/biz/ - Business & Finance

Updating with more money-thots to keep the thread alive.

>>18202976
There isnt a direct relationship between the M1 monetary base and the amount of inflation, thats a common misconception.

If you wanna understand money study MMT, watch warren mosler on youtube

>>18202976
To expand on my original post:

My colleague argues that it's perfectly fine for the government to incentivise spending by making currency depreciate in value over time. Yes, he's left-wing, how did you know? Anyway. I'm struggling to put my thoughts together about why constant inflation is a bad thing.

Okay, so you have a monetary system with $100. You create another $10 to pay someone, so that they build a road for everyone to use. Everyone's money is now effectively worth 10% less. Prices for everyday items increase 10%. Let's say that your wages also increase by 10%. Everything is okay.

Yet, in that time, you've managed to conjure up a new road, seemingly from nothing.

Where am I going wrong here? I know I must be.

>>18203145
Can you expand on this point a bit please?

>>18202976
ill play.
why havent you brought up wages? If money becomes in unlimited supply, and wages dont increase, then the price of goods increases while the amount people have to spend stays the same.

also you two are talking about supply and demand of currency, demand is how much people have/want to spend, and supply is the supply of money. if supply goes up, and demand is the same or smaller (because of the shutdown and unemployment and businesses going under) then the price of goods rise and the value of the dollar drops.

the fed printing money is bad for mostly other reasons, if the fed buys Mortgage backed securities, that drives the rates up on those combine that with a cut fed reference rate and that means refinances and new mortgages are causing morgage owners to LOSE money and risk defaulting. Combine that with the impending rent strike and you have a house of cards similar to 2008.
read this
>https://www.reddit.com/r/wallstreetbets/comments/friwc9/mortgage_servicing_crisis_explained/

>>18203040
lol ew, I feel gross just touching goybux with my bare hands

>>18203276
Lets imagine that wages increase in perfect unison with inflation. What then? Obviously if they don't that's an immediate issue.

>[ if supply goes up and demand is the same then the value of the dollar drops ]
When would demand ever increase, though, without the government incentivising spending by depreciating the currency?

Thanks for the link.

>>1820319
yes, ill expand
YOU HAVE TO STOP THINKING IN TERMS OF STUPID NUMBERS AND THINK IN TERMS OF REAL WEALTH.

What matters is the amount of "wealth" in the nation,
case 1) people get fired because of corona and dont work any job for 10 months, no real wealth gets created
case 2) government prints money and hores those people to build things, real wealth is created.

In case 2, more real wealth has been created, so, in real terms, the nation is better off. Thats all that matters.

Now, will your mcBurger cost 1$ or 100$? Thats mostly irrelevant, its just a unit of account. If the fed decides to 100x everyones bank account, prices will just 100x, so the effect is zero. What they can do when printing money is choosing where the money is distributed, so they can redistribute savings. Eg, if the fed prints and puts it all in the stock market, then only people who own stocks will see their assets inflating.

Generic inflation, applied to most assets at the same time, is basically a tax on lazy people that keep their money parked somewhere, while it benefits people who actually build things and create wealth.
So yea at least some percent of inflation is always desirable.
The 0.1%ers of course dont want inflation, they want to keep controlling a huge share of wealth without producing anything, so they push for the idea that inflation is bad through control of media and education.

>>18203480
>real wealth is tangible, not stored in currency
I agree. But if people are using that currency to transfer items of wealth (physical, tangible goods) then isn't fucking around with the currency a problem?

>generic inflation is a tax on lazy people
Hahahah, this is an interesting take. Can those people not choose to save up, so as to put a deposit down on a house or something?

>>18202976

It depends on what you define as possible. At some point the values of computers won't be able to hold the price of bread properly. Will people still work for fiat only to lose their wages 5 minutes after? Hyperinflation is not a failure of inflation itself, it's that people become unwilling to exchange goods and services for fiat. It's no longer a store of value.

You can have 5 trillion dollar bread, but you can't have bread go up from 5 to 5 trillion in a matter of weeks.

>>18203933
Sure, if the rate of inflation is too high then it doesn't work. People have no idea if their money will still buy bread after a week. But say a slower, permanent, stable increase of 2% year-on-year. What about that?

