| ▲ | js8 2 hours ago | |
The problem is you can't really hoard products. Most products depreciate - it's a force of nature called entropy. I think the argument from symmetry still holds, but it leads into a different conclusion. Since products (goods, physical assets) depreciate in value over time, money must too decrease in value. Hence you get inflation. I believe that "natural rate of inflation" is driven by natural depreciation of goods and the free market mechanism that exchanges money and products as you describe. | ||
| ▲ | TheGRS an hour ago | parent [-] | |
Capital has multiple forms, I agree that physical goods generally depreciate over time. But there is also land, equity, and bonds and they all have their own market forces to deal with. I'm hand-waving a lot of arguments and considerations with this statement, but from my perspective one advantage to 2-3% inflation is to incentivize owning capital that will outpace inflation. Land, equity, and bonds all have that potential. Deflation may incentivize renegotiation of labor, but it also incentivizes hoarding of cash, which itself is not otherwise valuable. The value comes from it being passed around through the economy buying more assets. The more purchases -> the more money to be passed around -> the more opportunity to grow the economy. In a deflationary environment (at least in theory) this slows all of that down and decreases economic opportunity, which we generally don't want. | ||