If companies start investing their money domestically then excess savings will fall, deflationary pressures will be gone and the economy will start growing quickly again and that means wages will grow too.
They are a US company, reaping the tax benefits of that nexus. If they'd been an EU company, they would have paid a lot more in various taxes (including higher wage taxes) over the last 40 years. IOW, they would not be as wealthy a company today.
Tons of countries tax worldwide income.
i've read some rhetoric somewhere that deflationary money is a terrible thing for the economy since it reflects in asset prices and makes you more concerned with saving. From my perspective, that's a very good economic consequence and would stop all these boom bust cycles that we seems to be creeping up at irregular intervals of massive spending.
A better system of stock trading would be bonding. When i buy a stock, the money is locked into a contract that is reimbursed to me after the purchase period. say i buy $100 worth of Tesla for a 1 year stock period. At the end of that lease, i will recieve my $100 back and Tesla may reward me with a % based on the performance of that year. I have no liquidity but my only 'Loss' is the loss of other rewards i could have gained by betting in another industry or company. Everything being completely liquid allows for HFT and the banking industry to drain our economic fecundity by placing it in the realm of fairy-land instead of investments in infrastructure, energy generation and manufacturing.
It is very simple why this is not a good policy.
Let's say you are a software engineer working on some software product/service. You are working hard on that software, adding features, fixing issues, maintaining it, etc. The buyer pays you $100 today for that software.
Tomorrow you release a new version, with lots of upgrades and new capabilities. The buyer for this software says "my money should be worth more tomorrow than it is today" so they offer only $80 for the new version. Boom -- your work is worth less every day!
Your point is not pedantic at all and in fact completely negates the other commenters counterpoint made to your initial argument.
The buying power of the entity you are exchanging in has changed -- for everyone. This absolutely does not diminish your work. It is literally equivalent to being paid in many more bitcoin in 2012 versus today.
I am sure there are valid critiques of allowing deflation. But, as of yet a solid one has not been provided in this thread.
It would be interesting to see if anyone can offer other sources or arguments against this pro-savings, deflation-allowable, economy.
Allowing natural volatility into the value of any asset that is traded, including the USD, likely resolves to a more natural equilibrium in the economy, no?
Yes, this is because of the interchangeability of the value of an asset declining and the fact that no one is buying it. No different than a stock price in free fall. Why is it in free fall? Because no one wants it.
Artificial infinite inflation takes away from the buying power of especially younger generations (but average people in general). It inflates the supposed price of assets (in terms of the inflated exchange asset, e.g., USD) which makes it much more difficult for newcomers to gain access to the necessary amount of buying power otherwise.
Think of it like inflating bitcoin. True, bitcoin is worth more. But, it takes a lot more work and time to get more bitcoin. This actually causes deflation to people's labor value and thus their buying power and leverage.
And not all assets will inflate equally. And some assets will receive government subsidies (this is an increasing phenomenon due to the inflating economy) because they are considered "critical" to society e.g., gasoline, milk, and green energy.
Overall, allowing things to deflate and inflate more naturally actually increases volatility which is actually what will increase economic velocity. Trading will increase, and interest will increase because of profitable trading, and thus investment will increase.
So, no, the current artificial and centralized system that thinks it can outgame game-theory is just stupid.
It's just Neo-Liberal/Neo-Conservative hippie baby boomer nonsense to concentrate wealth and power into an aristocratic elite empowered by trillions of dollars of managed retirement portfolios. They simply do not want to allow for natural volatility so that their managed assets are always increasing. It's absolute insanity.
EDIT:
Not that my above comment was perfect, but let me attempt to be more succint.
> Monetary appreciation only helps
Appreciation of an asset only helps the holders of said asset. But "appreciation" is always an exchange rate. Appreciated relative to what?
> A deflationary environment explicitly benefits creditors.
And this is where my contention lies. This dogmatic condemnation of deflation ever being allowed to happen. Temporary deflation or even deflation for some extended period of time is not a bad thing.
Economic velocity runs on volatility and not what one currency or asset is doing relative to another. Inflating and deflating exchange rates only increase volatility. But, truly, only if both types of relationships are allowed and are not artificially snuffed out by government and/or central bank intervention.
And you assume that creditors are the only ones holding an asset? Credit is only one kind of exchange. Spending is another. Stock trading is another. They all depend on volatility.
Thus, I am not arguing for inflation or deflation. I am arguing for the greatest amount of allowance for natural volatility.
> in your proposed monetary environment.
I see that you assumed that I was arguing for constant monetary appreciation. I was arguing that there is nothing wrong with monetary appreciation.
