Your purchasing power depends on far more factors than simply making Snickers cost a nickel again. As tripperday pointed out consumers will delay purchases in anticipation of falling prices. This is a downward spiral which leads to further depressed prices. Banks can not function well when deflation happens because they will be unable to match, with an interest rate, the value of money's ability to grow on its own by simple hoarding. Even more, they will become much less likely to borrow money as they can just sit on the cash until they can afford a Cadillac with the same amount. In the current system of inflationary pressure which most economists, and not just the evil boogey men of the mainstream media think is the best scenario, taking a loan for a house is possible and advantageous to the borrower. If someone can afford to pay $800 a month on a thirty year mortgage in 2015, by the time that mortgage comes to fruition in 2045, $800 a month is nothing. The borrower is paying on principal that is essentially worth much less, but the bank is able to make the loan because they get their money at the beginning when it's still worth a lot. The consumer gets to own a house. Win/Win. In deflation, which you argue is a good thing, bread will cost less. And then your $800 mortgage payment will cripple you with its increased worth, but equal utility. It's the same house, but now you are paying a huge portion to the bank with dollars worth much more than they used to be. If you refinance, the bank is going to charge you to re-write the loan in recent dollars, and you'll go through the same process again and again. This will repeat itself over and over in every market where capital borrowing is necessary. But Snickers will cost a nickel again. So that's totally worth it. The best part of paying the same nominal amount for your mortgage payment, but with dollars worth more, is that your dollars can't go to something else. You don't get to buy a PS4 because you have to make your house payment. You don't get to buy anything with a long-term loan in deflation because you will eventually be losing your shirt everywhere. Those who do will negatively impact consumption with the cutbacks they make elsewhere. If you think that understanding how banks and economics work is trolling you, I invite you to go back to Reddit.
Falling prices being a problem is a common misconception. Electronics keep getting cheaper and better but people keep buying them anyway, which proves that it's not actually a problem. People buy whatever they want and can afford (and sometimes things they can't). But when prices are falling, then people will have more money left over for buying other things, which is good for, you know, the economy and all. What you're not seeing is that even saving money is good for the economy, because savings are capital that can be used for productive investments. Savings --> Capital --> Investment --> Production --> Wealth --> Purchasing Power --> Savings .. and the virtuous cycle repeats. Huh? What's this supposed to mean? What exactly do banks need to "match" and why? It's also interesting how you call saving money "hoarding" (just like you've been trained to), even despite what I showed above. It sure is evil of people to accumulate capital that can be used for investments that ultimately increase everyone's prosperity!! And getting more for your money is.. Bad? :D Look, we're not obligated to spend all of our money all the time. It's just that the beneficiaries of the current status quo really want us to do that, because maintaining the status quo even for a little longer is predicated on us doing that. But you're just spreading the misinformation they've given you. Whose problem is it if you don't want to buy a car? Or a house? Or a Snickers bar? Why would you be obligated to buy anything? You're constantly not buying countless things, and somehow the world survives just fine. Well, the bank will confiscate your house somehow long before paying your mortgage becomes "free" for you. Good luck suing them! Oh, and a loaf of bread will cost $500 or whatever. Yay inflation? What? The bank loses control of the money that's valuable in the beginning, and the reason they would go through with that is the expectation of a return on that investment in the future. But as a currency loses its value, so does the ROI. You're saying that's good for the bank? That's only a problem if there's a sudden, massive deflation. If you end up in deep shit because of deflation, it's unfortunate, but then you should have made better choices. On the plus side, everything else you need would be really really cheap, and your income might be even higher than when you took out the loan, so.. you wouldn't even be in trouble! What are you saying? If my purchasing power increases, then it's easier for me to afford that PS4. What's the problem? What's the "best part" about a non-existent problem? Are you just assuming my nominal income would go down correspondingly? Well, we've just established that it's you who's confused about economics. Not me. I'd invite you to think twice before engaging in snarky condescension.As tripperday pointed out consumers will delay purchases in anticipation of falling prices.
Banks can not function well when deflation happens because they will be unable to match, with an interest rate, the value of money's ability to grow on its own by simple hoarding.
Even more, they will become much less likely to borrow money as they can just sit on the cash until they can afford a Cadillac with the same amount.
