Why do we keep measuring the value of things with something that constantly loses value over time?
-
This post did not contain any content.
-
This post did not contain any content.
Nothing has constant value
-
This post did not contain any content.
Value is subjective. Everyone values different things, and to different degrees.
-
This post did not contain any content.
banana for scale
-
This post did not contain any content.
Objectively, I'd say its about Relativism.
-
This post did not contain any content.wrote last edited by [email protected]
If money became worth more over time, there'd be an incentive to hoard it, which in turn would make it scarcer in circulation and worth more. Of course it's more complicated in real life, and the cycle would eventually break, but that's the gist of why deflation (what that is called) is seen as a bad thing.
Minor inflation is pretty harmless. Exactly 0 change in the value of money might be good too, but it's right next to deflation. So, the usual target amount is a percent or two of inflation per annum, to be safe. Central banks achieve this primarily by lending money out, at a higher or lower rate of interest as conditions demand.
-
This post did not contain any content.
Because it's convenient to trade said object for that something instead of carrying around a scale and silver pieces.
Also I'm not sure how much the previous metal prices fluctuates but currency may just be more stable.
-
This post did not contain any content.
What if inflation isn't about the money losing value, but you having access to more money and thus spending it more frivolously?
-
This post did not contain any content.
You're on to something: the 2% inflation target is just an arbitrary value.
It means your salary is constantly going down for doing the same work - you have to stay on the treadmill just to stay in place.
But if you're an asset holder then the prices of your holdings appreciate indefinitely, and governments get the power to levy this constant invisible tax on the workers.
Mark Blyth is an expert on the topic:
https://youtu.be/GXBSNCysxiA -
If money became worth more over time, there'd be an incentive to hoard it, which in turn would make it scarcer in circulation and worth more. Of course it's more complicated in real life, and the cycle would eventually break, but that's the gist of why deflation (what that is called) is seen as a bad thing.
Minor inflation is pretty harmless. Exactly 0 change in the value of money might be good too, but it's right next to deflation. So, the usual target amount is a percent or two of inflation per annum, to be safe. Central banks achieve this primarily by lending money out, at a higher or lower rate of interest as conditions demand.
wrote last edited by [email protected]It does become worth more if you hoard it. They call that interest.
-
It does become worth more if you hoard it. They call that interest.
wrote last edited by [email protected]No, you have to lend it to someone else for that, who probably spends it. And it never really matches what it would be doing if invested, and if it's something like a savings account the interest you earn might even be less than the inflation rate. There's a whole logic to this.
Collection of interest and profit from investments definitely are included in the reasoning of central banks.
-
This post did not contain any content.
Because value itself is arbitrary. It's not like time or physics. Value is not an inherent property of the universe.
-
This post did not contain any content.
Cause it allows you to have a Ponzi scheme in which you always assume the future will be more prosperous.
If money loses its value, that puts pressure on people with money to use it and try to turn it into more.
So unless your willing to lose money due to inflation, you HAVE TO get a return on your investment, thereby ensuring perpetual growth.
It works well when there is tons of room to grow, but then it all falls apart when you run out of that.
Once that happens, you just keep increasing the money supply, allowing capital holders to increase at a faster rate than workers. Even though workers “make more”, they have a smaller share of the pie.
-
Nothing has constant value
Yea nothing is constant I know. Asking more like why don't we measure the value of things with someone that holds its value better like gold? It's physically scarce and cannot be manipulated because it's verifiable at an atomic level, and will always be in demand.
-
Yea nothing is constant I know. Asking more like why don't we measure the value of things with someone that holds its value better like gold? It's physically scarce and cannot be manipulated because it's verifiable at an atomic level, and will always be in demand.
Everyone used to tie their money to gold. Not anymore.
https://www.npr.org/sections/money/2011/04/27/135604828/why-we-left-the-gold-standard
https://www.stlouisfed.org/open-vault/2017/november/why-us-no-longer-follows-gold-standard
-
Everyone used to tie their money to gold. Not anymore.
https://www.npr.org/sections/money/2011/04/27/135604828/why-we-left-the-gold-standard
https://www.stlouisfed.org/open-vault/2017/november/why-us-no-longer-follows-gold-standard
wrote last edited by [email protected]I'm not saying we should have a gold standard again, there were obviously bad downsides. I'm questioning why we measure everything in money which loses its value over time due to inflation. Can't we measure things in something that has a more stable value while also not having a gold standard?
-
This post did not contain any content.
An even more concerning question to me is why shops charge jeff bezos the same amount for something as a homeless guy. His money is clearly worth much, much less, being 99.999% stolen, and should be treated as such.
-
This post did not contain any content.
Because this way you'll never know if it's just inflation or an ever growing markup.
-
Yea nothing is constant I know. Asking more like why don't we measure the value of things with someone that holds its value better like gold? It's physically scarce and cannot be manipulated because it's verifiable at an atomic level, and will always be in demand.
Gold can be manipulated. Reserves can be made available or unavailable by the wealthy. You can also have supply shocks if new reserves are discovered.
Also, most banking problems stem from issues with the reserve ratio affecting the money supply. That doesn't go away with a gold backed currency.
-
Gold can be manipulated. Reserves can be made available or unavailable by the wealthy. You can also have supply shocks if new reserves are discovered.
Also, most banking problems stem from issues with the reserve ratio affecting the money supply. That doesn't go away with a gold backed currency.
I'm not saying we adopt gold as a currency, I'm thinking we should try using it more often to measure the value of things. I'm considering working on a web application that allows users to easily determine the price of something in gold by weight. It's a fun thing to think about. Even with supply shocks from a new reserve, that is absolutely nothing compared to the inflation of the money supply.
