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Knowing that there will be better hard drives in the future for less money has some effect on your willingness to purchase. Expectations of the future matter. The US Treasury is getting considerably less revenue right now from capital gains than usual because tons of financial entities are holding off on realizing returns from their investments now and are holding them until possible tax reform in the hopes of paying future taxes and thus getting greater returns.

In your example, HDD space is purely a good to be consumed though and not a currency (or an investment beyond an actual capital investment because it does work for data storage). Thus, if you need to store data, you will buy storage simply because you need it then. But you can't sell that storage in the future for a positive return, so the incentive I'm talking about doesn't really exist in the example you used.




You can make a positive return in terms of hard disk space. Refrain from swapping USD for hard disk space, and you can get more hard disk space in the future. This applies to all sorts of goods, like TV's, music players, etc. The value of USD is increasing against these goods, yet people still make the trade of USD for goods. I suppose if we increase the inflation of USD such that the price of hard disk space increases in USD terms, then people will be more inclined to swap USD for hard disk space sooner, and it will be a boon for the hard disk industry. But is that real economic growth? It smells more like malinvestment to me. One could even make the argument deflation is good for the environment, people are only inclined to consume that which is necessary, and the structure of the economy's physical capital will be realigned to support that pattern of consumption instead.


Production can't easily saved in grain silos, so money must be used to buy it, or it should be lent to someone that will use that production productively. If no one needs to buy hard drives ATM, then the hard drive company goes under and there is no better next generation.

Money is a means of allocating production. If it is just stored under a mattress, it isn't being useful and production is being wasted. We capture the negative effects of that waste with inflation.

Deflationn is basically a death spiral for an economy, as everyone consumes only essentials because everything will be cheaper tomorrow; lots of production is wasted because it can't be saved easily for tomorrow, people are laid off, companies go out of business, it sucks. Wars have even been started over silver and gold's deflationary tendencies (e.g. See the opium wars).

Don't confuse inflation with hyperinflation, the latter of which just destroys trust in the currency and makes it useless to save at all, causing runs on all production and starving investment. A bit of inflation is all that is needed to put money's use into a positive state without flipping in the other direction.


If you believe that we should have UBI (and it seems like many here do), deflation is the exact opposite of it -- it slowly concentrates wealth with those who already have it, and all they have to do is hold the currency.

Whereas inflation at least basically forces the wealthy to invest in real assets or else slowly transfer the value of the cash towards debtors.


Currency isn't wealth - wealth is real estate, stock, furniture, computers. Deflation makes it easier for wage earner savers to increase their tangible wealth. The economic data matches this - economy was a lot more equal on the gold standard until 1971, and have become a lot less equal once a policy of inflation is implemented. Are we going to act on theories that match the data or does not match the data? With deflation, UBI income will increase in value over time, the deflation occurring from technological change accruing to UBI receivers.


> Currency isn't wealth - wealth is real estate, stock, furniture, computers. Deflation makes it easier for wage earner savers to increase their tangible wealth.

Yes, we agree on that. However, I think we need to also acknowledge that 1) a large proportion of wage earners have very few, or negative net assets, so deflation actually hurts them and 2) even though deflation helps savers, the biggest savers in the economy are actually the rich. Deflation helps savers, but the people with 80%+ of nominal assets are the already-wealthy.

In fact, the most common form of household wealth is a house, where you own a real asset and owe a nominal debt.

Under inflation, your house value grows at inflation while your debt remains constant, so this even benefits the saver. Under deflation the opposite happens.

> Are we going to act on theories that match the data or does not match the data?

You need more data. The developed world has been on the gold standard since the late 19th century through to the 1970s. During that time the US has seen:

- the Robber Baron age and the Long Depression (where the rich got much richer)

- the roaring 20s, when wealth was more distributed

- the subsequent crash and the Great Depression, where the entire world was in misery (but inequality was very high)

- WW2 and the post-war era, which saw large decreases in wealth inequality

Seems a bit silly to say that 'the gold standard was responsible for lowering wealth inequality', given the huge swings back and forth in inequality while we were on the gold standard over 100+ years.


"Knowing that there will be better hard drives in the future for less money has some effect on your willingness to purchase."

It'd probably be surprising to know how many businesses have been killed by intentionally or inadvertently releasing information about an upcoming product.




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