Consumerism and Destructive Behavior: A Case against ANY Monetary Inflation

[Satofan44]

Background of the thread.

My last statement here would be that inflation promotes all kind of irrational behavior, dangerous consumerism and degeneracy. We could split this into a separate thread entirely and discuss where appropriate.  

This thread is co-authored by d5000 and me and is a spin off from the sub discussion as quoted above. It combines our existing knowledge on this subject and provides a mix of both our perspectives. The thread is divided into several parts, and each is jointly written but with varying levels of contribution from both of us. If you wish to merit a particular user for this work, you can do so on any part of their posts in this thread.

We acknowledge that the arguments presented here are shaped by years of learning and reflection. Users who have done deep reading of books and research in this topics may find that some of our ideas resemble or at times are equal to those of other authors even if we don't recall specific sources. We hereby do not intend to plagiarize on anyone's work, but intend to provide our view of the matter based on our personal assimilation of various work. I would also advise readers of such books to never dismiss entire lines of reasoning on the basis that the source could be biased or has flaws in certain parts of their work. Dismissing an entire book on such grounds is neither fair nor productive. What matters is the coherence, strength, and thoughtfulness of individual arguments themselves.


Part 1. Why Monetary Inflation at all?
As a stepping stone into this debate we think it would be wise to look into the historical context of why we even have inflation at all? Few people understand the true implications of money printing and inflation, and even fewer understand how all of this came to be.

One of the earliest cases of monetary inflation contrary to popular belief is found during the Roman Times! The first debasement was done by the emperor Nero, around AD 64. There were several more events in the 2nd to 3rd century AD, where the Empire reduced the content of silver in the existing coins and thereby debased them¹. The reason for this often was to enable the state to fund the military for imperial expansion; the military must be kept loyal². Some researchers claim that it was done for other reasons due to various difficult situations that occurred during this period. However, the debasement was already in progress before most of these situations occurred. They merely made the things worse.

Wait, but what is even debasement? What happened when in the example of the Romans who used a silver standard you reduce the content of silver in the coins? Their real world value drops! Most people think that the 1 in 1 dollar represents value, but it is solely the unit of currency. Its real value is not "1 dollar", its real value is defined in the terms of goods and services that you can acquire with this "1 dollar". Because of this, the value of 1 dollar is always changing. The 1 dollar from a past point in time, for example 1960, has a much higher value than the 1 dollar from 2025. Furthermore, a more formal definition of debasement is provided here.

Monetary debasement is the deliberate reduction in the intrinsic value or purchasing power of a unit of currency by the issuing authority, typically through lowering its commodity content or increasing the nominal money supply without a corresponding increase in real economic output.

Key Historical Events:

• World War I
• Germany-Wiemar Hyperinflation
• Breton Woods Agreement
• Nixon Shock

Here I want to emphasize one truth that most experts will run away from. There are three primary reasons for monetary inflation:
    1) One is that it provides the state with the capability to wage bigger wars using the wealth of its people. This enables it to bypass and restrictions from its own budget and potential lenders.
    2) The other is that it provides the government the ability to cover-up its failures, i.e., use the wealth of the country to deal with the mismanagement of the economy/country/companies. We are talking about bailouts of "too big to fail" enterprises and other crises.
    3) The third reason is the funding of the welfare state without tax increases which are not politically popular.
    
    
There are historical examples of each of these occurring. So how does monetary inflation steal value? Every new unit of currency that is printed is effectively stealing from each citizen an amount that is equal to (unit of currency)/(number of people in the state). Let's see how devaluation looks like for the USA in a very simplified way:

• $1 printed / 335 million people = $0.000000003 of value stolen from each citizen. Nothing, right? Who cares?
• $1 million printed / 335 million people = $0.003 of value stolen from each citizen. Not even a cent yet?
• $1 billion printed / 335 million people = $3 of value stolen from each citizen. Just 3 dollars?
• $1 trillion printed / 335 million people = $2,985 of value stolen. Something, but not that bad?
• $10 trillion printed / 335 million people = $29,850 of value stolen from each citizen!

   
    
The situation is even worse than it seems for two reasons:
1) The value stolen is from your hard-earned after-tax money. If you factor in income tax, sales tax, property tax and other taxes that you may be subject to the value stolen increases by 50-100% to a staggering $45k to $60k stolen through monetary inflation in case of $10 trillion printed! Depending on how exactly monetary inflation/printing is counted, the current amount for USA stands at more than $20 trillion.
2) The less you earn the more you are impacted. Stealing $60k from someone who has hundreds of millions or even billions is pretty much nothing. Stealing $60k of value for someone who does not even own their house or who does not have a good amount of savings is a lot.


Part 1.1 How Money Gets Printed in the Modern World
The money printing today is primarily digital, but there are differences in how it works according to the model of the central bank. Overall there are 2 major models.
1. Independent Central Bank (e.g. ECB, FED)
In this type of model the central banks operates with an alleged high degree of independence from the government. There are 3 main ways for the creation of money:

• Direct Printing - This is used in a very limited way or rarely, so the central bank would just credit the money to itself or the government. In most cases this is not done and the government is not directly funded this way.
• Indirect printing through Quantitative Easing (QE) - The central banks would buy government or private bonds in the market. This creates M0 money, central bank reserves and it is also reversible (known as quantitative tightening QT).
• Commercial Bank Lending - Most modern money (M2) is created through these banks when they issue loans. However, the central bank is indirectly responsible for this as well as they create the rules relating to fractional reserve banking and the interest rates.
  

2. Government-Controlled or Weakly Independent Central Bank (e.g. Argentina)
In this case it is even more direct, the central bank just creates money and gives it to the government treasury. The difference here is that it could involve bonds without any market value. This money can be spend directly by the government and often leads to high inflation if the economy can't absorb the excess printing.

While it is true that most of the M2 comes from commercial banks via loans, as we can observe above the central bank has both a direct and indirect responsibility for this. In essence the central bank is the most responsible entity for all monetary inflation. In terms of numbers, the image below shows how the balance sheets grew during the recent crisis.

In essence the difference between M0 and M2 can be seen as a semantic gymnastic that hides the real source of inflation and makes the system more confusing for the average person. Think about it. If the central banks didn't create the extra reserves then neither could the government have spent it nor could the commercial banks have created extra M2. The central bank is the cause of monetary inflation even if they didn't directly print the M2 themselves.

    
How to know if the central bank is printing or not? A good metric is dividing (real) M0 by the (real) GDP of the country or economic area. For example, we can see that in the Eurozone there was printing in the early-to-mid 2010s and in the pandemics phase 2020-23. Even if there are phases where this indicator falls, like 2023-25 in the Eurozone, the long term trend is ascending.

Part 2. Debunking Reasons For Monetary Inflation
2.1 Moderate inflation is needed to encourage spending.
This is a common claim, completely backwards and misleading of course. It is often argued that moderate inflation does encourage spending, but is that always good? Moderate inflation raising spending does not create necessary conditions for economic well-being. People spend when they have good income and find good opportunities or products -- not just because the value of their money is melting. If inflation was truly necessary for spending stimulation then:

• Argentina would be booming because of high inflation.
• Japan would have collapsed because of low inflation.

   
Neither one is true. Therefore, while inflation may have an impact on the time of consumption for some people, that does not necessarily translate to benefits or genuine consumer demand. In the best case, inflation-driven spending essentially encourages panic buying (over-consumption and overspending) in order to preserve value. This is not healthy for a market economy and not good for the individuals.

2.2 Reduction of government debt burned through inflation
While it is true that the inflation of money makes the existing debts of governments cheaper in real terms, is this a good thing? It is basically an admission that it is a stealth tax and it has a very perverse incentive. If a mechanism like this is used to pay debts then this incentivizes the government to not care to properly manage their finances. In the end citizens are forced to pay the price for their failures through value dilution.
This argument is just for the sake of political self-preservation of those who are unfit to govern, and those who should never be voted again and be in prison if they were able to enrich themselves by doing damage to society.

2.3 Moderate inflation helps wages rise
Often a claim that inflation facilitates an upward movement in wages. This is a lie. It is only true if wages outpace inflation, which they usually don't. Sometimes the numbers are even manipulated to make it seem like they do, but what confirms this statement is:
    - The middle class has been shrinking. Wages have been stagnating for several decades while asset prices have been inflating.
    - Productivity has been rising at an extraordinary rate but real wages barely have risen at all.
    
Inflation therefore increases nominal wages (an useless number), not real purchasing power of the citizens. What good are paper riches if you are consistently losing real buying power.

2.4 Price Inflation equals a growing economy
There are cases in macroeconomics where rising prices are linked to growing demand and economic expansion, however this does not mean that price inflation equals a growing economy. Price inflation is defined as the "overall general upward price movement of goods and services in an economy"[11]. The causal inference is not valid because price inflation simply means that the overall prices are increasing, it does not necessarily mean that the economy is strong or growing. A healthy economy does not require rising prices.  Real growth is about efficiency, productivity, innovation, trade and not currency losing value. Actually the most optimal economies would have slowly decreasing prices.

Think about it simply. A country that is experiencing hyper-inflation has hyper-rising prices. Does that signal economic strength or an healthy economy?

2.5 The money supply must be inflated to match economic growth
Some economists claim that more money must be provided to facilitate more transactions as the economy expands. Given the current state of things this can be considered a valid reason for printing/inflation.

One of the problems is mass psychology. If the number of goods grows, a stable money supply would mean deflation. In the current system, that would confuse people - they'd like it more to see the growth reflected in "having more money" than "having the same amount of goods but for less money". Another example is the stock market. It is argued that in a growing economy the stock prices should be able to surge, and that is mainly possible if the money supply is increased. In contrast, if the stock prices of companies doing well were static, even if the purchasing power of the money you obtain when selling a stock grows, this would take a lot of dynamic away from the stock market.

Thus a deflation in a growing economy needs a mentality change. That's hard to achieve -- not impossible but it would be probably slow. So in the current system "printing" in a growing economy can be justified according to some. However, one can also argue the opposite: As the economy is made more efficient, say through digital improvements, this actually should decrease the need for base money and not increase it. The real reason for this claim is that these economies are build on credit expansions and without it things would start failing.

2.6 Inflation can be made manageable and predictable.
Some economists claim that a small and controlled level of inflation is possible and that it can be kept stable over time. We can see this in many advanced economies, they often have an explicit inflation target of 2% (Federal Reserv, ECB and others). However, in reality inflation can not be managed according to textbook models. Although the causes vary a lot, what often happens in practice is that targeted end up being missed or they have to be revised or reinterpreted. A stable 2% becomes up to 4%, then it becomes a transitory 5% and then they start peddling around the inflation calculation in order to manipulate the real inflation and present falsified numbers. Of course the inflation goes down when you subtract the things that are affected by it the most!

