true. |
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You mean the global food shortage that was the result of farmers switching from food crops to oil crops because the profit is higher? Meanwhile overproduction, food stockpiling and grants for farmers not to produce into an already flooded market continue in other areas of food production.
You can blame it on any conspiracy theory you'd like, it's still not because of the money printing. |
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Note that it took 30 years for the price to double (1950->1980), and now it's doubled again in just the last five years (2007->2012).
It's mostly because of the global food shortage, but I suppose facts that don't fit what we want to believe should be swept under the carpet as usual? |
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No, obviously everyone should spend all of their money as fast as possible Brewster's Millons-style. Think of all the jobs that would be created!  The amount of trade that is happening is what defines the size of the economy. When you trade away your money you have to do something to get new money, and this is what adds to the economy. Lots of people stacking almost all the money in a safe for later does not. Every day you don't trade anything is another day you haven't added anything to the economy. That does not mean that that every trade that is possible to do is smart to do, but with no trade there is no economy, and with little trade you have a little economy. Lots of trade means a big economy. It's really that easy, and that's why currencies which creates price deflation gives a smaller economy than one which creates inflation. I also know you will never accept this because just like religious people you have decided on what you want to believe first and then make up "facts" which fits your belief. |
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You spend it by spending the money in your pocket on goods and services. Your money will now go further because the money in other people's safes is not chasing after those same goods and services.
So if everybody puts all their money in the safe the economy will be booming from all the money it's borrowing, right...? This theory is obviously just more rationalization from deflationists. |
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Here's a thought: it's impossible to save money without lending it. Imagine that you take a $100 bill and stick it in your safe for a year. It's true that when you do so, you're not lending that money to a specific person, but you are lending the purchasing power of that money to the overall economy.
So, what how do I go about spending my share of the money people have in their safes? |
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If you can't see how bad your last counter arguments are I see no point in using more time on explaining how the real economy works.
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The economy is a result of the efforts of the participants, the size and growth rate are a result of trade. To force people to behave or trade in a certain way will harbor resentment and cause conflict, people choose to trade for mutual benefit. While we very much live in a world filled with Keynesian dogma, forced trade (or investment) to ensure economic growth does not ensure mutual benefit, just more growth. I have seen no evidence to justify manipulation of market forces.
People will adapt to any system, whether it has an inflationary or deflationary currency. If you want to call that being forced for one system it's hypocritical to say you are not being forced by the other one. |
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Microsoft is usually above average, but more money would not give nearly the same profit margin, and maybe even a loss. This is the case with mosts mature businesses.
But not all: If you have two wind turbines or two solar panels you will earn twice as much as if you only have one. Yes, all. One wind turbine is not really a good example because you also need infrastructure so you may even earn more from the second turbine. On the other hand running a business like this on such a scale is not competitive. If it's a large company which for instance 25% of the market it can't just double the production to earn twice as much. Some reasons: - Increase in power supply means lower prices - The best spots will have been used for the first turbines, so the additional ones will need to be put in areas that are more expensive or generate less power - It will need to hire more people, and the best ones will already have been hired, so the new employees will be less qualified or demand a higher salary - Increased demand for wind turbines may mean higher prices (like more food means more people = same price for the additional food after a while)
Food is not currently a limiting factor. It probably will be if the global population continues to increase, though. |
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That person/people with problems don't equal the economy. The stuff they don't get goes to someone else who on average can use it better.
Your answer makes no sense in this context. Did you read the link? |
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A one state solution of Israel-Palestine is the only real viable solution.
I hope you're not serious? |
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On the other hand there are successful businessmen, with records of running profitable companies, who emphatically disagree with you:
You think that someone who got into problems because they could no longer get credit would agree that lending is not necessary for the economy? I continue to be baffled by what some people thinks makes sense in this forum. |
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Really? I'd say that by definition, about half the investors should expect to earn a higher profit than the average market, since the market is never in complete equilibrium. Unfortunately, it's not possible to know who it will be. To the degree that it is possible to know in advance which companies will earn more, that will already be priced into the shares. If noone could get a higher than average share of profits, loans wouldn't even be neccessary. People could just invest the capital they own in whatever they want and recieve their average return. Which is why index funds are so popular. Again, I'm talking risk-adjusted returns. When you put money into a business the risk adjusted return is always about the same. When existing businesses print more shares there is competition to buy them. That means that if the average return of businesses are 3%, that's what you can expect from your investment, even if the current owners are earning 5% on the investments they have done earlier. If you insist on paying less for the shares, other people will outbid you because it would be a better investment than the 3% they can expect elsewhere. Resources are not homogenous no. And it takes time to reallocate them yes. But if Motorola sells its capital it certainly gets back the market worth of its capital. No, it doesn't. The people buying it could put money in Apple just as easily as you could, so they would only buy it if they can get it at a price where they would end up with the same profit. That means you will not benefit from switching. And all of its resources can be used by other companies. The energy, labor, competence, raw material and knowledge etc that Motorola currently posses could be used for other purposes. So why aren't they? Your theory implies they must be stupid to continue doing business when others are earning more. Post #136.
