Is deflation truly that bad for an economy? - page 18.

deisik

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Quote from: johnyj on March 20, 2015, 07:38:42 PM

Quote from: tee-rex on March 20, 2015, 05:52:16 AM

You say that most of the people had been robbed off of their wealth long before the bubble burst, but this alone would immediately cause the instantaneous collapse of the bubble (right after people had lost their wealth), since the bubble can only exist as long as new money is flowing in it, and in ever increasing amounts at that.

The bubble only collapse when people find out that their wealth on paper start to drop, and they rush to sell it. As long as that paper wealth is rising or keep flat, people will just hold into it or buy more, thus the sell pressure on market is not enough to trigger a downfall, however those who drove the bubble has already cashed out long before the crash, because they know in advance, when they stop injecting more credit into the market, the bubble will burst inevitably

How can they buy more if by that time they had long been stripped of their wealth (as you said earlier)? Also, if they had been robbed off of their wealth, wouldn't it be natural that they would try to cash out immediately, thus causing the bubble to pop? Your arguments lack a proper timing between events (namely, complete stripping of wealth and bubble collapse), thereby rendering you whole point dubious (that withdrawing of all fiat from an economy won't stall or crash it)...

V for Varoufakis

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Yes dinofelis. They are both scams. Money supply should be controled by M=PQ/V or M=kPY (Cambridge equation). https://en.wikipedia.org/wiki/Cambridge_equation.

deisik

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Quote from: johnyj on March 20, 2015, 07:49:56 PM

Quote from: deisik on March 20, 2015, 05:01:06 PM

Wealth is not money

This is the common statement trying to hide the truth. Money is wealth, and it is the most liquid form of wealth, because it can exchange any kind of wealth at any time, anywhere (Domestically)

Those who claim that money is not wealth are usually banks, since they don't want others to be suspicious about the fact that they create wealth by just writing numbers and printing. If money is not wealth, then their money creation seems not a big deal

Do you really believe that "it can exchange any kind of wealth at any time, anywhere"? It is certainly a far cry from reality. Say, you have a home (where you live and which you love for its uniqueness), and someone suggests you sell it, and gives a higher price than the average on the market for that type of house at that. Would you sell it? There are a lot of things that can be bought and sold, but which people may not want to sell for whatever reason and whatever money...

And I don't even say about things that are commonly considered as wealth of top quality, but simply not for sale (in fact, being more valuable than money itself)

dinofelis

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Quote from: alani123 on March 20, 2015, 08:25:34 PM

Quote from: V for Varoufakis on March 20, 2015, 02:35:29 PM

The return to gold standard is propaganda. According to the laws of economics, the amount of banknotes in circulation, must correspond to the quantity of goods and services in the market. So, deflation and inflation are always bad for an economy.

Germany, one of the biggest and supposedly stable economies in Europe has one of the biggest gold reserves in the world. This happens while they're part of a monetary union. They're not the only ones that control the rate of money printing within this union.

China has also increased the rates it imports gold. While I agree with you that it's unlikely for a gold standard to return, gold is still held as a reserve globally.

I don't think that the amount of gold held by a central bank has anything to do with the currency they emit. It is just that a central bank, which can emit a currency, can also use that currency to manipulate markets: it doesn't cost them anything because they can print the money to buy in the market.
Central banks usually want to manipulate the markets of other stores of value, such as gold, to make people loose money in it (except for their friends). Bitcoin will, if it is big enough, also be manipulated by central banks.
The essential reason for central banks to manipulate other stores of value is to make them more volatile and hence less attractive as store of value, and keep people from using them in general instead of their printed money.
This is why they pump and dump regularly the gold and silver market for instance.

It has nothing to do with "keeping reserves" (for what ?), but is sold to the public that way.

Central banks want people to use their money, also as store of value. They need to destroy confidence in all other forms of store of value.

dinofelis

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Quote from: V for Varoufakis on March 20, 2015, 08:42:39 PM

The gold standard (fixed supply) and the inflationary banking fiat system, violate the quantity theory of money (M=PQ/V), the most important law in economics. Both are scams.

That's a bit like "the moon and Mars violate Newton's law of gravity ; both are scams", no ?

The quantity theory of money cannot be violated because it is tautological: both sides express the price of what has been bought during a certain time with a certain monetary asset. On one side it is the total price of sold stuff (P x Q), on the other side it is the total amount of money paid for it (M x V). Both are tautologically equal: what you pay for it, is the price of it. So the equation can only be valid.

If 1 million dollars is spend buying stuff, then the price of what has been bought is 1 million dollars, and the amount spent on it is 1 million dollars, right ?

V for Varoufakis

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The gold standard (fixed supply) and the inflationary banking fiat system, violate the quantity theory of money (M=PQ/V), the most important law in economics. Both are scams.

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Quote from: V for Varoufakis on March 20, 2015, 08:25:18 PM

Quote from: johnyj on March 20, 2015, 07:57:28 PM

Quote from: V for Varoufakis on March 20, 2015, 02:35:29 PM

The return to gold standard is propaganda. According to the laws of economics, the amount of banknotes in circulation, must correspond to the quantity of goods and services in the market. So, deflation and inflation are always bad for an economy.