The success track record of inflation targeting depends, and in some cases have lead to extreme problems such as the case with Argentina. Even though modern central banks in advanced economies have had a fair amount of success in reducing volatility compared to previous decades with high-inflation such as the 70s, it can not be claims that inflation can always be made manageable and predictable -- because this is not an empirical truth. In reality it depends on many things, from institutional credibility, real world conditions, policy discipline, market and public expectations and many others.


Part 3. Monetary Inflation Abuse and Acceleration of a Hyper Inflated Society?
Let's briefly revisit some examples in recent history of monetary inflation abuse.

3.1 Argentina
Argentina has a long history of problems with high inflation. In many occasions, the government used money printing to cover their fiscal deficits for many years and they did it consistently. Inflation was also sometimes systematically under-reported. An example is the period between 2007 and 2013 when a 20-30% yearly inflation was reported as only being of 10-15%. Periods of hyperinflation like in 1989/90 led into many monetary reforms. There were also periods of fiscal austerity, leading into a boom-bust cycle. The 1990s were an example, when the government limited printing by law making the local Peso convertible 1:1 to the US dollar, thus tying the local currency supply to the availability of USD reserves.
The core problem however remained: The people have no trust in the Argentine currency, and when they can they escape to the dollar to save money. And thus towards the end of the 1990s stable phase a relatively minor economic downturn (the effects of the Brazilian crisis) led to a forced devaluation. A lasting improvement would require consistent and good policy over long periods of time to re-establish trust in the local currency.

3.2 Zimbabwe: A clear case of Hyperinflation and currency trust-dependence
The case of Zimbabwe is probably the most clear case of hyperinflation in recent history. People are not even able to comprehend what this number means in practice, but at the height of the crisis the inflation in Zimbabwe was estimated to be 79.6 billion percent month-on-month [3]. According to Wikipedia you couldn't even pay a bus ticket with a $100 trillion banknote. As the crisis was intensifying people started using foreign currencies to preserve their desperately devaluing wealth, and this was the final shot that collapsed the economy. A fiat currency is primarily dependent on trust, everything else comes secondary. If the trust is truly gone, collapse quickly follows.

3.3 Venezuela: State-sponsored Money Printing
A more recent case of extreme hyperinflation comes from Venezuela. What was once a previously fairly well off country has been getting destroyed through a variety of things, one of which is massive money printing and the subsequent inflation. In 2018 the estimated inflation rate has reached 2,000,000% and the currency suffered a collapse in value [4]. Similarly to other places citizens have increasingly relied on the US dollar and even barter to survive this crisis.

3.4 Turkey
Turkey has been experiencing a financial and economic crisis since the year 2018. While this is not a case of hyperinflation and complete collapse, the situation was pretty bad for several years whereby the annual inflation was near 100% [5]. Furthermore, this situation continues to be unresolved as the current inflation rate is just under 50%. This is significantly better but obviously still a disaster compared to environment that a country is supposed to be even those that are advocated by pro-inflation voices, very far from the target of 2%. There are many reasons of both economy and currency mismanagement that created the foundation of this crisis, but as it was unfolding it was intensified by institutional collapse. The president was trying to intervene in the work of the central bank with his false views on interest rates. In a debt-based economy, a central bank does not have many tools to deal with inflation. Its primary tool to do so is to prevent additional money printing and raise the interest rate. This was the reason  why the crisis has stabilized at a lower inflation rate as the interest rate is at 50% (a number quite rare in modern economies).

There are many more examples of this, some are less extreme than others and each has occurred under different and specific circumstances. Naturally this is expected as the environments in which they have occurred are very different, but there is a clear pattern here: money control, money printing, inflation and hyperinflation. Whether the system is of apparent independence or direct control, the risk comes from the action of managing money and the money printer itself and not from the type of control -- which eventually collapses under some scenario where the trust in the currency is loss.

Part 4. Consumerism, Over-consumption, and Degeneracy
4.1 Inflation Encourages Instant Gratification/Consumption
In an economy which has inflation, even at moderate levels it encourages people to buy stuff. If you look at economies with moderate inflation these days, the interest rates are low and it does not make sense to save money. So people are presented with a choice:
    1) Spend money now on something.
    2) Wait and let your money lose value at a rate of least 2% per year, but more often at a much higher rate.
    3) Invest in assets that could preserve the value, which often are speculative and risky.
    
Since savings are no longer encouraged, the other behavior has emerged as the most common way that people behave these day. Surely inflation is not the only cause of this behavior, the problem is much more complex and societal. Social media algorithms expose people to endless content and create a biased perception of the world, creating feelings of desire in them for useless things, experiences and whatever else -- just for the sake of consuming and spending. This can be seen in electronics, especially smartphones. The majority of people who jump between the latest model are those who do not need them. A fair percentage of them even buy these things using debt! There is no argument that can be made to defend such behavior. Otherwise why not apply it to other things? Why not buy a AMD server CPU even if you are just a Microsoft Office/Browser user? "But that's different"? No it is not. This is part of the complex societal brainwashing that encourages people to rationalize bad behavior and dismiss arguments against it.

We are increasingly finding ourself in an age of over-consumption. Whether it is cars, electronics, groceries, takeout, random junk.. people are increasingly buying things and creating waste as inflation and market pressures encourage such consumption. People rarely make a very long and objective analysis before buying something these days, something that should be the default behavior before any significant purchase. Houses are increasingly being filled with junk in a desperate attempt to fill a void that continues to expand through meaningless over-consumption of content and material goods.

4.2 Living Beyond Your Means
The inflationary environment is very dangerous when mixed in with a desire to consume and the desire to keep up with the trends (the majority of people are endlessly being programmed for this on a daily basis). Credit is easily given these days and it allows people to buy things that they don't need or above their means. We even rebranded Debt to "Buy Now, Pay Later" and similar concepts, all due to the goal of encouraging more spending. These days we can see many examples of this societal pressure winning over people. Some people take a lot of vacation photos from places that are actually shitty (look up pictures of lines at some of these "scenic" spots) and try to pretend that it was great. They tend to sometimes even slowly release these pictures to create an impression that their vacation was longer than it is, all while they took on a debt to go to it. Why would any rational person do this EVER?

Easy credit and societal pressure for faking is a mix made in hell. These days people sometimes even a brand new car in front of their house to show off, bought with credit of course, while their house inside is  empty and they can barely make ends meet. As more people continue to do things like this, it is a sure sign of healthy behavior in a healthy economy.. right?

4.3 Inflation is in Conflict with Environmental Goals
If we make an analysis on waste, the data is terrible. A lot of food is being wasted, there is a lot of electronic waste and waste of various kinds. For some we can place the blame on producers, they build devices that have planned obsolescence and are hard to repair -- the exact opposite of what it should be. However, on others the blame entirely lies on the consumer (even if they are manipulated/weakened through many mechanisms). If you valued every dollar that you have and believed its value would increase, why would you ever waste it? Food waste comes to mind but also other irresponsible shopping of any kind.

Inflation is in direct conflict with environmental sustainability efforts. The prices rising actually increase the urge to consume -- whereas people should actually avoid consuming unless they really need to or unless they have found something really valuable to buy. Over-consumption as fostered by inflation generally just depletes resources in an unnecessary way and increases the generation of waste. One of the core ideas behind environmental sustainability is to reduce over-consumption -- long-term, durable, quality goods should be prioritized over "fast products" -- but inflation drives the exact opposite behavior.

4.4 The Psychological Machinery of Manipulative Over-Consumption
In an environment that is inflationary, marketing increasingly becomes more aggressive over time. This compounds the problem of people over-consuming. Human psychology is designed to withstand constant bombardment of advertisements and campaigns which create a false sense of urgency or scarcity. Every brain has its own breaking point. Unless you actively try to opt out from this information loop, you will eventually at least partially succumb to these subconscious feelings. Consumers are being manipulated that consumption creates lasting satisfaction. They are being led to believe that trendy or limited-edition items, deals and discount will improve their status, happiness or life fulfillment. A clear example of this would be Black Friday sales or flash sales, which create a false urgency to consume so that people don't "miss out" or so that they "save money" (take a hint, spending is never a money saving measure even if the discount is 99%). This is a dangerous cycle that fosters impulsive behavior and wasteful consumption; a lot of the discount sales are items that people don't really need or won't actively use.

4.5 Material Goods and Long-Term Happiness are Inversely Correlated
Over-consumption is over consumption no matter in what flavor it is. If your life is driven by consumption whether pure material, whether caloric as in food, whether activities as in experiences, the effects are rather similar when it comes to psychology. Consumption is increasingly becoming a push for temporary pleasures, and as people condition themselves this way consumption becomes increasingly meaningless. This effect has similarly to drugs, where ever higher doses are needed to produce an effect that continues to diminish and diminish. But why? BECAUSE IT DOES NOT WORK. Studies are slowly catching up to the fact that focusing on increasing consumption of anything tends to lead to lower levels of happiness and life satisfaction, these things are practically inversely correlated.

The more you care about these things and the stronger you believe that they will make you happy, the less happy you are and the cycle continues. More consumption -> Less happiness -> Bigger Void -> Desire for even more consumption and validation -> Even less happiness.

4.6 Financial bubbles and possible effects on the housing crisis
The need to preserve the own wealth in an inflationary economy with high money supply leads people and institutions into riskier investments like stocks and ETFs, above all if the interest rates are low like in the QE periods in the 2010s. While it is not bad that companies are owned also by retailers, continuous inflation can generate excessive pressure on the markets if too much money competes for relatively few "good investment assets". That can lead to bubbles with some stocks and companies being hyped far beyond their real-world importance and fundamental value.

Another sector being affected by this investment behavior is real estate. In many countries, especially those plagued by chronic inflation like Argentina (but not only there!), people will buy a property as soon as they can, not only to use it for housing themselves but also to have a "safe" store of value. If this behavior is widespread, it will be followed by institutional speculation, for example by hedge funds buying real estate in hyped cities, which makes things even worse. So did you ask yourself why your rent is so expensive and you can barely afford a house, when in your parents' era that was far easier? Inflation and excessive money supply may be one of the reasons.

The bullish behavior of financial markets can lead to general economic instability. While it can become easier for companies to raise money, they are also more likely to get bankrupt if a bubble pops. Thus, if what we want is stable, solid growth of the economy and people's real wealth, bubbles are normally an obstacle to achieve that.

Part 5. Key Arguments for Deflation
If inflation is bad, then what are we left with? Overall, there are only 3 options:

• Inflation (increasing money supply, increasing prices).
• Deflation (decreasing money supply, decreasing prices).
• Neither (constant money supply, constant prices?).

1. Increased Purchasing Power
Contrary to the most common experience of modernity where money continues to lose its purchasing power, in a situation where there is deflation the purchasing power of money steadily increases. If prices are decreasing due to controlled deflation then consumers are able to buy more goods with the same amount of money. This would also be beneficial for people who have fixed incomes for example retirees.