(pretty sure that's what Bank of England aims for)

>>18203997

It works until people realize what's happening. Most people are bad at math. Until enough time has passed and they educate their children better. Then the usury jews get kicked out of the country again. This cycle has repeated hundreds of times and around 600 fiat currencies have failed thus far, while none have succeeded in lasting longer than roughly 250 years.

>>18202976
Realistically no.
It is "theoretically" possible as long as you have zero interest loans as well as flexible payments. However you do not have that because it would not make sense for the lender to do this as they would not be making money off lending.
Notice that much of the money is a LOAN https://www.visualcapitalist.com/the-anatomy-of-the-2-trillion-covid-19-stimulus-bill/ not a hand out. The handout they are doing (the 1200 dollars to individuals) is going to be made up for with loans from future government budgets and spending bills.
It is important to understand that when they say "print money" what they are really doing is adding credit.
The current state of the market is that you are on a train. In order to make sure it doesn't go off the rails you keep borrowing money to make sure it doesn't go off the rails.

Eventually a bubble will pop somehow someway. For example student loan debt. Eventually getting a degree to work at McDonalds will not be possible because they cannot make the payments on the loan they had to get that degree. This means that McDonalds (or whatever company) will have to adjust its wages to its employees, which then causes a domino effect of everyone suddenly unable to pay their loans.

What I am really trying to say is that the growth cannot "stop", but inevitably it will. It will stop when suddenly an industry or individuals cannot make payments. This will cause a domino effect in that other industries and individuals cannot make payments. At that point in time when you try to print more money to take care of debts that aren't paid you will cause hyper inflation meaning that bread is now worth 1 trillion billion dollars while people are still making normal salaries.

Posting more women to bump the thread.

>>18204059
I was going to bring out the "no fiat currencies have ever survived long-term" card, but I wasn't angling to go down that route. My question is *IF* they are inherently a bad thing, or whether it's the greed of people that control them that's the problem.

But then on the other hand. nothing exists in a vacuum - can you have one without the other?

there is a connection between wages and inflation too. what really matters is how much money is around for the common people to spend.

after 2008 only real estate and stocks inflated because the money never reached the common people.
this time could be different because at one point you just cant inflate further because people cant spend all their money on housing

>>18203997
>But say a slower, permanent, stable increase of 2% year-on-year
https://www.youtube.com/watch?v=sI1C9DyIi_8
Please watch this. I know it's an hour long, but a 2% yearly growth is HUGE. Any type of growth is bad and will inevitably lead to a collapse, which is why economies cannot be modeled on forever growth.
At 2% per year the economy doubles in 35 years.

>>18204345
>Any type of growth is bad
Can you crystallise why this is? This is the pivotal question here.

Thanks for the link, I'll check it out. Just looking at some Mosler vids

>>18203407
demand would increase if people made more money relative to the cost of living.

>>18204366
I'm saying that in reference to forever growth. Growth is good as long as you eventually have a Decline in your economy to match that growth. Fast Times vs Slow Times.
If you grow forever using inflation under realistic circumstances (no negative or zero interest rate and no flexible lending lengths) then eventually a collapse will happen as detailed here >>18204257
Eventually a loan will not be able to be paid back causing other loans to not be paid back and then suddenly hyper inflation and breadlines.

>>18204415
>suddenly an industry or individuals cannot make payments
>>18204257
>Eventually a loan will not be able to be paid back
Why would this ever happen though -- what causes this tipping point? Does the mere fact of charging interest on loans create this problem, or is it related to the fiat system itself?

I didn't mention; but in the original discussion with my colleague I argued that fiat can be useful, provided it's used correctly. AKA, periods of inflation *followed by periods of deflation* to keep it in check. You seem to agree on this point.

>>18204257
>Notice that much of the money is a LOAN https://www.visualcapitalist.com/the-anatomy-of-the-2-trillion-covid-19-stimulus-bill/

Wait, that isn't quite right. The $350B to small businesses is a forgivable loan provided they use the "loan" on payroll, rent, and utilities -- if they use it for those things, the loan gets forgiven as a grant (except for interest costs on the loan, which are capped at 4%).

The result is going to end in hyper inflation. Not necessarily just this 2trillion, but our government has bipartisan policy of tacking on trillions to our national debt like it’s no big deal. We’ve been kicking the can for a long time. What we do have on our side is that the Dollar is a world reserve currency. Our economy has been getting inflated by bubble after bubble after bubble. Now they’re adding 2 trillion. Fed promised 4 trillion. And Trump is already talking about another 2trillion for an infrastructure bill. The money gets put into the world and goes somewhere. Where did it go after the Great Recession? Stocks. You see how high the prices were just a month or two ago? And housing. But this party cannot and will not last forever. Buy gold :^)

>>18204509
USA is paying $479 Billion on interest for their debt in the current fiscal year. That money can be better on so many things.

