Comment by bko
7 hours ago
I have come around to gold. Money shouldn't be dual purposes, we should apply single responsibility principal. Money should refer to some stable (albeit slightly growing by nature) account of measure.
Prices should get cheaper. That's a progress dividend. We get better at growing food every year, why shouldn't food get cheaper? Imagine a world in which prices regularly go down. You're a passive beneficiary of technological progress.
The argument that prices can't get cheaper or [bad thing will happen] was never very convincing to me. Prices already do get cheaper for large swaths of the economy that have technological progress grow faster than money supply. Cell phones are rapidly depreciating. You can wait 6m to a year and get a significant discount on the latest iPhone version. People don't stop buying iPhones, and Apple doesn't stop investing in iPhones. This is even more true w/ AI models. Investors/companies are burning billions to build tech that will only get cheaper and obsolete in years if not months.
So if you were to try to convince me that deflation would reduce investment or spending, tell me why this doesn't apply to tech products that get cheaper every year.
> Prices should get cheaper.
Does that include the price of labour? Are you okay with your salary going down? Because the historical record shows that's what happens during deflationary periods: producers of good/services see the price that they can sell things for goes down, and so they insist on their suppliers and inputs—including labour input—reduce their prices as well.
Why would it go down? The person is becoming more productive? Do employees at Apple salaries go down because the iPhone they're working on is worth less every year?
Again, tie it to things that decrease in price over time.
Recall that real interest rate = interest rate - expected inflation. The goal of the central banker is to keep real interest rate low. If you have negative expected inflation, that sets a lower bound on the real interest rate since interest rate could only go as low as zero. This gives less flexibility for monetary policy to handle crisis and that scares the central bankers.
Tech product price dynamics benefit from a bunch of things that food doesn’t: they’re optional purchases, they’re early stage developments which have more low hanging fruit, and purchase price can be subsidized with later plays (subscriptions, data sales, network effects, freemium to enterprise pipeline).
Also - I think if you look at the data you’ll find periods off the gold standard where food prices grew more slowly than inflation and even wages, ie food becomes cheaper. 80s and 90s for example.
> I have come around to gold. Money shouldn't be dual purposes, we should apply single responsibility principal.
Gimme all the gold contacts in all of your electronics please, we shouldn't be using gold for those I guess....
> Imagine a world in which prices regularly go down
That world results in a lot of people individually deciding "why buy now, when I can buy for less later" and sitting on their money.
That in aggregate makes the economy much worse.
You're up against human nature here. Money may be an arbitrary numerical denomination of value, but people's behavior around it and how that affects the economy at large need to be accounted for. Having prices slowly creep upwards over time (low inflation) tends to result in more, better things sooner.
Keep reading the comment.
Why do people buy iPhones today knowing that they can get a significant discount in 6-12m for that same iPhone
The state of tech goods is such that they become obsolete and have a finite lifespan, due to battery and compute needs, as well as the "fashion" element of having the newest thing.
The price is dropping over time because you're getting something literally less valuable. The analogy would be, would you pay the same for a bag of rice expiring in 2 years, as one expiring in 2 months?
The argument you're trying to make, would be valid and convincing if Apple lowered the price of a new iPhone with each subsequent release.
Because an iphone is a status symbol, and in 6-12m that same iphone won't grant the same status, a newer more expensive one will.
>That in aggregate makes the economy much worse.
Does it really? A lot of our problems seem to stem from conspicuous consumption. People will still need things (food shelter clothing) and that will motivate purchasing. "Oh n0es people won't buy flavor of the month consumer garbage, what ever will we do" just doesn't track.
> Does it really?
It does, really.
Conspicuous consumption is a miniscule part of the economy, and for every person whose conspicuous consumption drops, you'll have 5 people who can no longer afford food and shelter.
If you'd like to learn more, I'd encourage you to take an economics class at any local community college. Intro level should teach you about lots of new things including this, much more than you'd learn reading HN comments.
> We get better at growing food every year, why shouldn't food get cheaper?
It has gotten cheaper, as a percentage of people's income and spending.
If prices get cheaper all the time, there would be no way for anyone to ever borrow money. Tech products like phones used to get cheaper because 1) they start out at a wild markup; 2) they have intense competition by rivals to build the latest and greatest; 3) the ability to make things faster/smaller continued to increase. Those factors are non-existent for most industries, and they are reducing in effect for tech products over time.
I suggest a bread standard. It's more useful than gold, and it worked in Brazil.
>"We get better at growing food every year, why shouldn't food get cheaper? Imagine a world in which prices regularly go down."
Because a lot of people earn their living by producing or selling food. Your other necessities don't become more affordable just because food prices go down, but if that's your livelihood it becomes at risk. Food was incredibly cheap during the great depression. There's an amazing quote from the PBS documentary series on it; "A sack of flour cost a nickel, but where were you gonna get a nickel?". Steady, controlled inflation via fiat is the only way to keep a capitalistic economy functioning, because you can't micromanage or control the price of everything, and people need money to live. The real issue is stagnation of wage growth while assets explode. It's the transfer of real wealth from earners to owners that has put us in the current position, not absolute prices.