>There is nowadays a very reprehensible, even dangerous, semantic confusion that makes it extremely difficult for the non-expert to grasp the true state of affairs. Inflation, as this term was always used everywhere and especially in this country [the United States], means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term "inflation" to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. It follows that nobody cares about inflation in the traditional sense of the term. As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil.
If inflation is "inflating the amount of cash in circulation" then it doesn't seem like something that just happens (i.e. 2% inflation per year is totally normal) but something that is done deliberatly by people.
Why is it done? Why would anyone, especially rich people, that their riches get worth less?
> If inflation is "inflating the amount of cash in circulation"
It's not, except when Austrian school adherents are mistaking equivocation for argument. “Inflation” without modifiers means consumer price inflation. Monetary inflation is a thing, but a different thing. Monetary inflation can contribute to consumer price inflation (that's often it's express purpose, compared to not having the policy, as when QE was adopted to prevent deflation), but it is not what “inflation” without qualifiers means outside of intentionally-deceptive rants from Austrian-school adherents
The rich proportionally have less wealth in $, so this affects them less. Additionally, slight inflation tends to produce economic growth, furthering the value of their investments.
Not just spend, but invest. Consider the reverse situation (deflation):
If you just hide your money under your mattress it is worth 2% more per year. If you are primarily concerned with protecting your wealth, why would you invest in a company that might lose your money? Sure you'll invest some just to diversify and attempt to see larger real returns, but most of your money you can just hold as cash.
With modest inflation, you lose wealth if it is not invested, so people will invest in an attempt to preserve their wealth (with real returns being a bonus).
With extreme inflation, the currency is no longer stable enough to be used as a store of wealth, so you will try to get rid of money as quickly as possible (wile paying off debts denominated in that currency as slowly as possible).
Exactly. If holding onto money made it go up in value, then why would you ever spend it? If you had BTC in 2010 and knew what would happen to its value over the years, would you still buy a pizza with it?
If I was really that hungry, then maybe I'd walk to the grocery store & get some store-brand pasta instead of getting pizza delivered. It's not like spending money is an absolute thing where you spend all or nothing. If I know it's worth my while to save, then I'm not going to spend as much as I would have if I knew that my savings was becoming worthless.
There's a theoretical relationship between the inflation rate and the unemployment rate [1], and the Federal Reserve has a dual mandate which is price stability and maximal employment. You may not agree with the theory, but the Fed's policy is supported by an economic theory.
It's always baffling to me people can simultaneously defend fairly liberal voluntary trade while supporting a command economy on one of the most important elements to trade -- currency. Clearly building an economy on an insidious command denominated currency threatens the entire market.
Command economy of goods/services/financial instruments leads to inefficient markets.
In systems where currency is subject to command economy (perhaps because it is in control by a minority of elected or unelected officials, who have a monopoly of control of the entirety of a national currency), it could result in additive inefficiencies to the entire market if the market is predicated on using that currency in trade. In general industries that are both a monopoly and centrally planned by governance yield sub-optimal results.
Some people generally realize this when considering other goods, services, and financial instruments but oddly there are a number of those same people who fail to consider applying this also to currency.
Thank you. Currency is not subject to a command economy. Governments don't have a monopoly on the issuance currency. Private entities are free to issue currencies.
I'm compelled to use US currency. Explain how I can trade 100% in another currency without being required acquire US currency to pay taxes on the profits on my trade.
> Private entities are free to issue currencies.
Yes and no. The government has a monopoly in some areas. For instance, Liberty Dollar was accused for issuing coinage, despite that coinage never representing itself as legal tender issued by Treasury. [ 18 U.S.C. § 486 ] DoJ suggested at the time they closed in on Liberty Dollar that they could interpret their constitutional authority as also going over restricting private notes in general, but I think the coinage was just their easiest route to secure a felony so they never had to resort to other means they believed they had available. The conviction of Liberty Dollar's owner has been interpreted by some as to set the precedent that silver coinage, when used as a currency, is a violation of 18 U.S.C. § 486.
There's also the fact of (USD) currency being legal tender for debts (public and private), and it certainly has a position of privilege in that regard. I'm not sure if I could refuse USD as payment for a judgement, if say a contract or other case were taken to court.