Se above. |
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You are still ignoring the point. The argument is that 2 million invested at a 5% return is better for society than 1 million invested at 5% and 1 million at 2%. The function of an interest rate is to make the former situation possible in cases where the capital is in the hands of the investor with the lesser return. You clearly have never done any real investing or business. You can never expect to earn a higher profit that the average market. Index funds will for instance on average give you a higher profit than trying to pick a managed fund, and only because the costs are lower. So 0% would be optimal? How else would those investments of ininitesimal profitability make any funding? You just don't get how investing works. You don't fund something you expect not to return a profit, but often it won't. The interest rate will usually be somewhat lower than the expected average profit, but picking a number that always works is not possible. My answer is that the function of interest is to allocate resources from lesser investments to better investments. "Resources" can't just be moved around like that. Motorola can't close down the mobile business, get the invested money refunded, and put them into Apple. Because your answer was a straw man. You said it was better to not take the risk when my argument already was about risk-adjusted returns. No, I didn't. Not even close. |
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Microsoft is usually above average, but more money would not give nearly the same profit margin, and maybe even a loss. This is the case with mosts mature businesses. It seems like you are just rationalizing now. No, it's the reason why your rationalization that you can just keep putting more money into the best businesses instead of starting something that has a high risk of not beat the average profitability is wrong. The money could obviously just as well be lent to a competitor to Microsoft if they won't borrow. The point still stands. Anytime we have a difference in profits between entities or sectors of the economy it constitutes a misallocation of resources. Even if one entity is unwilling to eliminate this misallocation interest rates is a tool to do so, and it should be used when possible. If you artificially lower the interest rate you destroy this tool. If the interest rate is lowered to 1% my 2% investment becomes a better option than lending to another company's 10% investement. You're a true genious, why didn't anyone think of that when the money were pouring in for Microsoft in the nineties? Anyone could just have started another software company and taken half the market and profits! What's the purpose of interest rates according to you? The interest rate has no purpose of it's own, it's just the price markets put on money. You said it wasn't an alternative, which it certainly is. Getting an interest rate of 3.5% percent (lending) is certainly better than getting an interest rate of 0% (hoarding), regardless of how the purchasing power changes. And 10% would be even better, but coming up with artificial numbers that would be completely wrong if you translate them into the real economy proves nothing. And if someone against all odds would refuse that 3.5% interest rate on a loan he would most likely not invest his money for 2% either. Anyone would take a free bonus on a deflationary currency, but as people are starting to realize in the lending sections of this forum, there is no such thing. If I make a 2% risk-adjusted return on my business and you make a 5% risk-adjusted return on your investment I'm hogging resources that you are more capable of using. I should quit my business and lend you my capital at a 3.5% risk-adjusted interest instead so you can expand.
I already answered this, so I don't know why you're just repeating it. |
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If you are above average you should want to expand. Then you do need more capital, and capital is limited. Capital I have is capital you can't have. Resources I use are resources you can't use. Microsoft is usually above average, but more money would not give nearly the same profit margin, and maybe even a loss. This is the case with mosts mature businesses. So please explain why the above loan of 3.5% is impossible.
I don't know why you think I've said it's impossible. It's just not necessary to lend the money to anyone to get the profit, so it's better to not lending them away and that way avoid the risk of not getting them back. |
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If I make 2% in my business and your make 5% I'm hogging resources that you are more capable of using. I should quit my business and lend you my capital for 3.5% instead so you can expand. We both gain. Society gains.
But then this is not the issue. I don't need your money for my 5% business, and you don't need to lend them to me to profit from the deflation my production causes. The only effect of you stopping production is that you earn slightly more, but because I did some business directly or indirectly with you, I will earn slightly less, and nobody will benefit from the production you used to have. Total production is reduced, society loses. |
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