According to this law, the amount of USD in circulation has increased 5x since 2008, so we should have 5x more goods and services in the market, which is not true

Or, I can create trillions of USD as I want but put all of them in my own account, so that the amount of banknotes in circulation correspond to the quantity of goods and services in the market

I believe this law of economics: In a free market, anything with exchange value, including money, must have a production cost close to its face value, otherwise it is a scam

You said exactly the opposite! You said: the quantity of goods and services must correspond to the amount of banknotes! lol lol !!

When did I say that? I think quantity of goods and services has nothing to do with banknotes

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Quote from: V for Varoufakis on March 20, 2015, 02:35:29 PM

The return to gold standard is propaganda. According to the laws of economics, the amount of banknotes in circulation, must correspond to the quantity of goods and services in the market. So, deflation and inflation are always bad for an economy.

Germany, one of the biggest and supposedly stable economies in Europe has one of the biggest gold reserves in the world. This happens while they're part of a monetary union. They're not the only ones that control the rate of money printing within this union.

China has also increased the rates it imports gold. While I agree with you that it's unlikely for a gold standard to return, gold is still held as a reserve globally.

V for Varoufakis

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Quote from: johnyj on March 20, 2015, 07:57:28 PM

Quote from: V for Varoufakis on March 20, 2015, 02:35:29 PM

The return to gold standard is propaganda. According to the laws of economics, the amount of banknotes in circulation, must correspond to the quantity of goods and services in the market. So, deflation and inflation are always bad for an economy.

According to this law, the amount of USD in circulation has increased 5x since 2008, so we should have 5x more goods and services in the market, which is not true

Or, I can create trillions of USD as I want but put all of them in my own account, so that the amount of banknotes in circulation correspond to the quantity of goods and services in the market

I believe this law of economics: In a free market, anything with exchange value, including money, must have a production cost close to its face value, otherwise it is a scam

You said exactly the opposite! You said: the quantity of goods and services must correspond to the amount of banknotes! lol lol !!

EDIT: You "said"

johnyj

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Quote from: V for Varoufakis on March 20, 2015, 02:35:29 PM

The return to gold standard is propaganda. According to the laws of economics, the amount of banknotes in circulation, must correspond to the quantity of goods and services in the market. So, deflation and inflation are always bad for an economy.

According to this law, the amount of USD in circulation has increased 5x since 2008, so we should have 5x more goods and services in the market, which is not true

Or, I can create trillions of USD as I want but put all of them in my own account, so that the amount of banknotes in circulation correspond to the quantity of goods and services in the market

I believe this law of economics: In a free market, anything with exchange value, including money, must have a production cost close to its face value, otherwise it is a scam

johnyj

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Beyond Imagination

Quote from: deisik on March 20, 2015, 05:01:06 PM

Wealth is not money

This is the common statement trying to hide the truth. Money is wealth, and it is the most liquid form of wealth, because it can exchange any kind of wealth at any time, anywhere (Domestically)

Those who claim that money is not wealth are usually banks, since they don't want others to be suspicious about the fact that they create wealth by just writing numbers and printing. If money is not wealth, then their money creation seems not a big deal

johnyj

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Beyond Imagination

Quote from: tee-rex on March 20, 2015, 05:52:16 AM

You say that most of the people had been robbed off of their wealth long before the bubble burst, but this alone would immediately cause the instantaneous collapse of the bubble (right after people had lost their wealth), since the bubble can only exist as long as new money is flowing in it, and in ever increasing amounts at that.

The bubble only collapse when people find out that their wealth on paper start to drop, and they rush to sell it. As long as that paper wealth is rising or keep flat, people will just hold into it or buy more, thus the sell pressure on market is not enough to trigger a downfall, however those who drove the bubble has already cashed out long before the crash, because they know in advance, when they stop injecting more credit into the market, the bubble will burst inevitably

rax

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Quote from: johnyj on March 19, 2015, 11:39:03 AM

Quote from: roadbits on March 19, 2015, 11:01:49 AM

In a deflation,the people delay purchases. This reduces demand for goods and services, which means employers have to reduce production, which means they reduce wages or hours and lay off workers

From first look, it seems reasonable, but if you look long term, it is totally different: In a deflative environment, people will delay the consumption and accumulate large amount of savings, with that amount of savings, their financial health is better and better, thus the whole society is stronger. But in an inflative environment, people will borrow more and more, and ends up with huge load of debt that they struggle to pay back, that will impoverish the whole society and make majority of people heavily enslaved by the banking class

Obviously, banks don't want you to save more and more, thus they have to pay you more and more interest, they want you to borrow more and more so that you can pay them interest, that is the true reason behind the inflative monetary policy

Boomshot!

deisik

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Quote from: dinofelis on March 20, 2015, 05:28:52 PM

Quote from: deisik on March 20, 2015, 05:01:06 PM

Who's told you that? It seems that you are overestimating the value and buying potential of money. Different countries use different monies, and even with gold you won't be able to buy the whole world economy, since not all countries (let alone individual sellers) consider gold as money, and not all of the world economy is for sale in the first place...

