Is there compelling evidence that inflation discourages hoarding? I don't think anyone would agree that USD-centric societies discourage hoarding, unless you think something like investing in mutual funds doesn't fit the term.
I don't think anyone would agree that USD-centric societies discourage hoarding.
No offense, but I think it would be wise to familiarize yourself with the basics of a subject before forming high-confidence blanket opinions about it like that. (The same applies to your other comment about why anyone would think an inflationary economic policy would be desirable at all.)
Sorry if I sound patronizing, but as it happens the link between inflation and hoarding is one of the few well-established empirical facts in economics [1,2,3] with ample historical evidence both from the well-documented shortage effects of price controls [4], to the well-understood effect of changes in bond yields on the money demand [5], which is the cornerstone mechanism of basic monetary policy.
[3] Milton Friedman once said: "We economists don't know much, but we do know how to create a shortage. If you want to create a shortage of tomatoes, for example, just pass a law that retailers can't sell tomatoes for more than two cents per pound. Instantly you'll have a tomato shortage. It's the same with oil or gas." From http://en.wikipedia.org/wiki/Price_controls.
> No offense, but I think it would be wise to familiarize yourself with the basics of a subject before forming high-confidence blanket opinions about it like that.
High-confidence blanket statement? I was asking a question. The opinion in question was poorly worded-- I understand that inflation means money either loses value or must be reinvested in the economy. I just don't think that inflation prevents a wealth incumbency (which I inappropriately referred to as "hoarding").
> (The same applies to your other comment about why anyone would think an inflationary economic policy would be desirable at all.)
I was referring to how the protocols have an identical economic policy (majority rules), not to inflation vs. deflation as economic policy (which I stated explicitly).
I was mainly curious about whether or not inflation vs. deflation matters in terms of preventing a rich-get-richer society. My admittedly poorly worded question seems to have given many HNers an opportunity to feel good about letting me know they understand a classical economic concept.
Absolutely, mutual funds and all investments assume some level of risk because to keep it in cash means losing money to inflation. There would be way smaller and more risk averse pool of investment capital if the dollar were deflationary. For example many portfolios whose goal is wealth preservation buy municipal bonds which fund public works projects(and certainly have a non-zero risk of default).
Investing in _anything_ productive is the opposite of hoarding. Hardly anyone in an advanced economy hoards large amounts of physical paper money; banks keep it to satisfy customer demand, but would much rather have the money in their central bank deposit account. A couple of central banks in Europe are experimenting with tiny negative rates on these deposit accounts precisely to encourage them to lend it out.
If you _invest_, you're either buying a productive asset, or storing something valuable for a period of time, or giving money to some other business to spend on equipment, employees etc. in the hope of future return.
Traditional economic theory says that inflation discourages hoarding. Inflation forces those with large amounts of capital to put that capital to work through investments to overcome the rate of inflation, or see their wealth decline.
Whether this will hold with dogecoin remains to be seen but is somewhat logical.
Mutual funds are an investment. Hoarding is savings.
One is productive, one isn't. That's the key difference.
The difference is even more glaringly obvious if you think about the difference between equity in a productive company, loans to productive organizations, and simply doing nothing.
Savings accounts have interest rates. The money in savings accounts is used by banks to leverage and invest. It's not really hoarding like holding on to bitcoins is.
Is there compelling evidence that inflation discourages hoarding? I don't think anyone would agree that USD-centric societies discourage hoarding, unless you think something like investing in mutual funds doesn't fit the term.