2. Incentivizes Savings and Investment
When there is inflation there is an incentive to spend, money loses its value. The longer it remains unspent the more value it loses. When there is deflation there is an incentive to save and invest as money retains or even increases its value over time. Borrowing would be less favorable. Of course this makes perfect sense since saving would generate real returns and would create capital that can be used for long-term investments. While the investment incentive also exists in an inflationary environment, the problem is that the unpredictable nature of inflation and the fear of inflation under-reporting leads people into seeking very high returns. That means more speculative investments, like stocks that are already in a bubble. And thus it leads to increased financial instability.

3. Efficient Allocation
Deflation can push the economy to become more efficient. Firstly it forces businesses towards price reduction to remain competitive. This in return forces the business to find ways to improve its efficiency. Companies are no longer able to rely on inflation number to boost their profits so they must innovate and adapt faster than ever before, and this would lead to less waste and higher-quality goods at lower prices than in an inflationary environment. A good example for this would be the housing market. In an inflationary environment the market is most closely aligned with a speculative bubble. In a deflationary environment this industry would focus on affordable construction practices and delivering real value to consumers whereby prices would more align with actual demand.

4. Lower Debt Burden and Risk
Borrowing in an inflationary environment quickly spirals out of control as we can see from our current reality. Borrowing is cheap and governments continue to print themselves out of fiscal mismanagement. In a deflationary environment the real value of debt would increase which increases the burden on borrowers in the short run. Central banks in modern systems often respond to deflation by lowering rates, that means in deflation there would be much lower interest rates and maybe even negative ones. This would reduce the cost of servicing the debt and can at least partially offset the real burden, which could diminish the effect on borrowing behavior than what theory predicts. Nevertheless, deflation would incentivize a more responsible and cautious approach to lending and borrowing, possibly even reshaping consumer behavior: Who would want to "Buy Now and Pay More Later"?

5. Avoidance of Hyperinflation
While deflation may cause short-term economic hardship, it offers a stark contrast to the dangers of runaway inflation, which can lead to hyperinflation. In extreme cases, hyperinflation can erode the value of currency so quickly that it becomes almost worthless. Deflation, while not without its challenges, avoids the far more destructive consequences of out-of-control inflation.

6. Economic Discipline
It is clear that the inflationary environment does not promote economic discipline at all. Both governments and consumers are often very reckless with their spending and tend to take up a large amount of debt to cover their fiscal deficits. Deflation turns this upside down and would encourage good fiscal discipline. As the value of money grows over time excessive spending has an increasingly detrimental effect.

Deflation can cause some short-term economic hardship and it does have its own challenges, but it avoids far more destructive consequences from high inflation or even hyperinflation.


Part 6. Historically Weak Arguments against Deflation
6.1 Deflation is always bad, so inflation is needed to avoid it.
There is a prevalent false claim that deflation is always bad, and that it is easy to get in a deflation spiral. The data does not confirm this and historical events have been twisted in order to tell a false narrative against deflation. Often it is claimed that people would delay spending money and this would lead to economic collapse.

Who can delay buying groceries? Who can postpone paying rent? Utilities? This is just academic fraud commuted by leading experts who were bought to confirm the party line. Mild and controlled deflation actually has the best results. It encourages people to save money and optimize their consumption. Why buy a trashy product when I can wait to buy a better one and pay less (in units of account)? The person is rewarded for making better choices, they benefit and so does the environment. Historically two points confirm this:

• The end of the 19th century had deflation and massive growth.
• Tech prices deflate constantly ($ per TB of ROM or GB of RAM) yet the industry has almost consistently high demand.

   
The real danger is: deflation in a debt-based economy. This is the truth that they don't tell you. They are using inflation to protect their mismanaged and failed system from failing. This way they can forego the consequences of their actions at the expense of the citizens.

6.2 Deflation causes to economic stagnation and job losses.
Critics of deflation tend to claim that in a deflationary environment businesses may face margin pressure which would force them to cut costs, lay off workers and reduce productions. This argument forgets three key things:

• The costs of inputs of a business is also reducing, e.g., cost of raw materials, cost of production methods and so on. These will offset a large portion of the margin pressure.
• People experience higher real wages which increases their purchasing power. They will spend real money on real and valuable goods.
• The game completely changes in deflation and the reliance on price hikes to maintain profitability is no more. Therefore companies can thrive in an environment of mild deflation where efficiency of processes would be extremely boosted.

6.3 Deflation discourages investment and spending.
Sometimes it is claimed that deflation discourages investment and spending and that people will speculate on further price declines and refuse to engage in these behaviors. However, this is essentially taking and twisting a benefit into a negative. Deflation encourages smart consumption and investing, whereas inflation encourages reckless spending and investing. Obviously smart consumption and investing will be more slow, and often will lead to someone delaying an investment as consumers consider longer whether the potential investment/spending is worth it.

Deflation essentially transforms the economy towards value-based consumption. Consumers would continue to increasingly make better purchasing decisions, and they are rewarded for avoiding low-quality items in favor of higher-value purchases.  From the business side of thing, besides fostering innovation it also directs capital towards productive uses -- away from speculative bubbles. If we look at the historical events, for example in deflationary periods like the Great Depression the demand for housing and infrastructure stayed strong. People were taking advantage that prices are falling and that affordability was improving, contrary to what critics claimed would happen. In the end money is spent in a more efficient way that benefits both consumers and the economy in the long run.

6.4 Deflation leads to a collapse in prices and creates financial crises.
This criticism point starts with an assumption that is not questioned by mainstream "experts". It assumes that prices must go up, for example asset prices. Why would that be? The world currently finds itself in massive asset price bubbles which is fueled through phases where credit expansion is cheap and through speculative buying when inflation is high. Deflation does the opposite and tries to re-balance the market to bring it back to an equilibrium, basically it system is eliminating excesses of speculative investing. As asset prices deflate to reasonable levels this provides more opportunities for individuals and businesses to acquire them at reasonable prices. It creates opportunity and fosters competition, whereas an inflation-driven environment continues to create higher barriers for entry.

The risks of instability and crises created through deflation are overblown when historically we have experienced many number of instabilities that were created by debt-fueled inflation. The recession of 2008 showed us that massive credit creation and inflationary monetary policies causes an unsustainable rise in asset prices. Eventually the whole scheme collapsed and caused a severe financial crisis which has many negative effects. You know the effects that they claim would happen in the case of deflation? That's right, job losses, bankruptcies, instability and a credit freeze. Debt-driven environments created a chain reacted that inflicted massive damage to the economy.

What critics often intentionally or unintentionally fail to mention in a nuanced way is that the risks of controlled deflation are extremely low. The real and only considerable risk comes from runaway deflation, which is something entirely different from controlled deflation. This is akin to always criticizing inflation based off of characteristics of hyperinflation. When prices fall uncontrollably there could be a downward economic spiral of runaway deflating prices, this is theoretically true. However, this tends to happen as a result of terrible monetary policies which get coupled with excessive debt or other fiscal issues. For example, switching to a deflation-based economy in a country that has very high debts would be a catastrophe. The real debt burden would increase on everyone, consumers, businesses, the governments and this would have to lead to a cut in spending and investments. This is what can trigger the vicious cycle where prices keep falling and demand still continues to decline.

However critics tend to state that this is a probably or even that it would definitely happen under any deflationary environment. This is a fabrication and lie from the status quo. When there is controlled deflation the economy can be adjusted through proper monetary policies. The central bank can target a moderate deflation rate of say 1-2% (it should be bound to productivity) and it can ensure that the monetary supply remains stable enough to prevent too extreme price drops. While deflation definitely must be managed to some extent to prevent the chance of a downward price spiral from happening, the risks of deflation are generally overstated/exaggerated compared to the severe crises that an inflationary environment has been proven to cause (contrary to these mostly theoretical risks of deflation).  


Sources
[1] https://www.degruyterbrill.com/document/doi/10.1515/jeeh-2017-0002/html
[2] https://www.thecollector.com/inflation-third-century-crisis/
[3] https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe
[4] https://en.wikipedia.org/wiki/Hyperinflation_in_Venezuela
[5] https://en.wikipedia.org/wiki/Turkish_economic_crisis_(2018%E2%80%93current)
[6] Tim Kasser - The High Price of Materialism
[7] John De Graaf - Affluenza: The All-Consuming Epidemic
[8] Donella Meadows - Limits to Growth: The 30-Year Update
[9] Paul Hawken - The Ecology of Commerce Revised Edition
[10] Martin Lindstrom - Buyology: Truth and Lies about Why We Buy
[11] https://govfacts.org/money/broader-economy/economic-indicators/the-two-faces-of-inflation-why-prices-rise-and-what-it-means-for-you/?
[12] Many other books.

This thread may contain all kinds of errors, from typos to formatting. The project was massive and took a lot of coordination over a long period of time. Therefore, please have understanding for any errors that you may encounter. The thread will be updated with fixes over time.

[d5000]

I'll add some thoughts about a deflationary economy and how some challenges could be addressed.

1. Raising capital in a deflationary or stable economy without money printing

One thing that is often mentioned by the supporters of moderate inflation is that it could become harder for companies to raise money, because bank loans would be more scarce in an economy with tight monetary policy if fractional banking rules still determine the money banks can "print" for loans. Above all innovative companies like startups, which are "risky by design", could have a harder time.

But cryptocurrencies actually provide the tools to improve such a situation. Innovative companies which are too small to start a traditional IPO can recur to the ICO mechanism to obtain financing: simply issuing a crypto-asset which is then used to raise money. While traditional ICOs have been often associated with scams, there are possible mechanisms to prevent fraudulent money raising schemes. There are already several companies and projects auditing or reviewing and comparing ICOs, like ICObench or also MixBytes, and this mechanisms can be developed further. The other idea is to crowd-finance the business selling utility tokens or smart property, meaning that people can buy goods and services directly in advance. Such tokens are less affected by bureaucratic regulations than traditional ICOs.

Even without crypto technology, similar financing schemes like the participation certificates (Genussrechte) [1] popular in German-speaking countries can provide similar opportunities, as there is less bureaucracy involved than with a full IPO.

And as it was already written in Section 5 of the OP, there could be more money available for investing because there is less "inflation-driven consumption" and people are more willing to save and invest. This would benefit these alternative financing schemes. But also bank loans would be less scarce as one could think at a first glance, at least if people still use banks to deposit their excess money.

2. Stimulating the economy in recessions

Recessions are another topic where a deflationary economy could struggle. While due to the reasons mentioned in sections 5 and 6 of the OP, deep recessions with real wealth loss are probably less likely in a deflationary economy, they can still happen due to cyclic reasons or external effects.