Wealth is not money

... assuming for the example, gold being the only money of course.

The point was that it doesn't matter how much "money" there is, whatever it is. Price will adapt.

And by "the economy" I meant of course total aggregate demand (or offer).

Won't work. First, it is exactly supply, not demand, that matters here. Second, if sellers taken together (aggregate supply) want 10 kilos of gold for their goods but you have only 1 kilo, guess what will happen? You would evidently say that the prices will adapt (namely, the prices that sellers ask), but this is not what will actually occur. You will spend your only kilo of gold (since sellers won't sell below production costs en masse), and the remaining goods priced for other 9 kilos will not be sold...

dinofelis

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Quote from: deisik on March 20, 2015, 05:01:06 PM

Who's told you that? It seems that you are overestimating the value and buying potential of money. Different countries use different monies, and even with gold you won't be able to buy the whole world economy, since not all countries (let alone individual sellers) consider gold as money, and not all of the world economy is for sale in the first place...

Wealth is not money

... assuming for the example, gold being the only money of course.

The point was that it doesn't matter how much "money" there is, whatever it is. Price will adapt.

And by "the economy" I meant of course total aggregate demand (or offer).

deisik

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Quote from: dinofelis on March 20, 2015, 04:56:00 PM

Quote from: V for Varoufakis on March 20, 2015, 02:35:29 PM

According to the laws of economics, the amount of banknotes in circulation, must correspond to the quantity of goods and services in the market. So, deflation and inflation are always bad for an economy.

The amount of banknotes in circulation ALWAYS corresponds to what you buy with it

If there are less bank notes, then you can buy more with a single bank note. If there are more bank notes, then you can buy less with a single bank note. In the end, with all the bank notes, you can buy everything. No matter how many bank notes there are.

If there's 1 kg of gold in circulation, then that 1 kg of gold will buy the whole world economy. If there is 1 ton of gold in circulation, then that 1 ton will buy the whole world economy. In the latter case, you will be able to buy exactly 1000 times less with 1 kg than in the former case.

Who's told you that? It seems that you are overestimating the value and buying potential of money. Different countries use different monies, and even with gold you won't be able to buy the whole world economy, since not all countries (let alone individual sellers) consider gold as money, and not all of the world economy is for sale in the first place...

Wealth is not money

dinofelis

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Quote from: V for Varoufakis on March 20, 2015, 02:35:29 PM

According to the laws of economics, the amount of banknotes in circulation, must correspond to the quantity of goods and services in the market. So, deflation and inflation are always bad for an economy.

The amount of banknotes in circulation ALWAYS corresponds to what you buy with it

If there are less bank notes, then you can buy more with a single bank note. If there are more bank notes, then you can buy less with a single bank note. In the end, with all the bank notes, you can buy everything. No matter how many bank notes there are.

If there's 1 kg of gold in circulation, then that 1 kg of gold will buy the whole world economy. If there is 1 ton of gold in circulation, then that 1 ton will buy the whole world economy. In the latter case, you will be able to buy exactly 1000 times less with 1 kg than in the former case.

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yes

Quote from: V for Varoufakis on March 20, 2015, 02:35:29 PM

the laws of economics

Appeal to authority and no arguments?

V for Varoufakis

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The return to gold standard is propaganda. According to the laws of economics, the amount of banknotes in circulation, must correspond to the quantity of goods and services in the market. So, deflation and inflation are always bad for an economy.

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Quote from: Allurestorm on March 03, 2015, 09:07:24 PM

We are being told deflation is bad for our economies and this is used as excuse from our central banks to print more money and destroy our savings/currencies. What they say is that in a deflationary environment, the price of goods falls so people would not buy anything and would rather wait to buy in future, therefore slowing the economy. If so why smartphones sell like hot cakes?their price is falling and people are buying them actually because of that. Maybe because each time the price decreases customers feel like they are getting a good deal, therefore are prompted to buy!!
If our economies are not growing it means that there isn't much inflation pressure, so I don't see any reason to artificially induce inflation by destroying our currencies. I would like to know your view on that..also do you think bitcoins (deflationary) will see a wider adoption by retailers in future?

Nope its propaganda, deflation will increase purchasing power of people who can then spend more on stuff.

Yes people could hoard and some consumption will be decreased, however those consumption levels are not healthy anyway.

Resources are finite, people should not consume madly like nowadays do with this credit card scam system, and some businesses are not meant to operate. The financial speculative sector is like 40% of the GDP of any western nation, which is totally unproductive, it should be like 3-4%.

And besiedes the whole fractional reserve system that we have now is only fueling the global ponzi scheme of credit speculation, which is directly funded by your tax money and it is the collateral for it.

Thats why governments bail out banks from tax payer money because its the collateral for it. So its stupid when people protest about it, because it was set up this way from the beginning.

Topic: Is deflation truly that bad for an economy? - page 18. (Read 24916 times)