If someone can afford to pay $800 a month on a thirty year mortgage in 2015, by the time that mortgage comes to fruition in 2045, $800 a month is nothing.
The borrower is paying on principal that is essentially worth much less, but the bank is able to make the loan because they get their money at the beginning when it's still worth a lot.
And then your $800 mortgage payment will cripple you with its increased worth, but equal utility. It's the same house, but now you are paying a huge portion to the bank with dollars worth much more than they used to be.
The best part of paying the same nominal amount for your mortgage payment, but with dollars worth more, is that your dollars can't go to something else. You don't get to buy a PS4 because you have to make your house payment.
If you think that understanding how banks and economics work is trolling you, I invite you to go back to Reddit.
Your fundamental misunderstanding of economic principles which have been explained to you in detail with examples is impressive. What is your economic background in terms of education? There are no respected economists who agree with you. There are many many respected economists who agree with me. I am well versed in these issues as I have an MBA and work in business analytics. What do you do that would give you an equal or even close education or experience?
So instead of addressing anything I said, you're comfortable with just calling me clueless? Way to debate things. It's been reasonably clear for a while now that you're a psychopath, so I'll just stop wasting my time playing your bullshit games.
Fine. I'll bite. I'm a sucker for this kind of thing. Depreciation of electronics is not equivalent to deflation. Electronics do not drop in price due to the increase of purchasing power that a buyer has, but due to improvements in manufacturing process, supply chain management, technological progress, and most of all competing technology which makes obsolescence the biggest factor in electronics depreciation. You can purchase a smart phone capable of all the world's computing power without wires because of incremental improvements, not because of deflation. People continue to buy these products because they get what is called utility from them. I don't keep my old phone because I want the new one. I want the new one because it does new things, or does old things better. The enjoyment and use that I get from this phone is called utility. People are not willing to wait to buy electronics if the utility that they would get from the new product is worth less than the money they would save by holding on to the old one. And people avoid electronics purchases due to improvements all the time. Example: "I broke my iPhone 5 screen. I could buy a new iPhone 5 screen and fix this one, or I could just wait for the 6 which comes out in a few months." They're not waiting due to price issues, or other factors. And they certainly aren't waiting due to deflationary pressure. Savings can produce a virtuous cycle. The question is whether or not that is a good investment. In inflationary times, if your interest rate is 3%, but inflation is 2%, then in real terms (real means inflation adjusted) you are not getting 3% back, but 1%. If I buy a house, and my interest rate is 4%, and inflation is 2%, then in real terms I am only paying 2% interest. In times of inflation, it can be better to purchase capital investments with borrowed money rather than hold cash. This causes people to purchase homes and other large but critical purchases. Home ownership accounts for nearly all the wealth in the middle class. It is the single largest factor in wealth, not income. In deflationary times all of this is backwards because it is in the interest of the renter and not the owner. You asked what I meant to make banks 'match' other investments. All investments, including savings, compete for investor dollars. If saving money in a mattress yields -2% due to inflation, the bank is a better bet even if it only offers 0% in real terms. If the stock market yields 5% then it can be a better investment. All investments compete with each other based on risk and reward. This is how the market decides how much an investor should receive. Getting more for your money is not bad. Getting more for your money is unlikely. Deflation does not just happen in a vacuum. There are reasons why deflation occurs and they heavily relate to consumer confidence. Consumer spending makes up over 71% of our economy. If even a small portion of this base holds off spending, it can really hurt the prospect for jobs, real wage growth, and economic prosperity. This causes businesses to lay people off, reduces the amount of money in the economy and continues deflation. The virtuous cycle is never going to happen. This will be a downward spiral. The Great Depression was not a boom time despite deflation. The US is a huge economic power because of inflation. If inflation gets to high, it will do the same thing as deflation and wreck the whole system. There is a delicate balance. The bank does not lose money in the housing deal by lending out money due to what is called amortization and interest. If a bank lends you 100,000 and you buy a house, the bank has to charge interest to make a profit. This profit will lose value due to inflation, but not in the same amount that the interest will accrue. They also head the inflation off at the pass by taking most of your mortgage payment and applying