Posted (under moderation now) to this post at Crooked Timber.
Somehow I don't share the belief that money is supposed to be a store of value. I see it as an economic lubricant, and if the lubrication works a bit better if some value slowly vaporizes, I see that as a feature not a bug. Typically currencies don't lose value very much in the milliseconds it takes to do EFT from my employer to my bank. And then once in my bank, in principle, it can re-earn sufficient proportion of the social dividend through interest and with guarantee principal to compensate for the loss for economically justifiable inflation. Haven't we seen long periods where inflation was lower than savings account interest? And what is really the correct explanation of why it may not do so now? I see grand disinvestment and financial gambling having upended the old order, and my animus is directed at them rather than government spenders (we need more of that government spending, IMO, lots more, to be a modern and progressing post industrial society).
Even in the store-of-value concern wrt money, it seems to me that the it's not how much nominal inflation there is, but what the difference is between interest in socially guaranteed saving accounts and inflation. How did that do in the 1970's? Not so bad as just looking at one number, I think. As far as anti-social people storing money in mattresses, gold, or bit coins rather than becoming invested in society--the worse outcomes for them the better IMO.
But that is still very far removed from the importance of money as economic lubricant.
In the actual 1970's, I made my way into a successful career in a way that would have not been possible in a deflationary economy, as I lacked the usually required credentials. So I gained from the inflationary economy that couldn't find workers fast enough, while meanwhile my fixed interest inheritance was ground into dust, so that indeed I had to live from my deeds and not what my father was owed. It's complicated to figure whether the combined effect was salutary or not because there are so many possible counterfactuals, but it compared with many other possibilities it was very much so.
I think in part the populist anti-inflation fear really comes from a fear that elites will profit while the little people don't see any wage increases, and it has little to do with the actual store-of-value aspect. In reality, the little people do better in a moderately high inflationary economy for many reasons, mostly having to do with jobs and wage growth which does reach farther down than it does in other times (e.g. 70's, mid-to-late 90's). Also true that the value of debts decreases, which matter more to most people of lower income than interest on savings. But they are constantly trained not to think that way but to think like bond rentiers. Because guess who owns the media.
Somehow I don't share the belief that money is supposed to be a store of value. I see it as an economic lubricant, and if the lubrication works a bit better if some value slowly vaporizes, I see that as a feature not a bug. Typically currencies don't lose value very much in the milliseconds it takes to do EFT from my employer to my bank. And then once in my bank, in principle, it can re-earn sufficient proportion of the social dividend through interest and with guarantee principal to compensate for the loss for economically justifiable inflation. Haven't we seen long periods where inflation was lower than savings account interest? And what is really the correct explanation of why it may not do so now? I see grand disinvestment and financial gambling having upended the old order, and my animus is directed at them rather than government spenders (we need more of that government spending, IMO, lots more, to be a modern and progressing post industrial society).
Even in the store-of-value concern wrt money, it seems to me that the it's not how much nominal inflation there is, but what the difference is between interest in socially guaranteed saving accounts and inflation. How did that do in the 1970's? Not so bad as just looking at one number, I think. As far as anti-social people storing money in mattresses, gold, or bit coins rather than becoming invested in society--the worse outcomes for them the better IMO.
But that is still very far removed from the importance of money as economic lubricant.
In the actual 1970's, I made my way into a successful career in a way that would have not been possible in a deflationary economy, as I lacked the usually required credentials. So I gained from the inflationary economy that couldn't find workers fast enough, while meanwhile my fixed interest inheritance was ground into dust, so that indeed I had to live from my deeds and not what my father was owed. It's complicated to figure whether the combined effect was salutary or not because there are so many possible counterfactuals, but it compared with many other possibilities it was very much so.
I think in part the populist anti-inflation fear really comes from a fear that elites will profit while the little people don't see any wage increases, and it has little to do with the actual store-of-value aspect. In reality, the little people do better in a moderately high inflationary economy for many reasons, mostly having to do with jobs and wage growth which does reach farther down than it does in other times (e.g. 70's, mid-to-late 90's). Also true that the value of debts decreases, which matter more to most people of lower income than interest on savings. But they are constantly trained not to think that way but to think like bond rentiers. Because guess who owns the media.
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