Imagine your boss factoring in a standard pay cut for everyone each year, to keep ip with deflation. That would be so demoralizing.
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PSA - things I should have done....
- Thread starter drgndrvr
- Start date
Is that any different than a standard pay raise to keep up with inflation? Other than the number getting smaller but if you standard of living stayed the same or went up, does the smaller number matter?
Negative interest rates! To keep with the analogy, imagine having to pay your boss every day for the privilege to work.
It isn't what we think about our "money". It is how the government and banks can manipulate our "money" in the name of monetary policy.
You're a billionaire. Net worth = assets - liabilities, not liquid assets - liabilities.
Doge Coin slippers!
Until musk tweets something silly and your stock tanks. Is it really an asset or a liability?
It’s an asset. You can borrow against it.
It's not a liability unless it's a debt someone can collect from you, and shares don't work that way. Worst case, the company goes into bankruptcy and the share value goes to 0. It can't go negative; no matter how badly the company does, if its assets are wiped out, the creditors can't collect against other assets of the ownership. That's like the entire point of a limited liability corporation, and where the whole "limited liability" part comes from. Our ancestors figured out that debtors' prison tends to stifle innovation.
The term you're looking for is "volatility."
FYI, most companies listed on the NYSE or NASDAQ aren’t LLCs
I'm fully aware, but that's irrelevant to the point I'm trying to make here. The point is the general concept of limited liability.
Right, but if you borrow against it and your lifestyle depends on it then you're hosed if it goes to zero because you can't pay a mortgage off of zero.
My point is that the monetary system already allows me to buy real things off of things that only have value because we believe them to. And if that belief falters then you're screwed.
The ability of the bank to go to negative interest rates is not something I am sure I am comfortable with.
Me too. But it has happened in several places including Japan.
To be clear, negative inflation rates do not necessarily portend a deflationary spiral; they are used as an instrument to drum up inflation. Japan and some European countries have tried it. Some economists have suggested using negative inflation rates to avoid what's called a Liquidity Trap, although, it is a poorly studied economic concept relative to other ones, partially because, until about 2016, no one had really tried it so it was all just theory.
But think about it: if you make it such that keeping your money in the bank costs you money, you're more likely to spend it or invest it. The potential upside: actual consumerism driving demand to juice a stagnant or shrinking economy. A potential downside (beyond the obvious of hurting savers/retirees, etc.) is that you may just inflate the price of stocks, bonds, and other assets without any real addition to their value (some would argue that's already happening in our current inflationary environment).
I'll have to read the article about how digital currencies could lead to negative inflation rates.
Edit, I see it's behind a paywall. What's the TLDR? Because of less demand for cash, we have deflation in USD, thus interest rates go to zero or below in order to prop up demand for cash (by basically forcing it to be spent)? I personally think it's a bit of a stretch. I also think the hype over crypto is overblown. My questions that I never get good responses from the disciples of crypto currencies are (but I am open minded to good answers):
But think about it: if you make it such that keeping your money in the bank costs you money, you're more likely to spend it or invest it. The potential upside: actual consumerism driving demand to juice a stagnant or shrinking economy. A potential downside (beyond the obvious of hurting savers/retirees, etc.) is that you may just inflate the price of stocks, bonds, and other assets without any real addition to their value (some would argue that's already happening in our current inflationary environment).
I'll have to read the article about how digital currencies could lead to negative inflation rates.
Edit, I see it's behind a paywall. What's the TLDR? Because of less demand for cash, we have deflation in USD, thus interest rates go to zero or below in order to prop up demand for cash (by basically forcing it to be spent)? I personally think it's a bit of a stretch. I also think the hype over crypto is overblown. My questions that I never get good responses from the disciples of crypto currencies are (but I am open minded to good answers):
- Explain to me how this is different than FOREX trading/speculation?
- Explain to me how this isn't the lesser/greater fools' theory in action?
- If you think there is a fixed number of a specific currency (which I understand there is) which you think is the root solution of ending inflation (which it isn't), then what happens when new currencies enter the market like Doge Coin, Ethereum, and other non-bitcoin competitors? Now they are different currencies, but in theory, if they just announce they will fix their end fixed value to the same as another, then you've doubled the amount of crypto currency available without an underlying increase in actual value?
- What societal problem does this solve compared to investing in a company that does solve a problem that people pay that company to do or manufacture?
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