Inflation, deflation, both...how do you see the future?

Discussion in 'Business & Economics' started by Seattle, Feb 7, 2023.

  1. Sarkus Hippomonstrosesquippedalo phobe Valued Senior Member

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    Stop trolling, James R. Posting just to say that you're not going to post is nothing but attention seeking on your part.
    If you have nothing to say (which seems to be the majority of the time) then don't post. Don't tell us that you're not going to.
    Simples, really.

    And you can stop me "bugging" you by generally correcting your behaviour. Sort that out and the site would likely be a happier and more productive site. If not, expect to be called out. We can't give you warning points. You can't get bans. But you need to be held to account for your poor behaviour.
    Sort it out.
    Simples.

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  3. Sarkus Hippomonstrosesquippedalo phobe Valued Senior Member

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    • Please do not troll.
    Are you not conflating two things here, though? You have tech being deflationary to the overall fiat economy, through improving productivity, creating more for the same outlay, increasing supply, so costs drop etc. That much is widely accepted. And you also have Bitcoin being itself a deflationary currency, limited supply meaning that as it becomes scarcer, increasing the purchasing power of a unit of the currency (at least once the hard cap has been reached). But there's not much of an overlap between the two concepts here.
    I mean, Bitcoin is a tech, but does it really help drive productivity? If so then, sure, to that extent it could be said to be deflationary. But it doesn't have the same functionality and benefits for aiding productivity as, say, Ethereum and its smart-contracts. So, is Bitcoin really deflationary in the same way that "tech" is? Or is it just itself a deflationary currency, its sense of "deflation" being distinct from that of tech in general?

    In the long-term, as that's where you intended the question to be answered, then ignoring the inherent deflation of a given currencies mechanism, while tech might start to play a larger part of the economy, I can't see it resulting in a deflationary fiat economy. I say this 'cos draw the line in the sand on a given day, and "tech" is really just a cause of future productivity-improvement. Once you get to the next year, you draw another line in the sand, and "tech" remains a cause of future productivity-improvement. In other words, the base position may change, but you're always chasing the productivity improvement, there will always be "tech" to improve the situation. We've been in this situation since, well, quite a while, and inflation has been the order of the day. So I don't see it changing, as I just don't see the chase for productivity tipping us into deflationary... which leads me to...

    Furthermore, there is fiscal policy of maintaining an inflationary economy, if to do nothing else than drive down debt. Governments can't afford for things to either stagnate or deflate, so they end up creating/forcing through, an inflationary trajectory. Short periods of deflation will occur, but thems the exceptions. Hopefully. This desire for inflation would seem to be far stronger than tech's deflationary pressure. It has been up to now, and I can't see that changing.

    Then there's the impact of an ageing population, and how that feeds into the above, which intuitively would seem to be a need for increased productivity.

    Now, energy abundance might alter the situation. The extreme might be the Star Trek model, where the economy is post-scarcity. That's certainly something to aim for: noone really wants for anything as long as you have the energy to replicate it. There is no currency. Inflation? Deflation? What are they?

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    Oh, and just for disclosure, I have no vested interest in Star Trek.

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  5. Seattle Valued Senior Member

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    • Please do not troll.
    You may not have any vested interest in Star Trek but do you have any interest in Star Wars? It appears to me you are being a little too clever by half. Interest in Star Wars is really no different than interest in Star Trek, wouldn't you agree?

    It's also possible you have no intellectual interest in either but that you are being paid by some other source to promote your concepts. It's also possible that you are a bot. All jokes aside...

    Moving on... if I understand your questions (and I may not) I'm not trying to conflate a possible deflationary economy due to tech and Bitcoin. My interest in posting wasn't initially Bitcoin related. It was just as I was posting that I thought Bitcoin kind of fit in with that scenario as well, so I mentioned it.

    As you mention late in your post, when/if energy costs become deflationary through fusion (and that's a big if of course) then that runs throughout the economy. It's still just a matter of degree as is other tech.

    We currently have elements of deflation running though the economy but there is more inflation so that comes out on top, so to speak. In the 60's we had transistor technology and it caused electrical components to become more "abundant" but that only had a small effect.

    When you add in CNC machining, computers, the internet, robotics, then the tech deflationary effect becomes a larger percentage of the economy. At some point the scale has to tip. It might not be as pervasive as I've described until we do have energy from fusion but again, it's all a matter of degree and at some point there would be more deflation than inflation in terms of goods and services.

    Regarding currency, that inflation is government controlled. If a decentralized currency like Bitcoin takes a lot of the market share then that is outside the control of government monetary policy. It doesn't have to be complete.

    You can still have the dollar as the currency to interact with the government (pay your taxes) but if there is competition for currency outside the government's control then that does affect what the government can do. If less and less people and governments are buying Treasury debt then what the government does with monetary policy matters less and less.

    It may even have a positive effect by making them clean up their act before it gets to the point where the dollar is so debased that no one wants it or to the point where the interest rate to get interest from investors is so high that we have runaway inflation with the government no longer being able to service the debt.

    You hear many people worrying about tech taking away jobs (not me but many) and a Universal Basic Income becoming necessary. You hear others arguing that UBI would be too expensive and not being the right approach or arguing that new and better jobs will always be created.

    There can be elements of truth in all that (or not). By the time there might be a better argument for UBI (after fusion has brought down energy costs, if it does after considering the issues with distribution) then in a deflationary environment the cost for UBI would be much less anyway.

    I'm not able to accurately predict the future of course and what I am talking about isn't about what could happen in a year or two, it does seem to me to be the way that it's likely to play out.

    You don't have to continually grow, particularly if it's artificial growth that's really just inflation needed to pay back debt. In a capitalist system you can still function with deflation just as well as with inflation. There are pros and cons with each.

    With deflation you get stability though saving. It's not true, as some have said, that you wouldn't buy anything or spend money if you had a currency that wasn't always being debased. You would buy the necessities obviously (food, shelter, etc) and you would also still start a business if you had a better idea.

    You might make less profit than today but you would profit and you would live in a world where money was less necessary so the less fortunate in that society would be better off than today but those who create and build would still have more.

    Did I answer your questions, or did I miss some points?

    For some others I'll point out that this is a conversational style of writing (that's the way most discussion goes). I'm not going to provide "links" or cite data. This isn't an academic paper. I'm not going to spend hours on it just to footnote it.

    I'm not saying anything outrageous and Google can clear up any questions you may have or just post your thoughts here since that's how a discussion works. Discussion doesn't have to be black and white with all the answers completely worked out. There is also no point in just finding cited articles from elsewhere and cut and pasting them here with added footnotes and little personal commentary. That's not discussion. I'll use "other things equal" rather than "ceteris paribus" in an attempt to make it easier to read. If you still don't understand it, you can ask a question or read up on economic I guess, or ask a question peppered with "potshards".

    If you find this subject interesting, add to it with your own comments. Nitpicking or paranoid commentary doesn't contribute to anything other than less discussion. We have enough of that IMO.
     
    Last edited: Feb 15, 2023
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  7. James R Just this guy, you know? Staff Member

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    Sarkus:

    I posted to ask you to stop bugging me. Your attentions are unwelcome.

    This is the second time I'm asking you to stop. So please stop.
     

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