It seem that you and others are deadset on arguing that all deflation is immoral.
My above comment mentions the common root of such views.
> Much like it's difficult for newcomers to buy large amounts of bitcoin.
Yes, I should clarify my bitcoin comments. Bitcoin is deflationary relative to USD (where most "newcomers" are coming from).
BUT, to add substance to my point it should also be noted that there are coins that outperform Bitcoin and are thus deflationary in their relationship to Bitcoin. A newcomer holding these would actually have more purchasing power.
I clarify this to stress that at the end of the day: consumer spending, loans, credit, etc. are all trading. And trading is what makes the economy go around. Volatility is good.
> Monetary appreciation only helps
Appreciation of an asset only helps the holders of said asset. But "appreciation" is always an exchange rate. Appreciated relative to what?
> A deflationary environment explicitly benefits creditors.
And this is where my contention lies. This dogmatic condemnation of deflation ever being allowed to happen. Temporary deflation or even deflation for some extended period of time is not a bad thing.
Economic velocity runs on volatility and not what one currency or asset is doing relative to another. Inflating and deflating exchange rates only increase volatility. But, truly, only if both types of relationships are allowed and are not artificially snuffed out by government and/or central bank intervention.
And you assume that creditors are the only ones holding an asset? Credit is only one kind of exchange. Spending is another. Stock trading is another. They all depend on volatility.
Thus, I am not arguing for inflation or deflation. I am arguing for the greatest amount of allowance for natural volatility.
> in your proposed monetary environment.
I see that you assumed that I was arguing for constant monetary appreciation. I was arguing that there is nothing wrong with monetary appreciation.
It seem that you and others are deadset on arguing that all deflation is immoral.
My above comment mentions the common root of such views.
> Much like it's difficult for newcomers to buy large amounts of bitcoin.
Yes, I should clarify my bitcoin comments. Bitcoin is deflationary relative to USD (where most "newcomers" are coming from).
BUT, to add substance to my point it should also be noted that there are coins that outperform Bitcoin and are thus deflationary in their relationship to Bitcoin. A newcomer holding these would actually have more purchasing power.
I clarify this to stress that at the end of the day: consumer spending, loans, credit, etc. are all trading. And trading is what makes the economy go around. Volatility is good.
Aggregate demand and supply is very much affected by currency and commodity appreciation, contrary to what you're saying. Additionally there is volatility, and there is price discovery. Today, right now. Things are already how you want them to be. The dollar depreciates and appreciates against commodities and other currencies all the time.
Bingo! But, I do not see anyone complaining about this "only benefiting the creditors".
> econ 101
To be fair, I find a reference to very weakly approximating models of reality, taught to ignorant and naïve students for the sake of starting them off somewhere, to be slightly disingenuous.
> Appreciation due to contracting supply.
Contracting supply is not the only reason for appreciation. If we take that fact into consideration then your causality arrow of 'low monetary velocity' -> 'supply shrinks' -> 'appreciation' is one of many possible paths. Therefore, deflation is not what causes appreciation, it is in of itself a description of that very appreciation. Again, appreciation RELATIVE to something. You seem to be ignoring this very important fact.
You also created circular thinking. In a prior comment you said the deflation causes monetary velocity to fall, and then you say monetary velocity causes appreciation. Appreciation is where the deflation comes from. So, which is it? Deflation pops into existence and causes monetary velocity to fall? Or a magical appreciation occurs from a slowing monetary velocity and causes deflation to occur?
> In a fractional reserve system
Yes, in a central banking system the 'monetary velocity' is artificially controlled. Almost completely. You can push money into parts of the economy to inflate things at a whims notice. Then everyone loves that the "values" of investment vehicles are bigger than they were yesterday.
So, you are effectively only arguing for the status quo. But the status quo is not working. Is this really your best argument?
> volatility, and there is price discovery
Ah, word games. Even if someone might provide definitional differences, there is no objective real-world difference between the two things.
---
Here is what I argue for:
Not allowing natural (not managed) volatility (or 'monetary velocity') -- MOVEMENT -- is a fool's game. You cannot beat basic game theory that is dependent on the biology of humans. You just can't. There is no fancy economic jargon that can allow you to. There is no monetary policy that will enable you to. You can pitch and sell artificial manipulation of the economy (via economic theories or political ideologies) but you are only pitching bubbles.
Allowing natural periods of deflation in the economy allows for volatility, trade, flux, interest, investment, wins, ... and here is the most important word: losses.
Loss. It allows for someone to actually lose.
These hippie boomers have never had to lose anything in their lives. The artificial manipulation of the markets and the economy reflects this mindset and attitude.
