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THE Deflation vs Hyperinflation Thread (merged)
Re: Which will come first, deflation or hyperinflation?
by MrBill » Fri 20 Jun 2008, 05:11:47
$this->bbcode_second_pass_quote('mattduke', 'I') confess I have no idea where you guys are getting the idea that we are going to have deflation. Once the dollar goes to zero, it ain't coming back.
You like Mises, right? He defines money as that which is most liquid and therefore used for trade, and hoarded as a means of saving for the future. Therefore, deflation of one asset can occur relative to another asset. No asset has an absolute value. Only a relative value against other assets. That is why we can see deflation and inflation at the same time regardless of in what form of money we measure it with. Wages are being deflated against the value of energy and commodities as we speak.
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Re: Which will come first, deflation or hyperinflation?
by mattduke » Fri 20 Jun 2008, 09:41:27
$this->bbcode_second_pass_quote('MrBill', '')$this->bbcode_second_pass_quote('mattduke', 'I') confess I have no idea where you guys are getting the idea that we are going to have deflation. Once the dollar goes to zero, it ain't coming back.
You like Mises, right? He defines money as that which is most liquid and therefore used for trade, and hoarded as a means of saving for the future. Therefore, deflation of one asset can occur relative to another asset. No asset has an absolute value. Only a relative value against other assets. That is why we can see deflation and inflation at the same time regardless of in what form of money we measure it with. Wages are being deflated against the value of energy and commodities as we speak.
Well I can tell you haven't read any Austrian economics, otherwise you would know deflation is a contraction of the money supply. Relative prices are just market data. Heck, even Benedict Bernanke will tell you that "inflation is a monetary phenomenon". Duh. I'm always surprised when people fail to grok that prices react unevenly to inflation, not every price goes up (although some prices that went down would have gone down even more without inflation (roaring twenties)). No, I take it back. I'm not surprised anymore. All you deflationistas please, buy long term treasuries, the RISKLESS investment!
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Re: Which will come first, deflation or hyperinflation?
by MrBill » Fri 20 Jun 2008, 10:36:34
$this->bbcode_second_pass_quote('', '[')b]MONEY IS NOT A MEASURE OF VALUE
Money transmits value, Mises taught, but money does not measure value. This distinction is fundamental in Mises's theory of money. "Money is neither an abstract numeraire nor a standard of value or prices. It is necessarily an economic good and as such it is valued and appraised on its own merits, i.e., the services which a man expects from holding cash. On the market there is [sic] always change and movement. Only because there are fluctuations is there money" (Human Action, p. 418).
Any economic theory that teaches that money measures economic value, or that any civil government should establish policies that preserve the value of money because money is a measure of value, is anti-Misesian. You must understand this conclusion if the remainder of this study is to make any sense at all. The call for government-induced stable purchasing power, with or without a government-licensed monopolistic central bank, is an anti-Misesian call for government intervention into the economy. Mises was opposed to government intervention into the economy, including the monetary system.
Mises was adamant: there is no measure of economic value. He was a disciple of Carl Menger. Menger was a proponent of a strictly subjective theory of economic value. Mises insisted that there is no objective way to measure subjective value. He began Chapter 2, "On the Measurement of Value," with these words: "Although it is usual to speak of money as a measure of value and prices, the notion is entirely fallacious. So long as the subjective theory of value is accepted, this question of measurement cannot arise" (TM&C, p. 38). Subjective valuation "arranges commodities in order of their significance; it does not measure its significance" (p. 39). It ranks significance; it does not measure it. This is the theme of Chapter 2.
If it is impossible to measure subjective use-value, it follows directly that it is impracticable to ascribe 'quantity' to it. We may say, the value of this commodity is greater than the value of that; but it is not permissible for us to assert, this commodity is worth so much. Such a way of speaking necessarily implies a definite unit. It really amounts to stating how many times a given unit is contained in the quantity to be defined. But this kind of calculation is quite inapplicable to processes of valuation (p. 45).
The fact that money does not measure value is a crucially important aspect of Mises's theory of money. Perhaps this analogy will help clarify his reasoning.
Money transmits value, Mises taught, but money does not measure value. This distinction is fundamental in Mises's theory of money. "Money is neither an abstract numeraire nor a standard of value or prices. It is necessarily an economic good and as such it is valued and appraised on its own merits, i.e., the services which a man expects from holding cash. On the market there is [sic] always change and movement. Only because there are fluctuations is there money" (Human Action, p. 418).
Any economic theory that teaches that money measures economic value, or that any civil government should establish policies that preserve the value of money because money is a measure of value, is anti-Misesian. You must understand this conclusion if the remainder of this study is to make any sense at all. The call for government-induced stable purchasing power, with or without a government-licensed monopolistic central bank, is an anti-Misesian call for government intervention into the economy. Mises was opposed to government intervention into the economy, including the monetary system.
Mises was adamant: there is no measure of economic value. He was a disciple of Carl Menger. Menger was a proponent of a strictly subjective theory of economic value. Mises insisted that there is no objective way to measure subjective value. He began Chapter 2, "On the Measurement of Value," with these words: "Although it is usual to speak of money as a measure of value and prices, the notion is entirely fallacious. So long as the subjective theory of value is accepted, this question of measurement cannot arise" (TM&C, p. 38). Subjective valuation "arranges commodities in order of their significance; it does not measure its significance" (p. 39). It ranks significance; it does not measure it. This is the theme of Chapter 2.
If it is impossible to measure subjective use-value, it follows directly that it is impracticable to ascribe 'quantity' to it. We may say, the value of this commodity is greater than the value of that; but it is not permissible for us to assert, this commodity is worth so much. Such a way of speaking necessarily implies a definite unit. It really amounts to stating how many times a given unit is contained in the quantity to be defined. But this kind of calculation is quite inapplicable to processes of valuation (p. 45).
The fact that money does not measure value is a crucially important aspect of Mises's theory of money. Perhaps this analogy will help clarify his reasoning.
source: Mises on Money
The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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MrBill - Expert
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