>>18202976
>My argument is that this will devalue the dollar.
It won't because the way the system is currently set up is that in the future budget, more loans will be taken out in order to pay for that hand out that was given (the 1200 dollars).
https://www.thebalance.com/interest-on-the-national-debt-4119024
The government is taking more debt to pay off its existing debt and its interest rate.
Eventually the system will collapse and that is when the dollar will be devalued in a huge amount overnight.

>>18204520
The loan will be paid somehow if it is forgiven. If the SB is not paying the loan, then that will be payed in the next budget by the government.

>>18204509
>what causes this tipping point?
There are lots of examples to use, but in this one I use student debt.
Because of Growth, every year colleges increase tuition prices. This is a real thing.
Samantha takes out a loan of $1,000,000 dollars in order to get a job at McDonalds. The payments on this loan are $10,000 per month. McDonalds only pays $9,000 dollars a month. Each year 3 million people graduate college. For this graduating class they now must make payments. Because this is the
>tipping point
This will cause one of two things.
McDonalds will have to increase its pay at a rapid rate. McDonalds can't do that because infinite growth has caused them to take on massive loans for new products, new buildings, etc. This is a real thing in that most businesses are operating off mountains of debt.
The other thing that can happen is that Samantha and the 3 million others, don't pay the loan, causing a collapse of lenders.
If McDonalds increases their pay they will be unable to pay their debts.
So either way you will end up in a situation where loans cannot be paid.
This will domino things into other industries unable to pay their loans.
The end result is that the government must take out a massive amount of money in order to cover these unpaid loans, which causes hyper inflation and bread lines.

>>18204599
"this will cause huge amounts of inflation" was my gut reaction. I'm yet to figure out exactly the implications of >>18203480 and >>18203276 however. I'm still struggling to wrap my head around the "this is okay" argument.

>>18204720
>[it won't] devalue the dollar
>the dollar will be devalued in a huge amount overnight
So you think there will just be a sudden crash, then - rather than a gradual change?

>>18204720
In this scenario, wouldn't McDonalds also increase the price of their burgers to make up the difference?

>>18204509
>Fiat Systems
IMO Fiat Systems are perfectly fine. I think its a redherring that it must be attached to something or that using gold or crypto is somehow better.
A burger can cost 2 dollars, 2 gold coins, or 2 btc, but at the end of the day the cost is determined by the market.
The problem most people have with Fiat Systems is that its rife with abuse, not the fiat itself. You can't magically create gold coins or crypto. If you disallowed fiat to be generated and created as credit it would be fine.

>>18204783
>So you think there will just be a sudden crash, then - rather than a gradual change?
Correct. The infinite growth of 2% won't match a crash of 3%. That's why you always need forever growth in the current system, you always need to be 1 step ahead of any contractions in order to stop the train from derailing.

>>18204783
>wouldn't McDonalds also increase the price of their burgers
Keep in mind I'm using McDonalds as the placeholder of the service industry. If McDonalds increases the price of the burgers then people won't buy as many. Demand won't meet the price and some will stay home. What I'm really saying is that they would lose business by increasing prices assuming that they've done their own price point analysis.

>>18205034
>If McDonalds increases the price of the burgers then people won't buy as many
But if people have more money to spend, if the wage increase tracks inflation, why would they not?

>If you disallowed fiat to be generated and created as credit it would be fine
Isn't that (strictly in theory) one of it's most useful traits? Expand the supply when needed, contract afterward?

>>18205080
>if the wage increase tracks inflation
Wages are "keeping up" with inflation (even that is debatable), but not growth. I think most people including myself want this to happen, but it doesnt. Theoretically it would work, but I'm talking about realistic scenarios.
https://www.epi.org/nominal-wage-tracker/
Check this chart out. Assuming a 3% growth, people should be making more, but they are not.

I can only speak for myself, but I've never seen a wage increase for inflation except from the government. Most people are given a salary or hourly rate and then they keep that for many years until they move to a different position at higher pay.

