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Comment by timwiseman | Hacker News Reader

Because the currency economy is mostly a zero-sum game in the sense of total money ownership (barring inflation),

This statement is true in its literal sense but very misleading. Holding currency is close to a zero sum game, holding wealth is nowhere near that.

If someone were to, say, sell me a pound of gold for $1, he would win in terms of pure currency. He would have one more dollar, and I would have one less, but I think I would come out ahead.

Similarly, if someone sold me a tool I needed to do my job, he would clearly win in terms of money in that transaction, but I could turn around and use that tool to create new things that never existed before and create more value in the world.

Paul Graham talks about this in more detail and more eloquently than I can hope to at http://www.paulgraham.com/wealth.html

(Edited to add a small comment).

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This statement is true in its literal sense but very misleading. Holding currency is close to a zero sum game, holding wealth is nowhere near that.

I already understand that "value" can be generated regardless of how much currency is available. Why is everyone here on HN in a rush to ignore that currency exchange is a zero-sum game and keeps trumpting that wealth can be generated? Perhaps it is because Paul Graham wrote that article.

Wealth is a different subject from currency. You can generate all the "wealth" in the world, and if there is only $100 circulating in the world, all that "wealth" isn't magically going to expand this $100 except when you convince the government to print more money.

This has important limitations on the liquidity of your "wealth". Let's say that you've created $1 quadrillion worth of meat. You want to convert this into alternative forms of wealth such as currency and medical supplies. However, is it at all likely that you will be able to convert all this wealth before it expires? Nope. And this is one of the most important distinctions between wealth and currency.

The supply of currency is artificially limited by the government, while the supply of wealth is an arbitrary measure that people decide to assign their work and belongings.

wealth creation with fixed currency causes deflation. deflation means you can now buy more products and services with the share of the currency you do have. so you're wrong.

Deflation is a good thing. It means the cost of living goes down.

As long as you have a fungible currency - a liquid currency - deflation is a boon.

Everything should be getting cheaper as technology advances. The only reason it doesn't is because of the influence that codexon has been trying to explain. The currency game is zero-sum. It was designed that way. It's one giant pyramid with the BIS at the capstone.

I never said deflation was a bad thing. although I agree that the current fiat monetary policy is fucked, calling it a pyramid scheme is naive at best.

Can you read? I didn't call it a pyramid scheme. I called it a pyramid.

If you think deflation is good for liquidity, you are missing econ 101 knowledge. You only have to look to Japan in the 90's for proof or the great depression!

When deflation rises, businesses start feeling uncertain about the amount of money they can pull in regularly and start laying off workers. Individuals start to save more and spend less. Instead of hiring workers to do their lawns or buying meals, they will try to do everything themselves. In this manner, the "monetary" value of "wealth" from lawn mowers and processed food producers approaches 0.

This is another fundamental difference between the wealth pool and the currency pool.

you mean people will forgo consumption in favor of investment? the horror!

Exactly. Codexon, saving just causes another, ostensibly wiser, form of spending. If you save your money in a bank, then they will lend it out where it will be spent, usually on capital goods (whatever that means anymore, or ever meant). If you save it by buying some stock, you drive up the stock's price, making it more a better deal for the company to issue more stock (and spend the proceeds in building their business). Same thing with bonds.

I think you are being a bit naive here.

Think about this. If everyone saves all their money, who is going to do the spending? How is anyone supposed to earn money?

The only people you can trust to earn money from are the people who aren't saving all their money.

If you save your money in a bank, how are you and the bank supposed to make interest if everyone starts saving and no one takes out a loan??? Your savings rate will drop towards 0 in a situation like this. If companies act in the same manner, why should they issue any stock??? What is the benefit for them if they prefer to save up and use their own cash instead of share holder cash?

What happens in a situation like this is that the stock prices don't grow at all as you can see here in Japan for nearly 20 years:

http://www.progressdaily.com/wp-content/uploads/2007/10/Nikk...

I recommend you think about these points for a while before discussing this matter again.

Codexon, on this site people use a civil tone. Please read this: http://ycombinator.com/newsguidelines.html

Also I'd rather not debate economics, sorry.

See my reply here to see why that is a naive point of view.

http://news.ycombinator.com/item?id=1000181

Yes, assuming you didn't try to hoarde the currency. You would sell it in large portions, buying what you needed with other things in the process. There is only a problem if you want to actually hold $1 quadrillion in currency, not at all if you want to hold $1 quadrillion in value.

The supply of currency is artificially limited by the government, while the supply of wealth is an arbitrary measure that people decide to assign their work and belongings.

Fiat currency must, by definition, be artificially limited by the government. It is created by governments and given value only because they assign it value (largely through accepting it in payment for taxes). Nonfiat currency such as gold bullion or else paper money issued back by gold is limited by the available supply of whatever commodity is being used. I believe, though I've never verified, that all currencies in major use today are fiat.

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