🚀 go-pugleaf

In article <1993Jan22.180808.6155@tandem.com> kenr@orleans.storage.tandem.com writes:
|In article 1jngr2INNfq7@darkstar.UCSC.EDU, david@cats.ucsc.edu (David Michael Wright) writes:
|>
|>In article <1993Jan21.211928.8356@athena.mit.edu> cmk@athena.mit.edu (Charles M Kozierok) writes:
|>
|>|how is [inflation] good? it is rather simplistic to just look at the increasing
|>|price of your house without also considering how the price of everything
|>|else is also increasing, and the fact that the bottom tier of house
|>|buyers is pushed out of the market.
|>
|>Unanticipated inflation is, in general, a good thing: if wages are
|>sticky it gives you the opportunity to work if the real wage is
|>reduced, it makes you economize on money balances so you invest more,
|>it reduces debt and thereby makes it easier to invest, it gives a
|>signal that the economy is improving (which it may be for the
|>reasons above or not) and so boosts consumer confidence. Moderate inflation has
|>nearly always been associated with rising output.
|
|Unanticipated inflation rewards the net monetary debtor and punishes the net
|monetary creditor.  The real value of the money owed by the net debtor erodes
|with inflation, as does the debt held by the net creditor.  One gains, the
|other loses.   Since on whole the amount of money owed equals the amount of
|money loaned, the gains to one party are offset by losses to the other.  It`s
|a zero sum game, and I find it hard to claim that inflation is therefore, in
|general, a good thing.  It`s only a good thing if you happen to be a net debtor.

It is a fallacy of modern simple conventional economics that changes
in distribution do not have significant changes in overall output. We
know this when there are non-lump sum taxes, but what I am thinking
about has to do with the incentive effects. If firms have debts
repudiated, then they can invest more. True, creditors loose, but who
cares, since investment is largely effected by expectations of future
demand, not the supply cost, whatever that is, of credit. If the
economy picks up due to an increase in investment, the Fed and
financial instituions will make available the credit required. So what
I am saying is that the redistribution to investment will increase
output. What is required is that savings be a more insensitve to
reward, which I think is quite reasonable: often the return to savings
is pretty much a rent anyway.
-- 
"There is nothing in the marginal conditions that     
    distinguish a mountain from a mole hill"            
                      Kenneth Boulding                             

					All comments  are mine---(David Wright) 
						david@cats.ucsc.edu.