There was a precedent which can provide us hints for a solution. Argentina in 1999-2001 had a deep recession, one of the major reasons was the economic crisis in its most important trade partner, Brazil. This was just in a phase of tight monetary policy where (excessive) money printing was prohibited by law: the local currency was pegged to the US dollar, and the Central Bank could only print money if they increased their US dollar reserves. So there was no easy way to stimulate the economy with money printed out of thin air. And there was also slight deflation in that era, so it is quite comparable with a recession in a future deflationary scenario.

But the effects of this crisis were less devastating than one could have thought, and there were no significant effects on infant mortality or life expectancy. One of the reasons was probably that people who had lost their jobs created a massive alternative economy: the Red Global de Trueque (RGT) with a barter currency called the Crédito.[2] Up to 10% of the population participated in the RGT economy, effectively cutting unemployment (which went up to 20%) in half. The Crédito lost importance after 2002 due to the recovery of the formal economy, but also due to some flaws in its conception. But it showed that alternative currencies can be efficient temporarily to increase liquidity and solve real-world problems, also on a large scale.

In a deflationary economy this can be the model to follow if recession hits: people and companies can offer their goods and services without using the main currency. Instead of a buggy printed currency like the Argentine Crédito, in the "Bitcoin-informed" world we're living now in, cryptocurrencies and tokens can be used for this purpose. The utility token and smart property mechanisms mentioned in the previous paragraph can also help in such situations. Instead of raising money as capital, in times of recession and liquidity problems, companies can raise "smart property based tokens", based on goods, resources (e.g. real estate) and services other companies and people offer.

Further Reading & Sources:

[1] Participation certificates: https://en.wikipedia.org/wiki/Participation_certificate
[2] A simple introduction to the Crédito and the RGT can be found in Wikipedia. A more detailed overview with the problems and challenges of the RGT can be seen in Rossmeissl, B.: El Trueque en Argentina – ¿Estrategia eficiente en tiempos de crisis? (Spanish).

[Ambatman]

Beautiful so far but just read over a few paragraphs since I'm already feeling sleepy. But will add little things first.

the Roman Times! In the 2nd to 3rd century AD, the Empire reduced the content of silver in the existing coins and thereby debased them

Around 64 AD by Nero to be precise after the great fire of Rome
Which added to their expenditure then not withholding his greed.
War a great source of revenue was on pause then.

So how does monetary inflation steal value? Every new unit of currency that is printed is effectively stealing from each citizen an amount that is equal to (unit of currency)/(number of people in the state)

I believe you might have added this because I haven't read that far.
Output / growth helps in reducing the impact to some level in the economy.
Economic growth and the government couldn't pay hence why the Gold standard was stopped
Because they couldn't easily print.

[Satofan44]

Beautiful so far but just read over a few paragraphs since I'm already feeling sleepy. But will add little things first.

the Roman Times! In the 2nd to 3rd century AD, the Empire reduced the content of silver in the existing coins and thereby debased them

Around 64 AD by Nero to be precise after the great fire of Rome
Which added to their expenditure then not withholding his greed.
War a great source of revenue was on pause then.

The first major debasement was by Nero, I just checked. I was referring to subsequent debasements in the 2nd and 3rd century because the reasons for printing part originally had a different focus. The original focus was that the primary reason for money printing/debasement was to expand the capability for waging war by using the wealth of everyone in the country (historically this was more true in the past, so that part was changed and expanded). The debasement by Nero was more for rebuilding, and some other ones were more focused on military reasons. I will adjust this, thank you.

So how does monetary inflation steal value? Every new unit of currency that is printed is effectively stealing from each citizen an amount that is equal to (unit of currency)/(number of people in the state)

I believe you might have added this because I haven't read that far.
Output / growth helps in reducing the impact to some level in the economy.
Economic growth and the government couldn't pay hence why the Gold standard was stopped
Because they couldn't easily print.

This is my explanation of what money printing does to value, i.e., dilutes it. You are never going to find it described this way in mainstream economics, even if this is exactly how it works in a simplified way. The primary reason for that is because it would be a very frowned upon idea if it was described this way.  Imagine the government making this announcement a couple times per year: Today, we have printed some amount of money and have stolen from each person e.g. $5000 (in value). That would not end well, assuming that most people could even understand that statement.

If someone wants to be particularly annoying or picky, they can dismiss this explanation but in essence this is how it works. We have become so programmed to think that money printing is necessary that it becomes hard to imagine scenarios in which it is not used at all -- that everything could work without any printing at all. You will see more of this being an issue when different aspects of how things would work in deflation are discussed here.

I'll add some thoughts about a deflationary economy and how some challenges could be addressed.

Good thoughts, I will get back to this in the future.

[abhiseshakana]

Thank you for summarizing so much knowledge and information in one thread. Reading some of this thread, I realized that it's easier to find flaws than to appreciate someone's thoughts and efforts. I also answer with limited knowledge and the little new knowledge I've recently learned from the thoughts of my new economic minister.

Part 1. Why Monetary Inflation at all?

Historically, I agree with your points about:

• Roman debasement did occur and was often related to military financing and state deficits.
• Inflation is a decline in the purchasing power of money relative to goods and services.
• Modern money is fiat; its value is backed by trust and economic capacity, not precious metals.
• Inflation has a regressive distributional effect—it is more detrimental to low-income communities.

Some points I think we need to discuss are:

• Inflation is a complex macro phenomenon, a combination of monetary, fiscal, production structure, and expectations. Money creation is not always automatic inflation. QE creates base money (M0), not the money circulating directly in society. Inflation occurs when money growth exceeds real output growth. Monetary expansion without high inflation can occur.
  
• Inflation is not always the result of a technical accident; it is often a political-economic tool. For example, moderate inflation serves as an implicit redistribution mechanism to reduce debt burdens, maintain financial system stability, and avoid political conflict from explicit taxes. For example, the Roman debasement was not about money but about maintaining a power structure when productive capacity stagnated.
• Inflation is not neutral but reinforces the concentration of wealth and power. Those who benefit are:
  
  • Those who own real and financial assets (stocks, property, commodities) that increase in value during inflation.
  • Those who have early access to liquidity, before prices rise.
  • Those who own debt because it reduces the real value of debt.
  These beneficiaries create an asymmetrical architecture of power through:
  
  • Bretton Woods created a system in which the US became the issuer of the global reserve currency.
  • The Nixon Shock (1971) severed the gold standard, giving the global elite extraordinary monetary flexibility to export inflation to developing countries through the dollar, global interest rates, and capital flows.
  Developing countries endure inflation without control over global monetary policy, and their people suffer as wages lag behind prices, cash savings erode, and inequality increases.
• Inflation is asymmetric redistribution, not simple arithmetic theft, because not all money circulates equally, and its impact depends on who receives the money first, the structure of assets, and position in the credit system.

I also agree that:

• The central bank is the primary source of base money (M0).
• Without reserves, modern banking credit simply cannot develop.
• Weak or government-controlled central banks (Argentina, Zimbabwe, Venezuela) lead to direct monetization of deficits and high inflation, even hyperinflation.
• Central bank balance sheet expansion increased drastically after the crises (2008 & 2020).
  

I have different thoughts on several things:

• In fact, QE doesn't automatically flow into consumption; most of it is deposited in the bond market, stock market, property assets, and bank reserves. Therefore, what occurs is asset price inflation, not direct consumer inflation. Therefore, monetary expansion (balance sheet growth) does not always result in CPI inflation (money chasing consumer goods).
• The central bank's balance sheet is a crisis stabilization tool, not a direct indicator of consumerism because the graph doesn't show the velocity of money, or where money flows. It doesn't differentiate between asset price inflation, consumer price inflation, and deflation in specific real sectors.
• M0 and M2 are not semantics, considering that:
  M0: base money, passive, does not circulate to consumption without transmission.
  M2: the result of private sector credit decisions.
  Inflation arises from the interaction of the central bank, commercial banks, and households. The central bank does not decide who receives credit. Commercial banks distribute credit based on profit, risk, and regulations, while households choose between consumption and saving. Monetary inflation accelerated consumerism, but it was not the primary cause, considering that massive consumerism existed before QE, driven by advertising, status culture, consumer credit, social pressure, and the financialization of daily life.
• The M0/GDP ratio serves only as an alarm, not as direct causal evidence, given that GDP doesn't capture production quality, income distribution, financial asset growth, velocity, and supply-side constraints. Monetary inflation is a necessary but not sufficient condition for destructive consumerism. What truly makes inflation socially destructive is not its existence, but how newly created money is allocated toward speculation instead of productive capacity. I see inflation in 2021-2023 as not a purely monetary phenomenon.

Part 2. Debunking Reasons For Monetary Inflation

Some opinions in response to your explanation

• The correct term is that Moderate inflation prevents stagnation of economic coordination. You seem to be overlooking real economic issues like deflationary bias, liquidity traps, and debt-deflation spirals (Irving Fisher). History shows that if inflation is permanently zero or negative, people delay consumption, companies delay investment, and the debt burden increases in real terms, followed by rising unemployment, falling incomes, and then declining consumption. So, inflation does not create demand, but zero inflation does not guarantee healthy demand either.
  https://en.wikipedia.org/wiki/Debt_deflation
  
• In Argentina's case, high inflation was caused by a structural fiscal deficit and institutional collapse. Meanwhile, Japan's stagnation was not due to low inflation but due to demographic factors such as the large number of zombie firms and a balance sheet recession.
• I think, a system without inflation is far more brutal. All modern debt systems require real adjustment mechanisms through default options, extreme austerity, social unrest, and economic depression. My focus is on who bears the costs of economic adjustment? Without inflation, the burden of adjustment likely falls on layoffs, nominal wage cuts, and mass bankruptcies. Inflation could be said to spread losses, while deflation concentrates losses. So, inflation is a mechanism for distributing losses, not creating them.
  
• In my opinion, inflation doesn't steal wages. It merely highlights inequality, not creates it. If inflation were eliminated altogether, wages wouldn't automatically rise, the middle class wouldn't immediately expand, and the asset bubble wouldn't disappear. The problem is caused by the distribution of economic power (monopolies, cartels, weak labor bargaining power, pro-asset owner policies).
  
• If inflation were eliminated, consumerism would collapse i think it is wrong because consumerism is more of a socio-psychological phenomenon, not a monetary one.
• The correct language in a credit-based economy and nominal contracts is that moderate inflation is a system lubricant, not a growth engine. Your hyperinflation analogy seems inaccurate, as if you were saying that because overdoses are fatal, drugs should not be available (CMIIW). Excessive inflation is destructive, while moderate inflation allows for economic coordination.
• Historically, deflationary eras are often sustained, often associated with depression, unemployment, and debt crises. Even in eras of high productivity, price deflation often triggers investment delays. Price declines due to technology are not systemic deflation. Sectoral deflation is safe, while general deflation is dangerous.
• You say that deflation in a growing economy requires a mentality change. In other words, the current system is incompatible with deflation, meaning that eliminating inflation WITHOUT replacing the entire economic architecture is a high-risk social experiment.
• If you claim that inflation cannot be managed, how can you explain the 1990s-2019 economy, where inflation was relatively stable and volatility was much lower than in the 1970s, and developed countries were able to avoid hyperinflation for decades?

