Short answer: Inflation encourages spending, because if you don’t spend it, it will be worth less in the days, weeks, years ahead as inflation eats away at the value. If your money is worth more by saving (deflation), then you wait to spend because the thing you want to buy will be cheaper tomorrow, and cheaper yet the next day. If people stopped spending the economy grinds to a halt. Everyone loses their jobs.
I hear this very often, but has this ever been proven? People are not exactly going to stop eating or paying rent which already eats more than half of people’s income. I could see gambling and entertainment become more stale, but I’m not sure how big of a problem this is.
Yes, not all demand is the same, but the idea isn’t to increase the demand of bread, it’s to increase investment. If sitting on cash gets you more interest from the bank you’re going to let it sit more. If it loses value you’re going to spend or invest it more. And yeah, this does happen, among other things because inflation affects everybody, not just consumers, although this also influences how likely individual people are to buy things on credit. Companies and governments also care about this.
As always with economics things aren’t straightforward, and you get lots of weird paradoxical behaviors, but the big lines of this one are easy to see. If you have some inflation and low interest rates you’re gonna be more likely to make big purchases or investments on credit. And the real problem is once you have those and are paying them back if inflation flips and suddenly the 100 bucks you pay each month for that credit go up in value to 110 you may find yourself losing money on that investment or being unable to afford it, which is a big problem when that happens to literally everybody who owes money (including the government) all at once.
And since the people you owe money to are mostly just a handful of banks… well, that’s not a great wealth redistribution technique, is it?
I hear this very often, but has this ever been proven?
Yes, multiple times we’ve seen this play out in real life. The most recent big one would be Japan 1990s. Look up “The Lost Decade”. The biggest one in the USA was the Great Depression in the 1930s.
People are not exactly going to stop eating or paying rent which already eats more than half of people’s income.
You stop buying all but the absolute basics (bulk beans and rice and nothing else?), so all the food that isn’t a “basic” goes un-bought and the people producing that food/product lose their jobs. Then you stop buying food when you’re out of money, which is what can happen in an extreme deflationary environment because you have no income, because you lost your job, because no one buys whatever your work produces.
And if you stop paying rent, you’re going to get evicted. If you stop paying your mortgage, the bank will take your home. This played out exactly this way during the Great Depression.
I could see gambling and entertainment become more stale, but I’m not sure how big of a problem this is.
Its much more than just those sectors, but just imagine how many jobs are in the gambling and entertainment business. Now all of THOSE people are out of work competing with you for whatever jobs remain. That, too, happened during the Great Depression.
"For world economic equality to be achieved with the currently available resources, proponents say rich countries would have to reduce their standard of living through degrowth. "
Can I ask what measures you’ve taken in your life to reduce your standard of living to match the degrowth goal?
Can I ask what measures you’ve taken in your life to reduce your standard of living to match the degrowth goal?
Buy local products, buy conflict-free, slave-free, or fair trade products whenever possible, most of my belongings are second hand or have been in my possession for a long time (the oldest piece of clothing I was gifted is about 40 years old, the oldest I bought about 20), don’t own a car and public transport is taken whenever possible, short distances are by bike or foot, food waste is nearly 0, etc.
First, I’m not bound by your measurements because I’m not advocating your Degrowth position. You, however, are.
I’m taking a slightly different path to sustainability. I live closer to the food which drastically reduces the carbon consumption needed to bring it to me. That does require owning a car. However, my house and my car are powered by sunlight from the panels on my roof collecting it. I work from home so that also means I’m not commuting, reducing my car usage significantly. My hobby is electronics repair, so I get non-working TVs etc, from the waste stream, repair them and return them to service reducing the need for new units to be produced.
Short answer: Inflation encourages spending, because if you don’t spend it, it will be worth less in the days, weeks, years ahead as inflation eats away at the value. If your money is worth more by saving (deflation), then you wait to spend because the thing you want to buy will be cheaper tomorrow, and cheaper yet the next day. If people stopped spending the economy grinds to a halt. Everyone loses their jobs.
I hear this very often, but has this ever been proven? People are not exactly going to stop eating or paying rent which already eats more than half of people’s income. I could see gambling and entertainment become more stale, but I’m not sure how big of a problem this is.
Yes, not all demand is the same, but the idea isn’t to increase the demand of bread, it’s to increase investment. If sitting on cash gets you more interest from the bank you’re going to let it sit more. If it loses value you’re going to spend or invest it more. And yeah, this does happen, among other things because inflation affects everybody, not just consumers, although this also influences how likely individual people are to buy things on credit. Companies and governments also care about this.
As always with economics things aren’t straightforward, and you get lots of weird paradoxical behaviors, but the big lines of this one are easy to see. If you have some inflation and low interest rates you’re gonna be more likely to make big purchases or investments on credit. And the real problem is once you have those and are paying them back if inflation flips and suddenly the 100 bucks you pay each month for that credit go up in value to 110 you may find yourself losing money on that investment or being unable to afford it, which is a big problem when that happens to literally everybody who owes money (including the government) all at once.
And since the people you owe money to are mostly just a handful of banks… well, that’s not a great wealth redistribution technique, is it?
Yes, multiple times we’ve seen this play out in real life. The most recent big one would be Japan 1990s. Look up “The Lost Decade”. The biggest one in the USA was the Great Depression in the 1930s.
You stop buying all but the absolute basics (bulk beans and rice and nothing else?), so all the food that isn’t a “basic” goes un-bought and the people producing that food/product lose their jobs. Then you stop buying food when you’re out of money, which is what can happen in an extreme deflationary environment because you have no income, because you lost your job, because no one buys whatever your work produces.
And if you stop paying rent, you’re going to get evicted. If you stop paying your mortgage, the bank will take your home. This played out exactly this way during the Great Depression.
Its much more than just those sectors, but just imagine how many jobs are in the gambling and entertainment business. Now all of THOSE people are out of work competing with you for whatever jobs remain. That, too, happened during the Great Depression.
I see. That makes sense.
No wonder the degrowth movement exists. It’s because of this bullshit that we harm everything around us.
Economists and those that made political theory have been looking for better alternatives since the formation of civilization.
What is your suggestion for a better system?
incoherent screaming and whining
Degrowth
From your source:
"For world economic equality to be achieved with the currently available resources, proponents say rich countries would have to reduce their standard of living through degrowth. "
Can I ask what measures you’ve taken in your life to reduce your standard of living to match the degrowth goal?
Buy local products, buy conflict-free, slave-free, or fair trade products whenever possible, most of my belongings are second hand or have been in my possession for a long time (the oldest piece of clothing I was gifted is about 40 years old, the oldest I bought about 20), don’t own a car and public transport is taken whenever possible, short distances are by bike or foot, food waste is nearly 0, etc.
How about you?
First, I’m not bound by your measurements because I’m not advocating your Degrowth position. You, however, are.
I’m taking a slightly different path to sustainability. I live closer to the food which drastically reduces the carbon consumption needed to bring it to me. That does require owning a car. However, my house and my car are powered by sunlight from the panels on my roof collecting it. I work from home so that also means I’m not commuting, reducing my car usage significantly. My hobby is electronics repair, so I get non-working TVs etc, from the waste stream, repair them and return them to service reducing the need for new units to be produced.