There is more than one currency and that fact alone negates any possible argument against allowing deflation to occur naturally in the economy. If it occurs because of temporary "contracting supply" (of one currency) then so be it.
The dollar, and its associated monetary policy, isn't something that has been perverted by evil external forces. I'm arguing the 'status quo' because thats how it was intentionally designed and thats how it intentionally works. Not wasting my time describing some fanciful alternative perfect system
Asset trading is about as natural to human civilization as you can get. Having a socially accepted intermediary asset is not much beyond that. Simply saying its not a "natural phenomenon" is not a mathematical or scientific self-validating statement. It's just a statement.
> it's their currency.
Yes, and literally anyone can create a currency out of thin air. Other people will use it if they decide to assign it value.
> Its existence is inherently political
No, It's existence is civilizational. It technologically fulfills the ability to have high transaction rates of an increasing population that other assets can not satisfy. the ability to transact more easily and more quickly is what determines the bounds of the potential of an economy. So, of course, all major civilizations have utilized this technological tool for political means. As a way to increase and concentrate power through economics.
This is fundamentally different from intermediary assets being constructed initially as a political tool. Money is technology. It is not politics. Like literally any other technology it can be used politically.
> isn't something that has been perverted by evil external forces
I am not sure what insanity you are trying to project onto me, but I never even came close to implying anything along these lines. You should attempt to avoid fallacious arguments a little harder.
> some fanciful alternative perfect system
You mean like your supposedly perfectly controlled and singular monetary systems with artificial inflation hoses? Have you seen the economy?
If this is your dream economic system then why not live in China with even more inflation and more centralization? Or maybe you already do. Genuine question, nonetheless.
Even with your assumption suppose you accept their offer. The $80 received should in turn be able to purchase something that was worth $100 dollars yesterday. The nominal value may have gone down but the quantity of goods and services you can buy with it is the same.
Deflationary thinking meant everyone expects prices to be lower tomorrow, so no one spent money on needed items and simply waited to make purchases to save money. This slowed down the economy into a death spiral that they still are climbing out of. Mortgages became crushing. You can't get a raise. Interest and deflation work together to make debt nearly inescapable.
The point of money is to be spent, i.e. facilitate the simple transfer of value. An excellent example of the direct damaging effects of deflation is bitcoin. No one spends it. It has utterly failed at its goal to become a primary mechanism to transfer value. Everyone expects its value to keep increasing so it is almost never transferred (to the point that hodling and never spending became a meme). Slowing down the exchange of money is what kills an economy.
The way inflation is calculated is quite flawed from my understanding (they don't include rent/mortgage payments or college tuition - prices of which have exploded in the past two decades).
You are fundamentally misunderstanding the purpose of the modern central banking nonsense that the parrots you are replying to merely repeat without any understanding whatsoever of how absolutely devastating it is to the economic stability of the middle class.
Just for illustration, imagine if you know that you can buy 2 rolls of toilet papers 2 months later for the price of 1 toilet paper today, and you don't have an immediate need for toilet paper, then most likely you'd wait.
Spendings is what drives the economy and it's the circulation and liquidity that help the economy becomes more productive.
This is called a sale and happens all the time in consumer spending. It is a well known phenomenon that many people (not all) will wait to purchase when they have more purchasing power. But it is also well known that a subset of the population will not wait.
I am not sure how you perceive your arguments as being a rigorous support of your position or a rigorous critique against the opposing position. It is truly mysterious.
Money is not wealth. Money is a tool. The goal, at a macro level, is not to have people having big piles of money. Because money, in and of itself, is not that important. What matters is how the money is used. And the more it's used, the better. Money being used is consumption and investment.
What you call "a better system of stock trading" is called a "bond". It's debt and works similarly to how you described except the reward % is typically fixed.
Can you please stop making up your own economics? A currency is an asset. End. Of. Story.
Deflation is a directional property of an exchange rate between a pair of assets.
By "used" you mean traded. And yes trade increasing (of which consumer spending is a kind of trading) is a good thing. You only get that with volatility. This can be created through an inflation but dually it is also created through deflation.
There is nothing wrong or immoral about a particular asset going up or down in price relative to another asset.
This unscientific stance of considering all deflation as immoral is based on absolutely nothing except emotional propaganda.
You have provided exactly zero proofs verifying that any and all deflation in a currency is a bad thing. And you will never be able to provide such a "proof" because it does not exist.
Let's see if you are even capable of constructing a proper intellectual retort. My doubts run high.
Precisely because it did happen a long time ago. None of what is pointed out is new. It is basically celebrating Apple is an US business.