So far I have only had time to read and discuss parts 1 and 2. As soon as I read the entire thread I will try to share my opinion.

[Satofan44]

Inflation is a complex macro phenomenon, a combination of monetary, fiscal, production structure, and expectations. Money creation is not always automatic inflation. QE creates base money (M0), not the money circulating directly in society. Inflation occurs when money growth exceeds real output growth. Monetary expansion without high inflation can occur.

Inflation can be complex, and there are different kinds of inflation that it true. However, here we are focused on monetary inflation. How much printing is going to cause inflation depends on a variety of things, but it is always inflating that is not disputable. Why? Even if after printing you only have a small inflation rate of 0.1% that probably means that without printing you would have some deflation. So regardless of what the final number for inflation comes out as (small or high %), monetary printing is always inflationary.

Inflation is not neutral but reinforces the concentration of wealth and power. Those who benefit are:

• Those who own real and financial assets (stocks, property, commodities) that increase in value during inflation.
• Those who have early access to liquidity, before prices rise.
• Those who own debt because it reduces the real value of debt.

In other words, the top 5% but mostly the top 1% or 0.1% of people. Therefore, the case against monetary inflation could be made solely based off of this. On the last point I agree but it does not apply to people who don't have a variety of incomes and cashflows. If you don't, then the value reduction in the debt is offset by your increasing costs elsewhere. Unless you have very large debt as an individual, you are more likely going to be losing more value overall.

In fact, QE doesn't automatically flow into consumption; most of it is deposited in the bond market, stock market, property assets, and bank reserves. Therefore, what occurs is asset price inflation, not direct consumer inflation. Therefore, monetary expansion (balance sheet growth) does not always result in CPI inflation (money chasing consumer goods).

There has not been a time in history where QE didn't cause inflation. Nevertheless, when I talk about consumption in the thread I am not talking about consumption as a result of QE but as a result of living in a inflationary environment -- where people are encouraged or basically brainwashed towards consumption. The situation can be really bad, it depends on how much examples of individuals you know and how much data you have on this.

M0 and M2 are not semantics, considering that:
M0: base money, passive, does not circulate to consumption without transmission.
M2: the result of private sector credit decisions.
Inflation arises from the interaction of the central bank, commercial banks, and households. The central bank does not decide who receives credit. Commercial banks distribute credit based on profit, risk, and regulations, while households choose between consumption and saving. Monetary inflation accelerated consumerism, but it was not the primary cause, considering that massive consumerism existed before QE, driven by advertising, status culture, consumer credit, social pressure, and the financialization of daily life.

Then in this case you didn't understand the argument. This distinction, in my view, is that the blame can be shifted towards commercial banks when needed. However, since printing in M2 is not possible without M0 expansion and the rules for M2 are decided by the central bank -- then it all comes down to the central bank, they are fully responsible for all printing that occurs due to their setup. If central banks allowed private people to print $100k USD per year, who would be responsible for the resulting inflation that comes out of it? The humans that are printing or the central bank for creating this policy? Of course, the central bank!

The correct term is that Moderate inflation prevents stagnation of economic coordination. You seem to be overlooking real economic issues like deflationary bias, liquidity traps, and debt-deflation spirals (Irving Fisher). History shows that if inflation is permanently zero or negative, people delay consumption, companies delay investment, and the debt burden increases in real terms, followed by rising unemployment, falling incomes, and then declining consumption. So, inflation does not create demand, but zero inflation does not guarantee healthy demand either.
https://en.wikipedia.org/wiki/Debt_deflation

A lot of this thinking comes as a result of programming for consumption and inflation. You need to realize for yourself just how hard it is to think that things could be alright under those contexts, or even thriving. Otherwise why not make the case for the opposite extreme? If delaying consumption is bad, let's push policies that maximize consumption velocity. What could go wrong?   Clearly, there is a balance somewhere where the optimal behavior lies. Therefore to say in general that consumption or investment delay is negative is incorrect.
Furthermore the example from Irving Fisher and the Great Depression is completely misconstrued in mainstream information. That historical episode does not create a case against deflation it does the opposite:

• Created a case against runaway deflation.
• Creates a case against consumerism, debt purchases and similar.

You need to look into the years before the Great Depression, before the stock market collapsed and not after. There you will find the causes that triggered the stock market collapse, and the wider deflation.

In Argentina's case, high inflation was caused by a structural fiscal deficit and institutional collapse. Meanwhile, Japan's stagnation was not due to low inflation but due to demographic factors such as the large number of zombie firms and a balance sheet recession.

I leave this to d5000.

I think, a system without inflation is far more brutal. All modern debt systems require real adjustment mechanisms through default options, extreme austerity, social unrest, and economic depression. My focus is on who bears the costs of economic adjustment? Without inflation, the burden of adjustment likely falls on layoffs, nominal wage cuts, and mass bankruptcies. Inflation could be said to spread losses, while deflation concentrates losses. So, inflation is a mechanism for distributing losses, not creating them.

If inflation distributes losses, it does so in a disproportionate way. This means that it hurts the average people much more than it does the rich or those that caused the situation to develop this way anyway. How is this a good thing, how could you argue for this? In a perfect system, those that are responsible for these things should take most of the loss and losses would be distributed in a proportional way. Anyway, if you are talking about adjustment as in switching from inflation to deflation -- I explain also later in this reply, we did not create a strategy for transitioning. That is something that could be considered, but the absence of such a strategy or its difficulty can not be used as an argument against deflation.

In my opinion, inflation doesn't steal wages. It merely highlights inequality, not creates it. If inflation were eliminated altogether, wages wouldn't automatically rise, the middle class wouldn't immediately expand, and the asset bubble wouldn't disappear. The problem is caused by the distribution of economic power (monopolies, cartels, weak labor bargaining power, pro-asset owner policies).

Your opinion is wrong here, there is nothing to dispute -- i.e. no reason to provide an opinion when this is measured in a quantified way. The real value of wages has been stagnating or even down-trending in many places in the last decades.

If inflation were eliminated, consumerism would collapse i think it is wrong because consumerism is more of a socio-psychological phenomenon, not a monetary one.

I do think it would go away, but obviously not over night. You need to keep in mind that besides money gaining value instead of losing it, there would be no marketing of any kind for "spend now, pay later" ideas. I expect marketing that is inverse of that, and with time the population would adjust towards healthy spending and consumption.

The correct language in a credit-based economy and nominal contracts is that moderate inflation is a system lubricant, not a growth engine. Your hyperinflation analogy seems inaccurate, as if you were saying that because overdoses are fatal, drugs should not be available (CMIIW). Excessive inflation is destructive, while moderate inflation allows for economic coordination.

Yes ironically, in most cases mainstream economics uses spiraling deflation as an argument against any deflation. Historically we know that hyperinflation happens relatively frequently, and it does through monetary inflation. The risk is real, even if many countries have not yet had episodes of this. You need to give time. It does not mean that there is a necessary causal relationship between printing and hyperinflation -- that is, that it must always happen under a specific time frame. Currencies historically always collapse for a variety of reasons, but one big reason is giving absolute printing power to someone.

Historically, deflationary eras are often sustained, often associated with depression, unemployment, and debt crises. Even in eras of high productivity, price deflation often triggers investment delays. Price declines due to technology are not systemic deflation.

Those are uncontrolled deflation areas, where there was no policy about controlled deflation. Often they

Sectoral deflation is safe, while general deflation is dangerous.

This is mainstream economics dogma, the kind of bullshit you are not allowed to write against in an University -- you know, the places where they claim to be looking for the "truth". There is no proof for this claim.

• You say that deflation in a growing economy requires a mentality change. In other words, the current system is incompatible with deflation, meaning that eliminating inflation WITHOUT replacing the entire economic architecture is a high-risk social experiment.

I've written where the real danger lies later in the thread. It is not deflation, it is deflation in the messed up system of credit that they have created. This system does not allow for deflation, it is completely broken. We have made here a case against inflation/for deflation, we have not developed a comprehensive transition strategy -- that could be even more difficult, and it is probably better to be left to people who have experience in developing public policy.

• If you claim that inflation cannot be managed, how can you explain the 1990s-2019 economy, where inflation was relatively stable and volatility was much lower than in the 1970s, and developed countries were able to avoid hyperinflation for decades?

The value loss and the loss of the middle class in this period is extreme. While it did not spiral into hyperinflation, the negative effects are unquestionable.

So far I have only had time to read and discuss parts 1 and 2. As soon as I read the entire thread I will try to share my opinion.

It is better anyway to split up the responses, it makes it easier to talk about this.  

Good post, I will leave the meriting to the merit sources. I am sure d5000 will have plenty to say to these points. I am much more extreme when it comes to the topic of inflation. I have zero sympathy towards this slavery system.

[Ambatman]

We have become so programmed to think that money printing is necessary that it becomes hard to imagine scenarios in which it is not used at all -- that everything could work without any printing at all.

Who's the biggest debtor in an economy? Yes the government and what would favour them? Yeah inflation.
Wage may seem like it's rising but it always fall short to the rate of inflation
Hence why despite our supposed growth surviving still seems harder.
My country is plagued by inflation
Prices of goods are up. Wages can't keep up. Salaries are increased
But it seems things were better in the past that they are now.

And why isn't anybody talking about Mild Deflation? Adding to it be a little more equity financed than debt.
Money should be a store of value
But inflation makes it look otherwise.




Alright I think I have a feel of the thread. Deflation over mild Inflation.
Let me come from the angle of Inflation.
When I was younger I believed deflation felt like a plus to the subjects while inflation a plus to the government
But life isn't all Black and White
Using Keynes words, Inflation is unjust, deflation is inexpedient. Of the two deflations is worse.
He considered both harmful and picked deflation as worse in my opinion because of Debt .


In our society today, some level of inflation is necessary.
We are used to controlling inflation than we have historically solved the issue of deflation
Using Japan as an example it shows that you can't really stop deflation by pumping money to the economy (suffering for more than 30 years)
Unlike inflation where reducing the interest rate and controlling the flow of money helps.

If inflation is bad, then what are we left with? Overall, there are only 3 options:

There's always a cost.
There would always be an alternative forgone.


Like I said before, Debt place a key role here. The world is financed by debt and has pushed economic growth
Deflation corrodes this advantage and makes creditors loss out
While inflation encourages it.

So how does monetary inflation steal value?

Deflationary spirals steals jobs through amplified debt.
This widens the gap between the rich and the poor. Rich has more disposable income to save than the poor that may loss their job
And have little since it would be necessary to cater for their needs.
Yes inflation also leads to gaps between rich and poor but from another direction.


And on War? That's a fiscal policy. Inflation is usually a side effect.