it not to the principal of the loan, but instead to the interest that the loan has accrued thus far. EVEN MORE SO, most banks that originate the loan sell off your mortgage immediately to someone for a guaranteed amount and stop worrying about the interest ever. I lend you 100,000. I sell the loan for 102,000. I've just made 2,000 risk free. The guy who I sold it to paid 102,000, but now has the rights to the interest accrued on the loan and takes the risk associate with originating a loan. You will not see banks offering home loans for 4% in times of 5% interest for these reasons; you simply can't make money. If inflation is out of hand, which is as bad a thing as deflation and is supposed to be controlled by the Federal Reserve Bank, interest rates would sky rocket, lending would become unsustainable, and growth would slow. In fact, this is why the Fed adjusts interest rates in the first place. They have to slow the slowdown and speed up the little recoveries that happen ALL THE TIME as part of the natural business cycle. Banks don't confiscate your house if you pay your bill. Your income will not be higher in times of deflation. That's ludicrous. As salaries become untenable for businesses they will renegotiate old employment contracts, fire those who won't and re-hire people who will work for the new normal. There are cost of living increases made in nearly every business sector, these would become cost of living decreases. Everything you have said shows a very basic understanding of the word deflation but not any real understanding of the systems which support it. Friedman, Feldstein, Bernancke, Hayek, Keynes, they all agree with me. No one agrees with you. We aren't psychopaths, we just actually understand the system better. These aren't games, and this isn't a debate, this is you being told that you don't adequately understand what you're talking about and someone taking the time of their day to stop you from spreading ignorance. You're welcome.
A change in tune, I see. It was certainly necessary to have any chance of getting me to respond again. But I don't feel like honestly addressing everything you've said, again, when your previous message was just a dose of poison and an appeal to authority. Try responding to this message again: - quote the points I made and address them directly, just like I've done with your messages. Then I may be motivated to respond again.
All of your points are very well refuted in my previous posts. I won't do the reading of my post for you. You're supposed to be an adult with adequate critical thinking skills and I expect you to understand how the points in your post which I have clearly referred to relate to the points in my post. If you can't do that then that's fine, but don't pretend that your points weren't discussed in a clear enough way for you to comprehend. It's all right there. I'll even give you an example. The bank does not lose money in the housing deal by lending out money due to what is called amortization and interest. If a bank lends you 100,000 and you buy a house, the bank has to charge interest to make a profit. This profit will lose value due to inflation, but not in the same amount that the interest will accrue. They also head the inflation off at the pass by taking most of your mortgage payment and applying it not to the principal of the loan, but instead to the interest that the loan has accrued thus far and interest the loan will ever accrue. EVEN MORE SO, most banks that originate the loan sell off your mortgage immediately to someone for a guaranteed amount and stop worrying about the interest ever. I lend you 100,000. I sell the loan for 102,000. I've just made 2,000 risk free. The guy who I sold it to paid 102,000, but now has the rights to the interest accrued on the loan and takes the risk associate with originating a loan. I have never 'changed my tune'. I'll even reiterate it for you: Your understanding of the economics of the situation is capricious and lacks basic understanding of the underlying systems that you are attempting to discuss. I am not okay with your attempt to argue your point with no basis in reality as if it is actually a fact. My 'appeal to authority' is not akin to me just accepting the 'hive mind' or my 'indoctrination into the corporate drone squad' or whatever dumb shit you guys are saying in this current generation of ignorant internet economic experts. My authority in this situation is the academic research which has been performed before you and I were born, the studies that I have performed of that research, and the actual experience of the world based on that research. Your authority is a gut feeling that you have that inflation is bad and deflation would make us richer. It's akin to religious fervor. Your economic understanding is equivalent to creationism. You are actively denying science because it doesn't agree with you. Like I said, this is not a debate. You have been wrong the whole time. It's like you asking me to debate you on why 2+2=5. And I did, because I believe that you can understand why you're wrong and learn. Looks like you're going to prove me wrong. But that's okay. Someone else will read these and see what you did and laugh at your mistakes and move on richer for the experience. That's okay with me.The borrower is paying on principal that is essentially worth much less, but the bank is able to make the loan because they get their money at the beginning when it's still worth a lot.
