Deflation | Jörg Guido Hülsmann
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- Опубліковано 19 жов 2024
- Recorded at the Mises Institute in Auburn, Alabama, on July 17, 2018.
Mises University is the world's leading instructional program in the Austrian School of economics, and is the essential training ground for economists who are looking beyond the mainstream.
Thank you! another great lecture
36:47 If the money supply drops following bank bankruptcies, wouldn't the value of each unit of money increase, thereby triggering inflationary tendencies ? Wouldn't that stop the deflationary spiral ?
I believe you are contradicting yourself there. The increase in value of a unit of money is deflation (of the price level) so no it does not trigger inflation. You probably mean that once your money gains value and you see you can buy a lot more than before the bankruptcy crisis that you will feel richer and thus feel comfortable to satisfy more of your preferences by spending your money on goods and services. This increased demand indeed puts a halt to the deflationary spiral, generating in the end a new market clearing price level striving towards equilibrium.
You've mixed up deflation and inflation. Those words refer to the size of the money supply.
A cynic would accuse governments of scooping up most of the deflationairy gains for themselves and their cronies by gently inflating the currency. I am a cynic.
Most??? Why not all?
The deflation in some sectors, like consumer electronics, is simply too large to be completely confiscated with the blunt tool of currency inflation. It would inflate other prices so much that most would notice, and many would object.
Oh 100% they scoop the deflationary gains. This is what they mean by them seeing not enough inflation, that the market has absorbed the money supply and outpaced it to render still more productivity than they had assumed it would. And in calculating inflation, the biggest folly is calculating simply the price of commodities and nothing but. If a lock is made of stainless steel today and the same lock is made of zinc alloy 5 years later yet the price remains the same, to the moron there is no inflation and they would argue that there is deflation since despite inflation the price has not risen.
This is why people saying incomes have merely stagnated are wrong. Income in the terms of affordability of minimum standards of living have stagnated but in terms of raw purchasing power they have simply declined. Purchasing power, not of simply goods either, but the same goods made with the same heavy materials that used to be there prior to the inflationary 'scoop'.
Calculation and data for this is quite hard to find since we cannot really calculate what the new production costs would be of using the same materials over time that were used before. But it is not very hard to understand that they would go down since prior production was not efficient and used a lot of material to make the same thing serving the same purpose today. However, if incomes remained the same in real terms, they would be able to buy a lot more without the gov. 'scoop' happening thus affording much higher standards of living instead of simply the same thing and a little bit of excess that is spent on new innovations every once in a while due to advanced methods of production making products better for far less raw material than before and even that raw material being produced efficiently since everything is linked anyway. Its far too complexed to put a number on these things and generate a study to convince naive morons but logical individuals can see straight what I mean.
@@johnnysilverhand1733 When one can create money at almost zero cost, the spending possibilities are nearly endless, as is the temptation to do so. The trick, then, is not to get caught, or if you do, to convince those who catch you that their money somehow won't correspondingly shrink. Failing that, one can claim it was for a "public good", that only heroic "public servants" can understand.
There lie a threat for Bitcoin
Howso
Still waiting
@@mobysnick3841 I'm a very strong believer in Bitcoin, but we're also still waiting Bitcoin to be used as a mass medium of exchange. While BTC satoshis act as a fractal to prevent the deflation issue, what Jörg points to is still meaningful and a long term threat to Bitcoin economics, were we in a mainstream crypto world
Not only is it impractical - imagine buying a snickers for 0.0001 dollars - you're STILL incentivizing people have a 500$ bill lying around as a sort of s&p 500 etf equivalent. All the money today you would put asap into a trust or comparable, would not get to the companies to there get spend asap, it would lie around for as much as humanly possible. Amazon would make a huge profit just from sending product 1 day later to you aggregated over their revenue. Obv terrible idea.
The alternative with resource bound currency comes with all the problems of resource bound currencies. Really you want to have a reflection of resource values in general, not a certificate for theoretical access to a rare element of x protons in its core. It's certainly stupid to have your economy become increasingly obsessed with getting ever smaller fractions of gold to expand the monetary base.
This makes no sense? There is a time value for good. I would put all my money in a trust? I wouldn't buy any food and just starve to death waiting for my money to increase in value.
"All the money *today* you would put asap into a trust (because we have inflation + negative returns on bank accounts, and therefore having large sums of cash lying around is a bad idea *now*)"
Looking at it from the investment triangle perspective, this makes cash the most liquid, least risky, exactly average returning option. People would likely start to grow their own plants to eat, besides everyone would try to postpone any purchase as much as possible. Ofc thats just the theory.
In reality it would be RIP money, with people simply adapting what a smarter central bank provides.
Sheesh
Maybe you are confused about the permenace of deflation. Yes of course if the government was promoting deflation rather than inflation then yes people would just save as much as possible. The lecture isn't about how deflation should be central to our economy, it's about the benefits deflation has to a properly functioning economy. Deflation AND inflation should be working together, but our economies have been manipulated to exclude deflation almost entirely.
In case you have missed it, one guy actually said, how anything less than 10% inflation is actually deflation. Substitution effects, quality improvements and the massive value of now almost freely available information are the factors I get from the top of my hat, that distort the picture of us living in real inflation.
As a fan of Austrian economics, it should be clear that the money supply does not matter in the way most people think. Printing 5$ dollars won't create goods worth 5$. However, the individual has more incentive to keep surplus money in cash instead of goods, if cash is appreciating in money itself rather than goods. Now if I don't spend my money, other people can't get it to create more goods. Usually we say every transaction creates value, since otherwise people wouldn't have chosen to do so. In a deflationary state you basically ad the discounted future value of the money plus the risk premium of the uncertainty level of the expected utility relative to the one of cash to the opportunity cost. This makes every transaction much more costly even though we intended to not impact the economy with our monetary policy.
This leads me to believe, that if the amount of money compared to the goods is practically unimportant in a momentary state, we should modulate our money supply based on what has the most beneficial effect on behavior over time, given absolute efficiency.
Now I agree with him that we have had sometimes bad efficiency in surplus creation, but this is a separate factor, that should be accounted for and weighed against the benefits of increased consumer spending.
We escaped bullionism, with it's implicit goal of massive trade surplus, because it doesn't really give us the goods we got the bullions for in the first place.
Sheesh
People hoarding money instead of investing and spending (for hopefully short to mid-term periods of economic shifts) is still more benifitial in the long-term than artificial growth, in my opinion. And if I'm not mistaken, the comment about deflation being defined as anything less than 10% inflation was a joke.
Sometimes I wonder if there is an inflation in academic titles. Anyways, the following video shows how it really works and why central banks are important: ua-cam.com/video/PHe0bXAIuk0/v-deo.html
Markus Domanski you are wrong
Central banking is the problem