[Satofan44]

Wage may seem like it's rising but it always fall short to the rate of inflation

Wages have been stagnating for several decades, even in the best countries with the best currencies.

And why isn't anybody talking about Mild Deflation? Adding to it be a little more equity financed than debt.
Money should be a store of value
But inflation makes it look otherwise.

That is the question. Many people do not understand that economics is not a real science. It is nothing like math or physics, therefore there is a lot of subjectivity involved. From what I can observe and read through the lines, contrarian voices are suppressed and dismissed. It starts with what students are taught in class, continues with how their assignments are graded and all through undergraduate, graduate work, PHDs and until some of them become professors the cycle repeats. If you write things that are contrary to the mainstream economics, which is nowadays more of a dogma than anything else, you will receive worse grades. Very few professors will allow you to take a topic that disproves inflation or puts deflation in a big way. If you are a professor and write such a paper, peers will harshly criticize it or journals will refuse to publish it. You may lose funding or get denied further funding. Why would someone destroy their academic career by going against the system that is so broken? They won't accomplish anything, so they might as well just go along with it. The fact is, inflation is a scam built upon a house of cards. Lie upon lie.

Alright I think I have a feel of the thread. Deflation over mild Inflation.

Controlled mild deflation to be correct, over any kind of inflation.

Using Keynes words, Inflation is unjust, deflation is inexpedient. Of the two deflations is worse.
He considered both harmful and picked deflation as worse in my opinion because of Debt .

Keynes is Keynes, his words carry no authority here. His arguments were weak and unfounded. He was wrong on many things. Here are some:
1. He was wrong about inflation not mattering much, he completely underestimated the effect of long-term damage that comes from inflation. He was mostly focused on moderate short-term inflation and claimed that was better than unemployment. This may be true, but he made a big mistake.
2. He thought that surpluses during economic booms would be used to pay debt back, which is wrong. We basically have a temporary stimulus policy that turned permanent, it just has a short period where the stimulus is paused or low.
3. He never understood capital structure and never considered time. As we also demonstrate here, low interest rates and inflation leads to bad investments -- so booms are created through cheap money and this leads to busts later. This was actually one of the triggers for the great depression, but they won't tell you that. They will tell you, deflation bad look at the great depression! 
4. Too many others to go on.

So how does monetary inflation steal value?

Deflationary spirals steals jobs through amplified debt.
This widens the gap between the rich and the poor. Rich has more disposable income to save than the poor that may loss their job
And have little since it would be necessary to cater for their needs.
Yes inflation also leads to gaps between rich and poor but from another direction.

No, it does not. You can't use potential job loss as an argument for gap widening because these job losses also occur in our current environment. Again you are mistakenly using a deflationary spiral to argue against something which is not proposed here. In what we are arguing for, there is not deflationary spiral.

And on War? That's a fiscal policy. Inflation is usually a side effect.

You didn't understand the argument then. We are looking at reasons for which the government wants to print money, it does not matter what policy field it is in. War is constrained by the capabilities of the budget. Printing money allows the government to bypass this and start draining the wealth of its population to fuel the war machine. 

[Ambatman]

No, it does not. You can't use potential job loss as an argument for gap widening because these job losses also occur in our current environment. Again you are mistakenly using a deflationary spiral to argue against something which is not proposed here. In what we are arguing for, there is not deflationary spiral.

The crossed section is me speaking from the lense of what most Economist are spreading.
From the first paragraph it can be seen I believe Job losses are not really influenced on whether the economy is experiencing inflation or deflation.

We are looking at reasons for which the government wants to print money

Okay that checks out. And as can be seen with the German, hyper inflation.
The world itself is heading in that direction albeit slowly if nothing is been done. 
When they talk about deflation it's impact on debt is bought up. Debt is why it's considered dangerous.
If I'm not mistaken the earliest bonds were issued to fund wars.
Global debt is increasing and I believe it's unrealistic that it would ever be cleared.
They plan on paying via output when they create money more than it's produced

This was actually one of the triggers for the great depression

I liked Friedman view that deflation was a symptom of bad monetary policy not the root cause.
It's funny how this works. You create output and I reward by creating an IOU that is based on your trust.

[Satofan44]

No, it does not. You can't use potential job loss as an argument for gap widening because these job losses also occur in our current environment. Again you are mistakenly using a deflationary spiral to argue against something which is not proposed here. In what we are arguing for, there is not deflationary spiral.

The crossed section is me speaking from the lense of what most Economist are spreading.
From the first paragraph it can be seen I believe Job losses are not really influenced on whether the economy is experiencing inflation or deflation.

Oh then it is all good, it was a misunderstanding on my part. Your writing can be a bit confusing even if some details are very correct.

We are looking at reasons for which the government wants to print money

Okay that checks out. And as can be seen with the German, hyper inflation.
The world itself is heading in that direction albeit slowly if nothing is been done.  

Yes. Actually initially I wrote that this was the only reason for monetary printing, but d5000 pointed out that historically this is true but in recent times it is not. Therefore I added also some other reasons based on his suggestions. A great man once said (paraphrased by ChatGPT to conserve time):

The state always wants more power. It always wants to consolidate more control, and as it does, it becomes less accountable to the people. And that is the problem with centralization: when power is centralized, it becomes absolute. And absolute power is always abused.
Andreas Antonopoulos

To give any individual, group, organization or institution this kind of power is absolutely crazy. It is always abused, there is no dispute. Most people just don't understand that abuse can take shape in countless ways, that does not mean that it has to lead to a hyperinflation-style catastrophe. That is, they believe if there is no hyperinflation chaos that the money printer is not being abused.

When they talk about deflation it's impact on debt is bought up. Debt is why it's considered dangerous.

Yes, if debt to GDP ratios were 10% or lower then switching to deflation would not be dangerous. Meanwhile they created a situation with this sick system where it is extremely dangerous for both individuals and the state. The average individual is full of debt.

If I'm not mistaken the earliest bonds were issued to fund wars.
Global debt is increasing and I believe it's unrealistic that it would ever be cleared.
They plan on paying via output when they create money more than it's produced

I think that we are heading into a major catastrophe or a reset of some kind. Neither of this will be pretty and average people are going to suffer the most. What they have been doing mostly is pushing the problem into the future. What is often not talked about is what is the way out of this? As I said Keynes was wrong on so many things, including this one. I have not checked the data but practically no country is having a surplus that they are using to pay back debt, that is to reduce it (servicing a debt is not the same as reducing it). It seems that the total debt continues to increase and so do interest payments. This is unsustainable though, eventually the toxicity within the system will be too much and the existing measures and protections will not be sufficient. I always ask, what then? What is the way out of the current system?

1. Hyperinflated printing to pay back all debt. Economy and currency destroyed, complete chaos.
2. Default on debt and legally remove its existence (yes, they can do this the same way that they can steal Russia's funds -- everything can be "legally" done if there is enough will). Economy and currency destroyed (?), global chaos.
3. Something else? I don't know, I'm interested in opinions on this.

This was actually one of the triggers for the great depression

I liked Friedman view that deflation was a symptom of bad monetary policy not the root cause.
It's funny how this works. You create output and I reward by creating an IOU that is based on your trust.

Yes, on that he was absolutely correct.

[d5000]

• Inflation is asymmetric redistribution, not simple arithmetic theft, because not all money circulates equally, and its impact depends on who receives the money first, the structure of assets, and position in the credit system.

I agree until this part. Good post! This is of course related to the Cantillon effect, where certain services are benefitting more from a money supply expansion (government and banks, mainly).

In fact, QE doesn't automatically flow into consumption; most of it is deposited in the bond market, stock market, property assets, and bank reserves. Therefore, what occurs is asset price inflation, not direct consumer inflation. Therefore, monetary expansion (balance sheet growth) does not always result in CPI inflation (money chasing consumer goods).

For me there's a catch with this. While I agree that the flow is not direct, indirect flows are quite easy to explain. For example, the relation between real estate and consumer goods prices: if real estate inflates too much, there will be an effect on the CPI as well, above all for economic sectors like gastronomy where rent impacts a lot into the overall costs. And rising stock prices can impact in inflation too: first in niches like the luxury good sector (big stock holders spending their profits) and then in the consumer good sector too if the stock price increase is broad (companies can rise salaries, salaries impact in prices).

There may be conditions where there are obstacles to this indirect flow though.

The M0/GDP ratio serves only as an alarm, not as direct causal evidence, given that GDP doesn't capture production quality, income distribution, financial asset growth, velocity, and supply-side constraints.

Of course it is a bit more complex. There are phases where an increment in M0/GDP can indeed be "eaten" again largely, like in 2023/24 in the Eurozone. But in general terms I think satofan44 is correct: if money supply grows faster than GDP, then after some time you will see an impact in prices.

I see inflation in 2021-2023 as not a purely monetary phenomenon.

I think in this phase indeed external factors like energy prices were also a large factor, above all in Europe where the countries were most exposed to the effects of the Russian invasion to Ukraine. However, this is accumulative to the money expansion in the COVID era.

History shows that if inflation is permanently zero or negative, people delay consumption, companies delay investment, and the debt burden increases in real terms, followed by rising unemployment, falling incomes, and then declining consumption.

This is where I think that history (of the formal economy at least) doesn't show us the complete picture. I have brought up the example of Argentina's 2001 crisis in my follow-up post, you may have still not read it. But if there are liquidity problems in a zero-inflation or deflationary economy, people can circunvent it by "bypassing" the local currency with barter-like mechanisms. This increases liquidity but without touching the anchor of the local currency to the "real economy" and their values.

So, inflation does not create demand, but zero inflation does not guarantee healthy demand either.

I think I agree here, but if demand can be risen in a zero inflation economy, that demand is healthier in my opinion.

In Argentina's case, high inflation was caused by a structural fiscal deficit and institutional collapse.

Argentina's big problem is indeed one that could be solved with several decades of zero or near-zero inflation. The main problem is the lack of trust in the local currency, be it called Austral or Peso. This means that economic growth will always result into a tendency for capital flight, adding pressure to the local currency, it always tends to devaluate, and the prophecy becomes self-fulfilling.

Fiscal deficit is an important factor but only in some years. Actually the most recent "inflation wave" in Argentina started in 2006/07, which was a period of debt reduction due to the soybean boom of that era. Money printing resulted in a continuing high inflation once the economy cooled down again and deficit appeared again in the early 2010s. The most recent inflation spike in 2022-24 was mostly monetary due to COVID-related money printing, but strengthened by the effect I explained above: the rise of the Libertarians triggered fears of an even bigger devaluation that the one that happened at the end, and that resulted in the 200-300% almost-hyperinflation of 2023/24. The curious thing is that in 2023 before the government change in December the money supply didn't grow faster than in 2020-22, even a bit slower (see the Chg% value in this graph), which means that "structurally" the worst should have been already over but due to the continued distrust in the local currency and continuous devaluations the inflation accelerated even more.