What? The bank loses control of the money that's valuable in the beginning, and the reason they would go through with that is the expectation of a return on that investment in the future. But as a currency loses ts value, so does the ROI. You're saying that's good for the bank?
Really now? You: Me: You: That does not constitute a refutation of anything. But it served as a distraction to keep me preoccupied while you proceeded to pretend to school me. You want me to dance to your tune. I get that a lot of what you're saying is actually accurate. But your latest responses are much wider in scope/context than the ones I responded to earlier. Now you've sprung your trap and revealed a much better understanding of what we were talking about than what you seemed to possess earlier. As an example: -Yes. Good point, and if you had brought that up when you made your original claim, my response would have been different. But you didn't. It's a neat trick to make me look bad, at least to anyone who doesn't go through the whole thread for context. Sure you have. It changed from the ad-hominem post to one where you actually discuss things (while of course spewing your psychopathic poison along the way). But at the very least I've now established that your claim of refuting all of my points is simply false. I haven't appealed to any authority whatsoever, especially not a "gut feeling". But nice sophistry again. So you're saying losing your purchasing power (~inflation) is not bad then? By the way, I haven't claimed that (price-)deflation would "make us richer", but just that it amounts to an increase in purchasing power.All of your points are very well refuted in my previous posts.
As tripperday pointed out consumers will delay purchases in anticipation of falling prices.
Falling prices being a problem is a common misconception. Electronics keep getting cheaper and better but people keep buying them anyway, which proves that it's not actually a problem.
Your fundamental misunderstanding of economic principles which have been explained to you in detail with examples is impressive.
EVEN MORE SO, most banks that originate the loan sell off your mortgage immediately to someone for a guaranteed amount and stop worrying about the interest ever
I have never 'changed my tune'.
Your authority is a gut feeling that you have that inflation is bad and deflation would make us richer.
Dude, trolls are gonna troll. Not that you need me to tell you at this point, but it's just not worth putting time, effort, and logic into it.
I already have him on mute, hush, and filter. I just love economics and discussing it. The math is fun to do, and someone else will read this, or not since it was for me anyway, and learn something. I like that. It's more of a thought exercise to debate these guys than anything. My favorite part is that he made up a dummy just to share his posts. That's excellent.
Hopefully you find it inviting here, then. We have a range of opinions from people who are pretty knowledgeable on econ, stretching from hippies like mk to fascists like wasoxygen, and everything in between. Edit: I guess I should point out that I'm being tongue-in-cheek (kind of). I don't want you to get the wrong idea.
I am happy to pretend at expertise while presenting the latest fascist intel, as long as I can dodge the flying mud. b_b, why did you have to link to that comment? I was liking shiranaihito up until I saw that. At least I learned something constructive I can do. I pledge, every day, to frown so hard upon racism. Won't you join me?
Feel free to tell me how anything I said there is inaccurate. Though I suspect you've got a certain condition in common with yellowoftops and b_b.. :pI was liking shiranaihito up until I saw that.
This was the sentence I found most egregious: Lots of awful things are frowned upon hard; that doesn't make them no longer a "factor" in causing harm. Otherwise, I liked what you had to say about wealth, the virtuous cycle of saving, and questioning pat answers about "sitting on money." b_b and I do share a habit of talking past each other and sometimes refusing to acknowledge when the other side makes good points. He's a commie, but he means well, and he rarely spouts absolute nonsense. yellowoftops appears to have sympathy for my fascist (?) tendencies.In reality, in the US for example, racism against black people is frowned upon so hard, that it's really not a factor in why they're not successful.
Do you think I was suggesting that the frowning itself somehow makes racism not a factor, instead of say, its effects on (racist) people's behaviour? Besides, very few white people are actually racist, so their effect is marginal anyway. I'm afraid to ask about your "fascist tendencies".. :pLots of awful things are frowned upon hard; that doesn't make them no longer a "factor" in causing harm.
Everybody's got their thing. There are parts of the Libertarian community that I fervently dislike, and one of them is that some (hopefully a very vocal very few) people think that the legal permission to do things is equivalent to moral permission. I had to leave r/Libertarian because I got down-voted when I called out someone for being racist. That's not a group I would associate with. I fear that the online Libertarian community is a bunch of do-nothing extremists who are going to ruin my party. We don't have the numbers to afford bad first impressions.