>>18205080
I would say that the ability to be manipulated and abused is a bad trait to have.
The real useful trait in my opinion is that the fiat can never be "lost". If you have 1 million in circulation and 50,000 is lost, then you can always print that 50,000.
If Gold is lost you can't print more gold, same as BTC.

>>18205312
>wages are "keeping up" with inflation but not growth
Can you explain difference between inflation and growth in this sense?

>I've never seen a wage increase for inflation except from the government
I think this applies to a majority of people. I'm very bullish about salary with my employer, but it can only get you so far.

>>18203197
That road has been paid by bringing money forward in time.

Money comes from productivity, you’ve bought $10 that would have been productivity forward (let’s say) 1 year. So when we get to next year, there’s no productivity to pay bills then.

>>18202976
NEXT 10year INFLATION AVG? What is your prediction?

>>18205312
>Starting at 2008
>EPI
Both those aren’t great places to start.

>>18202976
yes infinite slavery is completely possible.

So much whinging in here about how the system would be better without inflation. Sure, it might work, until the neighboring big dick country intelligently riding debt leverage massively outproduces you militarily and technologically, seizing control over everything that matters and turning your magical deflationary paradise into an insignificant backwater.

Inflation is a product of competition. The economy does not exist in a vacuum, never forget that it is just a means to an end

>>18202976
no, obviously, infinite inflation doesnt work on a finite planet
you'll also run out of numbers

>>18207348
Maybe 5%? Unsure. I'm only just started with learning about all this.

>>18207785
>intelligently riding debt leverage
Expand on this pls?

>>18208586
This is my gut feeling. How do we slow down the infinite growth and inflation train, though?

>>18204783
this is okay argument means that the system that was created in response to the 2008 crash, was to provide liquidity to banks to prevent insolvency. It is okay to keep going but only in a short term, to keep it going prevents the market from being efficient and the assumption that the market is efficient is the basis of almost all financial structure. So the longer this goes on, the more risky the assets become.

>>18203197
you have just robbed everyone of 10% of their purchasing power to pay for said road. Prices of everything increase eventually to accommodate this.

>>18208735
How do you contend with >>18203480?
The argument being (I think I'm paraphrasing correctly): "sure: everyone is slightly poorer in terms of purchasing power - but the overall wealth of the country is greater"?

>>18208674
Op the truth is that everyone only has theories. There is no objective truth in macroeconomics.

They said they had a plan to wind down QE and normalize rates. Clearly they did not. They will say that there is a plan to wind this back. I suspect there is not plan. All we can do is lay our bets and hope that we are right. Positions speak so much louder than opinions. If anyone truly had insights about what will happen in the future, they'd have infinite money. Since no one does, it's reasonable to dismiss them.

>>18208889
wealth bro is missing the point. If there is an increase in wealth, but only certain people see that wealth, the average value of the dollar decreases.

>>18208674
I was trying to get everyone’s answer, but thanks. I’ll start my own thread I guess. You might want to check out the Zimbabwe dollar. They just start cutting off zeros eventually.

>>18208946
Believe me I fully understand your point of view. I'm just playing devils advocate to try and figure out the other guy's perspective.

Is there an inherent value in a nation that creates and produces things? I'm inclined to say yes. I started a long discussion on /pol/ last night asking if America could be where it is today without the utility of fiat.

>>18208972
Aye I'm aware of the mess that happened in Zimbabwe. My friend is Polish; he brought up what happened to the national currency, 'złoty', after WWII. Effectively the same thing - they knocked off some zeroes.

>>18209044
Gotcha :) love it.

I think to add to your thoughts that it is beneficial to generate wealth of a nation, it brings more money into the nation from an international perspective which counteracts the "inflation" incurred.

>>18204720
why do you need a degree for Mc Donalds at all?

>>18209044
Right, I don’t think inflation itself really matters. A zero rate over a hundred years or a 2000% rate is pretty much the same as long as it is predictable. Like cash in hand is different, but who just stuffs it in a mattress. A bank is going to giving a savings rate based on the inflation rate. It’s all the same in the end.

>>18209232
Degree inflation.

>>18209386
>I don’t think inflation itself really matters
What is your counter-argument to
>"If there is an increase in wealth [..] the average value of the dollar decreases"? (>>18208946)

>>18209620
Decreases? If there is more stuff, but the same number of dollars, then each dollar can buy more stuff. That's deflation.
What does wealth distribution have to do with it? People with a lot of cash or time like deflation, others don't.