I think, a system without inflation is far more brutal. All modern debt systems require real adjustment mechanisms through default options, extreme austerity, social unrest, and economic depression. My focus is on who bears the costs of economic adjustment?

See above and my paragraph about Argentina's 2001 crisis. This may be a "non-standard" mechanism today, but it could become the "standard" way to deal with liquidity problems once deflationary economies become more popular (e.g. in a "Bitcoin Standard" society).

In my opinion, inflation doesn't steal wages. It merely highlights inequality, not creates it.

I'd say it does not only "highlight", but increase inequalities. And wages are often only reached late by the money supply increases, so I see nothing wrong to call it "stealing from the wages". Other kinds of income like profit from stock price increases are not stolen but instead benefit from inflation.

If inflation were eliminated altogether, wages wouldn't automatically rise, the middle class wouldn't immediately expand, and the asset bubble wouldn't disappear. The problem is caused by the distribution of economic power (monopolies, cartels, weak labor bargaining power, pro-asset owner policies).

This is correct but it is a factor contributing to inequality. If we can deal with the negative effects of deflation on liquidity, then deflation would be beneficial to these indicators.

You say that deflation in a growing economy requires a mentality change. In other words, the current system is incompatible with deflation, meaning that eliminating inflation WITHOUT replacing the entire economic architecture is a high-risk social experiment.

I could again claim that the "experiment" was Argentina in 1999-2001, and we continue to see a low-inflation society in the case of Japan.

If you claim that inflation cannot be managed, how can you explain the 1990s-2019 economy, where inflation was relatively stable and volatility was much lower than in the 1970s, and developed countries were able to avoid hyperinflation for decades?

This was actually one of the disagreements in my discussion with @satofan44. I believe inflation can be controlled, but it can also get out of control. Thus the OP says out-of-control development "often happens in practice".

[Satofan44]

In fact, QE doesn't automatically flow into consumption; most of it is deposited in the bond market, stock market, property assets, and bank reserves. Therefore, what occurs is asset price inflation, not direct consumer inflation. Therefore, monetary expansion (balance sheet growth) does not always result in CPI inflation (money chasing consumer goods).

For me there's a catch with this. While I agree that the flow is not direct, indirect flows are quite easy to explain. For example, the relation between real estate and consumer goods prices: if real estate inflates too much, there will be an effect on the CPI as well, above all for economic sectors like gastronomy where rent impacts a lot into the overall costs. And rising stock prices can impact in inflation too: first in niches like the luxury good sector (big stock holders spending their profits) and then in the consumer good sector too if the stock price increase is broad (companies can rise salaries, salaries impact in prices).

There may be conditions where there are obstacles to this indirect flow though.

Actually, it can be even direct. People tend overlook that many countries have property tax. Money printing causes property prices to go up, this causes property taxes to go up, which causes rent to go up, which causes consumer prices to go up. The flow is direct in this case, there are just many intermediary steps. Just because we don't have a direct step from money printing to prices to go up, that does not mean that the flow is not direct. I would consider the same flow to be more indirect in countries where there are no property taxes. The rents will go up as asset prices inflate anyway, but not directly due to the increase in the tax burden.

History shows that if inflation is permanently zero or negative, people delay consumption, companies delay investment, and the debt burden increases in real terms, followed by rising unemployment, falling incomes, and then declining consumption.

This is where I think that history (of the formal economy at least) doesn't show us the complete picture. I have brought up the example of Argentina's 2001 crisis in my follow-up post, you may have still not read it. But if there are liquidity problems in a zero-inflation or deflationary economy, people can circunvent it by "bypassing" the local currency with barter-like mechanisms. This increases liquidity but without touching the anchor of the local currency to the "real economy" and their values.

Further, we have never had a deflationary scenario under the current conditions. Bitcoin and cryptocurrencies are now available too. People have many ways to escape and bypass the local currency, much more than they did ever before. It would be interesting if we could simulate this, but I don't think we have software that is capable to accurately simulate complex economies.

If you claim that inflation cannot be managed, how can you explain the 1990s-2019 economy, where inflation was relatively stable and volatility was much lower than in the 1970s, and developed countries were able to avoid hyperinflation for decades?

This was actually one of the disagreements in my discussion with @satofan44. I believe inflation can be controlled, but it can also get out of control. Thus the OP says out-of-control development "often happens in practice".

Yes, it does not mean that out-of-control must necessarily follow. The idea is more that with inflation this risk is always present (and sometimes these things did happen), and without inflation it would not be possible. Similarly, a deflation-spiral risk only exists in a deflationary environment. No deflation, no risk of spiraling deflation.

[Mia Chloe]

I agree until this part. Good post! This is of course related to the Cantillon effect, where certain services benefit more from a money supply expansion (mainly governments and banks).

In my opinion I believe this is a useful distinction analytically, but I’m less convinced it changes the lived reality. Whether we call it “theft” or asymmetric redistribution the outcome is the same for those who receive the money last especially wage earners and savers. The Cantillon effect explains how it happens, but it doesn’t neutralize the distributive consequences which in the end is profiting the government instead.

For me there’s a catch here. While I agree that the flow is not direct, indirect flows are quite easy to explain. For example, the relation between real estate and consumer goods prices: if real estate inflates too much, there will be an effect on CPI as well, especially in sectors like gastronomy where rent is a large part of total costs. Rising stock prices can also affect inflation first in niches like luxury goods (where large asset holders spend gains), and later in consumer goods more broadly if stock price increases are widespread, since companies can raise salaries and higher salaries feed into prices.

I'll say it's true in the short run but I don’t think the separation between asset inflation and CPI holds over time. Real estate inflation feeds into rents and rents directly affect service prices. Equity inflation also leaks out via wealth effects higher costs and eventually wages. The transmission is slow and uneven but it’s actually kinda hard to argue it’s structurally blocked.

Of course, the picture is more complex. There are phases where an increase in M0/GDP can largely be “absorbed” again, such as in the Eurozone in 2023/24. But in general terms, I think satofan44 is correct: if money supply grows faster than GDP, sooner or later you tend to see an impact on prices.

I agree it’s not causal on its own but I’d still argue it’s more than just a warning light. When money supply grows faster than real output for long enough price effects usually appear unless something actively suppresses them (say tight credit, weak demand, or institutional frictions) regardless delay doesn’t mean irrelevance.

In the 2021–2023 period, external factors like energy prices clearly played a major role, especially in Europe, which was heavily exposed to the effects of the Russian invasion of Ukraine. That said, these effects were cumulative with the monetary expansion of the COVID era rather than independent from it.

Energy shocks and supply disruptions were clearly major drivers especially in a country like europe. But I think where I'll disagree slightly is that I saw the COVID era monetary expansion as an amplifier since without it inflation would likely still have happened like it always had but kinda with lower peaks and shorter duration.

This is where I think history at least the history of the formal economy doesn’t show the full picture. I mentioned Argentina’s 2001 crisis in a follow-up post. When liquidity problems arise in a zero-inflation or deflationary economy, people can circumvent them by bypassing the local currency through barter-like mechanisms. This increases liquidity without re-anchoring the local currency to the real economy or restoring trust in it.

I think this conclusion relies too much on the formal economy. Based on some country's economy, when official money fails people don’t stop transacting instead they kinda reroute around the currency using trade by barter or foreign money and sometimes informal credit. These systems are inefficient and unstable but I believe they challenge the idea that deflation automatically causes economic paralysis.

This was also a key disagreement in my discussion with satofan44. I believe inflation can be controlled—but it can also escape control. That’s why the OP’s claim that inflation getting out of hand “often happens in practice” still holds.

I think inflation can be managed but history also shows it can actually slip out of control when institutions weaken or trust erodes. Decades of stability don’t disprove the OP’s concern they just show that control is kinda conditional and not guaranteed. I'll say the financial system weren't as messy and eroded as the current system is hence the lesser pressure people experience based off inflation back then.

[SatoPrincess]

4.1 Inflation Encourages Instant Gratification/Consumption
Since savings are no longer encouraged, the other behavior has emerged as the most common way that people behave these day. Surely inflation is not the only cause of this behavior, the problem is much more complex and societal. Social media algorithms expose people to endless content and create a biased perception of the world, creating feelings of desire in them for useless things, experiences and whatever else -- just for the sake of consuming and spending. This can be seen in electronics, especially smartphones. The majority of people who jump between the latest model are those who do not need them. A fair percentage of them even buy these things using debt! There is no argument that can be made to defend such behavior. Otherwise why not apply it to other things? Why not buy a AMD server CPU even if you are just a Microsoft Office/Browser user? "But that's different"? No it is not. This is part of the complex societal brainwashing that encourages people to rationalize bad behavior and dismiss arguments against it.

I often ask what my friends what they do with their “old” smartphones after they buy the latest version, their answer is always the same. They keep it in their drawer. Sadly, people here do not have a recycle culture. They don’t realize that the resources used in building the smartphones are finite. Children and women in DR Congo are being exploited in cobalt mines, not to mention the waste impact on the local environment but who cares as long I can get the latest iPhone.
https://www.amnestyusa.org/reports/this-is-what-we-die-for-human-rights-abuses-in-the-democratic-republic-of-the-congo-power-the-global-trade-in-cobalt/

4.3 Inflation is in Conflict with Environmental Goals
If we make an analysis on waste, the data is terrible. A lot of food is being wasted, there is a lot of electronic waste and waste of various kinds. For some we can place the blame on producers, they build devices that have planned obsolescence and are hard to repair -- the exact opposite of what it should be. However, on others the blame entirely lies on the consumer (even if they are manipulated/weakened through many mechanisms)

I agree. Inflation impacts UN SDGs more than we think. I could write a book on just the impact of inflation on SDGs. Like you pointed out, inflation increases poverty which affects SDG 1. Inflation also drives inequality and makes it more difficult for vulnerable communities to afford basic needs such as food and health services, which affects SDG 2 (Zero Hunger) and SDG 5 (Gender Equality).

For Nigeria, inflation is not just an economic problem, it’s a gender issue. When a family is struggling to make ends meet, it is usually the girl child that has to give up on her education and support the family in trade. This problem pose the question what is the WEF doing? Are their Nexus programs even working in countries that need it most or the programs dead?
https://www.mdpi.com/2071-1050/13/4/1919

[d5000]

Actually, it can be even direct. People tend overlook that many countries have property tax.

In many countries property taxes are so low that they almost don't influence rent prices. Above if you take into account that many properties don't change hands for long periods, and often their "valuation" by the State (to determine property tax) does not reflect market price. I think there may be indeed such a direct flow in countries with high property taxes, but the most significant mechanism in the flow between real estate and inflation imo is indirect, and that's why we can have several years with low CPI but high property increases.

Agree with your other statements in that post.

Energy shocks and supply disruptions were clearly major drivers especially in a country like europe. But I think where I'll disagree slightly is that I saw the COVID era monetary expansion as an amplifier since without it inflation would likely still have happened like it always had but kinda with lower peaks and shorter duration.