You also may want to view a glimpse into what the apparatus has to say about private issuance of currency [0]:
“Attempts to undermine the legitimate currency of this country are simply a unique form of domestic terrorism,” U.S. Attorney Tompkins said in announcing the verdict. “While these forms of anti-government activities do not involve violence, they are every bit as insidious and represent a clear and present danger to the economic stability of this country,” she added. “We are determined to meet these threats through infiltration, disruption, and dismantling of organizations which seek to challenge the legitimacy of our democratic form of government.”
While it may be technically legal, in practice you may be going to bed every night knowing that both the FBI and US Attorneys are going to bed thinking about how you're a 'domestic terrorist' and dreaming up how to make your life hell. In practice if the state apparatus sees what you are doing is wrong they can find a statute with which to destroy you, if they deem it worth their time.
Freedom to use a currency doesn't mean that you can force others to accept said currency. Depending on your choice of a currency you may find nobody that will accept it. Yes, this means you'll be compelled to use whatever currency is the generally accepted medium of exchange in the area where you live. No, that doesn't mean that you live in a "command economy". Freedom works both ways.
I control-f our conversation and the only mention I saw of 'free' or' freedom' was from yourself, not me. Are you debating with yourself?
If freedom to use a currency means that you can't force others to transact in it, then by your own definition we don't have freedom. I'm forced to pay taxes in US Currency whether I want to or not, whether I consent to it or not, even if I have no US currency and never once traded in it nor do I consent to any transaction in USD. I'm compelled to obtain USD.
[freedom] Is a very nebulous concept, I guess it's up to your interpretation as to whether our topic concerns freedom. But sure, it's probably not unreasonable to bring up the comment of freedom, I just wanted to make clear you were the one that introduced the notion of freedom. I find discuss on word 'freedom' are often incredibly difficult to get anything useful out of, because it's such a difficult word to define and work with.
I was talking about command economy of the compelled currency USD, which holds a priveleged legal position in that unlike any other currency in US I have a legal duty and responsibility to transact in it (taxes are the most obvious of these).
The combination of the compulsion, plus the central planning performed by a minority of elected and unelected government officials makes it a 'command economy' of USD for which there is no substitute; it is monopolized. It is simply illegal to trade and use a private currency as a full substitute for USD, and doubly so if you mint coinage.
I believe this monopolized command economy has yielded sub-optimal results, such as the temptation for governments to deliberately debase currency.
I didn't introduce the notion of freedom. You introduced the notion of command economy which implies a lack of freedom. A command economy, or more commonly a planned economy, is an economic system in which a central planner decides what to produce and in what amounts, as opposed to a market economy, where such decisions are made by the producers themselves according to their own judgement. A market economy is not incompatible with the public provision of certain goods and services. In fact, most governments provide policing, armed forces, education and health services, and currency. None of that implies that the economy is a command economy. Nor is it necessarily the case that such public provision of goods leads to sub-optimal results.
I never meant to imply the entire economy is a command economy. I am stating there is a command economy for currency (and parallels in some other nations), and that weaknesses in that economy on which the greater economy may depend can create subpar results in other markets as well as the market for currency itself.
The definition* of inflation (monetary inflation). The Austrian distinction between monetary inflation and price inflation is instructive.
See for example https://www.quora.com/What-is-the-relationship-between-monet...
And from the horse's mouth (Mises):
>There is nowadays a very reprehensible, even dangerous, semantic confusion that makes it extremely difficult for the non-expert to grasp the true state of affairs. Inflation, as this term was always used everywhere and especially in this country [the United States], means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term "inflation" to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise. The result of this deplorable confusion is that there is no term left to signify the cause of this rise in prices and wages. There is no longer any word available to signify the phenomenon that has been, up to now, called inflation. It follows that nobody cares about inflation in the traditional sense of the term. As you cannot talk about something that has no name, you cannot fight it. Those who pretend to fight inflation are in fact only fighting what is the inevitable consequence of inflation, rising prices. Their ventures are doomed to failure because they do not attack the root of the evil.