That seems a bit self-defeating for someone who advocates against imposing legislation on people. If legislation makes people moral, we should wish for more legislation. A more nuanced view is that trying to discourage immoral behavior with legislation can do more harm than good. Simply holding racist views is not illegal anyway. The do-nothing extremist is my favorite kind of extremist.legal permission to do things is equivalent to moral permission
Have you ever come across Helvetius? From what I understand (and I'm by no means an authority here), his basic political philosophy was that law can make people moral fundamentally, and not just make them act moral. It's an interesting philosophy, and his writings were very influential on Marx. Of course, we saw empirically in the 20th c. how misguided Marx's interpretation of Helvetius turned out to be. Can good laws fundamentally change our moral makeup? Certainly some religious people listen to their spiritual 'laws' and act (and feel) in ways that they see conforming to the rules. (For example, some religions mandate that their members tithe, and many of these members are happy to do it, because they see it as a moral imperative.) Could the government, if benevolent in its will, have a similar effect? My gut says likely not, because we don't view the government as an eternal force like a religious person might their authority, but rather we see the government as a useful institution that only is there to serve our interests (and rightly so). Perhaps that is why communist regimes always need a personality cult, to convince the people that they serve the government on not the other way around.If legislation makes people moral, we should wish for more legislation.
What you said there is literally why I am a Libertarian. The machine will be perverted, and it is my best interest to give it the least power to do damage when it is perverted enough to do so. But like fire can burn and warm you, government can do good things as well. The second part is often forgotten by Libertarians in exclusive pursuit of the first. They too have the Politician's Syllogism in their process, but backwards. Bad things have been done.
The doer has grown in power.
New things will be worse.My concern is that many commentators (and my fellow armchair commenters) advocate measures to correct the inequality problem using the same tool that Mr. Carson shows us is largely responsible for creating the problem. In order to pursue a political solution to the problem, concentrated political power is needed to effect the change. This power has been the source of the greatest harms ever caused by humans. Empowering an agency with resources and authority and a mission entails risk that the resources will be misused and the mission perverted.
I see. Perhaps I can get you to reconsider. It would be stupid to claim that government investment produces no benefits. I have found that the dialog is more constructive when framed as "better or worse" than "good or bad." Is government the only way to get the thing we want? If not, is any alternative better, when we consider both costs and benefits? Sorry for all the self-promotion, but it looks like you took a long nap and missed some of my best work.What you said there is literally why I am a Libertarian.
government can do good things as well
How is government a way to get what we, its subjects, want?Is government the only way to get the thing we want?
The usual answer is that you want to be able to get from point A to point B. For some reason you and your neighbors can't figure out how to lay asphalt, so you sign some invisible contract and people take money out of your paycheck and build roads and nuclear submarines with it, and now you can drive around.
Yeah. So I guess you're a Libertarian of sorts then?
I think we're actually already on the same page. What I said before is that Libertarians want to limit the government so it can do the least harm, but in pursuit of that goal you must temper your zeal with the truth that government can do good. In the same extremist view that would produce that "Libertarian Paradise" we could extend the Rupublican Paradise nightmare to include Abortion Death Penalty and Gay Compassion Camps where the impure are forced into hard labor to think about sin. Then you'd have the Democrat Paradise where we don't spend as much as possible on making all people equal leaving us poor but full of love and hugs. There's no such thing as a Libertarian paradise that doesn't include compromise with everyone else. And though your post is a very cynical view of Libertarianism, we can assume that it would be impossible to actually have that come to fruition in the current system.
Now there's a wild accusation that's not true. Oh, and weren't you supposed to have me muted?My favorite part is that he made up a dummy just to share his posts.
All that muting affects is the ability to comment on posts made by the muter and orange notifications being turned off when the mutee responds to the muter. It doesn't affect other posts. EDIT: Is this shitpost o' clock or something?
Alright, thanks. I wonder why he bothered with another lengthy response even after muting me.
Ohh, right. You're the guy who had just claimed "we live in a society that is set up to have black people at a disadvantage just by being born black". Now you're calling me a troll behind my back because I pointed to an example of the opposite. Way to go.
And what was incorrect about what I said there?