I don't know where the disagreement is here, as I think I wrote something very similar (I also agree with your post up to this point, basically you confirmed most of my points.)

Based on some country's economy, when official money fails people don’t stop transacting instead they kinda reroute around the currency using trade by barter or foreign money and sometimes informal credit. These systems are inefficient and unstable but I believe they challenge the idea that deflation automatically causes economic paralysis..

I believe in the cryptocurrency-informed era we're living in, we can find mechanisms to fight these "inefficiencies" and "instabilities". For example, the Argentine Crédito system collapsed eventually because it could not handle the massive growth followed by a recovery of the formal economy which led to a decrease of activity in the barter markets as people recovered jobs and formal income. Stablecoins like Dai have proven that there are ways to manage growth without the value of the base currency having to be unstable, and similar systems could be imagined in a deflationary economy: for example, a Dai-like system bound to a resource based largely on human work, for example agricultural commodities.

[Ambatman]

This was actually one of the disagreements in my discussion with @satofan44. I believe inflation can be controlled, but it can also get out of control. Thus the OP says out-of-control development "often happens in practice".

It is relatively controllable because it was man made and is been compared to deflation which is losing already to debt.
Control interest rate which is tied to the debt they created and effect start showing in inflation.
Even the said control comes at a cost, recession as can be seen with Paul Volcher

But cryptocurrencies actually provide the tools to improve such a situation. Innovative companies which are too small to start a traditional IPO can recur to the ICO mechanism to obtain financing: simply issuing a crypto-asset which is then used to raise money

I just got the time to read your post and there are something's I would like to share.
If I'm not mistaken you talking about equity financing which doesn't necessarily require cryptocurrency
Most ICOs are still usually considered equity by SEC and
It would be effective here
With deflation creating capital the problem is psychological
There are investments opportunity to buy future products but majority don't want to part with cash
Either because the returns has to outweigh what they would get from holding
Or that they would need cash to cater for needs.

Instead of raising money as capital, in times of recession and liquidity problems, companies can raise "smart property based tokens", based on goods, resources (e.g. real estate) and services other companies and people offer.

Imagine everyone holding their breaths and the solution is creating another air.
But the problem is people are refusing to breathe.

I saw the COVID era monetary expansion as an amplifier since without it inflation would likely still have happened like it always had but kinda with lower peaks and shorter duration.

It's harder to control inflation that comes as a result of supply shock like in the case of the pandemic.
They are usually about scarcity and you can't policy scarcity away in the short run with monetary policy.

[Satofan44]

Actually, it can be even direct. People tend overlook that many countries have property tax.

In many countries property taxes are so low that they almost don't influence rent prices. Above if you take into account that many properties don't change hands for long periods, and often their "valuation" by the State (to determine property tax) does not reflect market price. I think there may be indeed such a direct flow in countries with high property taxes, but the most significant mechanism in the flow between real estate and inflation imo is indirect, and that's why we can have several years with low CPI but high property increases.

This is why I wrote it can and didn't try to argue that this is the strongest effect, but merely explained how it happens. While it most cases the valuations will lag behind, it does not change that it has an impact and it will have an even bigger impact when these values are eventually updated. There are different models, some use old reference values, some use self declared values and others use the fair market value. Take a look at this, property taxes have a very wide range. Here are some sources:

https://belonghome.com/blog/property-taxes-by-state.
https://en.wikipedia.org/wiki/Property_tax_in_the_United_States

So how is the value determined in the highest listed state there, New Jersey which has a property tax-rate of 2.33% (according to the not so credibly looking website)?

The standard measure of property value is "true value" or market value, that is, what a willing, knowledgeable buyer would pay a willing, knowledgeable seller on the open market at a bona fide sale as of the statutory October 1 pretax year assessment date. The value of qualified farmland is based upon its productive capabilities when devoted to agricultural or horticultural uses.
https://www.nj.gov/njbonds/treasury/taxation/lpt/genlpt.shtml

This means that the value to be paid should be close to the market value, but of course it is going to lag sometimes as they are not going to reassess each property each year.  According to one source, on average they come pretty close to the actual market value:

The equalization ratio in Jersey City was 82.91% in 2022.  This means that in Jersey City in 2022, on average, assessed values were only 82.91% of market values.
https://civicparent.org/2023/03/24/property-tax-local-budgets-part-2b-two-ways-to-evaluate-assessed-value-for-tax-fairness-revisiting-property-tax-appeals-math-implied-market-value/

Therefore just do the math on a home that is worth $500k. To calculate the yearly property tax, I used the equalization rate to discount the market value of the house by 17.1% to an expected assessed valuation to get an average price of $414.5k.

Yearly property tax: 2.33% of $414.5k gives $9.6k.
Minimum rent needed just to cover property tax: $800 per month.

The example is a bit simplified and how much tax will be collected depends on a lot of things, but they are not relevant to this topic or this sub discussion. As you can see, these things can and do have a significant direct impact on rents in some environments.

[abhiseshakana]

Inflation can be complex, and there are different kinds of inflation that it true. However, here we are focused on monetary inflation. How much printing is going to cause inflation depends on a variety of things, but it is always inflating that is not disputable. Why? Even if after printing you only have a small inflation rate of 0.1% that probably means that without printing you would have some deflation. So regardless of what the final number for inflation comes out as (small or high %), monetary printing is always inflationary.

Your opinion makes sense, even though it negates the positive role of inflation. A more accurate description of inflation, in my opinion, is that printing money creates inflation if it pushes demand beyond production capacity. Otherwise, it's neutral and sometimes even necessary to mitigate economic contraction.

In other words, the top 5% but mostly the top 1% or 0.1% of people. Therefore, the case against monetary inflation could be made solely based off of this. On the last point I agree but it does not apply to people who don't have a variety of incomes and cashflows. If you don't, then the value reduction in the debt is offset by your increasing costs elsewhere. Unless you have very large debt as an individual, you are more likely going to be losing more value overall.

Agree ... It's too scary and not on my agenda and financial plan to have debt on purpose, let alone have large debt for any reason.

There has not been a time in history where QE didn't cause inflation. Nevertheless, when I talk about consumption in the thread I am not talking about consumption as a result of QE but as a result of living in a inflationary environment -- where people are encouraged or basically brainwashed towards consumption. The situation can be really bad, it depends on how much examples of individuals you know and how much data you have on this.

This is where our thinking differs. I actually see human greed as the cause of normalized inflation in this era. Overconsumption behavior is formed from advertising, credit and social pressure which I think is still often found in conditions of low inflation.

I still see post 2008 QE in the US, Japan, and Europe as not resulting in commodity price inflation. I believe asset inflation and general inflation are different categories.

Then in this case you didn't understand the argument. This distinction, in my view, is that the blame can be shifted towards commercial banks when needed. However, since printing in M2 is not possible without M0 expansion and the rules for M2 are decided by the central bank -- then it all comes down to the central bank, they are fully responsible for all printing that occurs due to their setup. If central banks allowed private people to print $100k USD per year, who would be responsible for the resulting inflation that comes out of it? The humans that are printing or the central bank for creating this policy? Of course, the central bank!

If you view MO as an absolute requirement for inflation without including the gap for sufficient cause, I won't argue. Because often in decision-making, the analogy is that I avoid alleys that have holes even though I can avoid them because I consider the x factors that might arise during the journey.

You need to look into the years before the Great Depression, before the stock market collapsed and not after. There you will find the causes that triggered the stock market collapse, and the wider deflation.

I agree that anything extreme is destructive, but the Great Depression is an example of the destruction of a credit system in a sharply deflationary environment.

If inflation distributes losses, it does so in a disproportionate way. This means that it hurts the average people much more than it does the rich or those that caused the situation to develop this way anyway. How is this a good thing, how could you argue for this?

What burdens the middle and lower classes is the exploitation of low wages relative to productivity, the lack of a social safety net, and high consumer debt. Inflation remains the primary cause. In my opinion, in a situation of deflation, whether inflation or deflation, the lower-income groups are still the most affected.

Yes ironically, in most cases mainstream economics uses spiraling deflation as an argument against any deflation. Historically we know that hyperinflation happens relatively frequently, and it does through monetary inflation. The risk is real, even if many countries have not yet had episodes of this. You need to give time. It does not mean that there is a necessary causal relationship between printing and hyperinflation -- that is, that it must always happen under a specific time frame. Currencies historically always collapse for a variety of reasons, but one big reason is giving absolute printing power to someone.

Yes, hyperinflation does occur frequently, and it doesn't occur in isolation. It's always accompanied by political conflict, fiscal crises, and falling production, not just money printing. I think your generalization is too extreme, assuming monetary expansion always ends in hyperinflation.

The value loss and the loss of the middle class in this period is extreme. While it did not spiral into hyperinflation, the negative effects are unquestionable.

When low inflation does not guarantee prosperity, in other words inflation is not the root of the problem, but rather the distribution and structure of the economy, not monetary policy.

[WillyAp]

In a perfect world inflation would be around 0.5 % a little surplus when more kids get born than people die.
As all figures only get clear after the events, a little surplus is healthy. And we don't live in a perfect world,far from it.

Not healthy is playing with inflation, deflation, recession and devaluations for means to become more competitive.
All states do it, Inflation in the EU is much higher if you just count items of 1st necessity. 

[Satofan44]

Sorry, I can't in good faith answer you any more. I am disappointed with your use with AI, I have said this to d5000 privately when it was discovered. I was not really expecting that, even if for most users it is obvious. Please reconsider your ways. I prefer broken, real English over polished AI and fake stuff (writing on a level that is not representative of your skills is dishonest to me). Do not reply to this here, I limited my response so that we don't go off-topic. You can reply where it was exposed or start your own reputation thread if you really want to, but there is no need unless someone gives you a tag.

In a perfect world inflation would be around 0.5 % a little surplus when more kids get born than people die.

See, if we could keep inflation at 0.5% and do so consistently then I would not mind it compared to the current system of abusive manipulation that we have. Still, this does not explore the question whether that is needed at all. We are so programmed to believe that inflation must be the answer that we often fail to look at alternatives. The economies of the current world really need some outside of the box thinking, but unfortunately pretty much every major universities has become dogmatic. They are not interested in alternative ideas, especially if those ideas destroy the status quo.

Not healthy is playing with inflation, deflation, recession and devaluations for means to become more competitive.
All states do it, Inflation in the EU is much higher if you just count items of 1st necessity. 

The question is should the central bank or anyone have power of the printer. As you can see with Bitcoin, it is best if it is preprogrammed and if nobody can alter it. Just imagine if this was not so and redo the Bitcoin history with this in mind. The supply would have been changed and manipulated many times for the gain of many different powers. Every abuser has their own messed up justification, but not a single abuser has a valid reason to change the money supply.