If you borrow a million dollars from the bank to build a house and then in five years that house is worth half a million…
I don’t understand much. What so bad about house losing value, if we never intended it as capitalistic investment?
Everything suppose to be “utilitarian” basis instead of ever-inflating “profit” basis that hurt majority, no?
Just my curiosity why deflation is a bad thing, other than monetary incentive system broke down and no one working (right now, monetary system still broke down on opposite spectrum due to purchasing power collapse, I assume?)
Im not sure what you are trying to say exactly. If you are running your responses through a translator you might try using smaller words so more of the meaning comes through.
Say you owe the bank roughly a million dollars and the house is only worth half a million. If you continue to pay the bank, you are paying double price for your house, plus interest. If you defaulted on the loan you could show up at the bank auction in a fake mustache and get it for half price. There are people out there who would work themselves to death to pay their mortgage because they see it as their sacred duty to the bank. Those people are suckers, and they end up very poor in this scenario.
Now keep in mind that this isnt just house prices were talking about. Stock prices, salaries, food, land, machines, fuel, clothing, vehicles, every month the price of all of it goes down and the value of little slips of paper goes up. This is the ultimate passive income. If you are rich you cash out everything, put your paper in a vault and each month you become richer. There no investment, no economic growth, no liquidity. The economy strangles to death while the people with all the paper control everything thats left.
This is the dream of all the gold, silver, crypto bugs trying to create deflationary currency. They figure they can stockpile enough of the new currency now and come out the other end of the disaster as the new owners of everything.
Even if the value of money goes up, it’s by a paltry 1-2% and it still wouldn’t seem to make sense to hoard rather than invest, unless I’m missing something. In what scenario would any rich person just sit on their money? Likewise, the impact of 2% deflation on a bank loan is well within the variance in rates we see today, and I imagine in such an economy the rates would be adjusted somewhat to compensate.
Simply put, the difference between an inflating vs deflating currency doesn’t seem enough to drastically alter people’s behavior. In the short to medium term it seems almost a non-issue, at least for regular people, and in the long term people won’t get fucked out of their life savings. I imagine the vast majority of the population doesn’t invest their money. Which policy would they prefer?
Tiny short term changes either way will not be enough to drastically alter people’s behavior. If those changes are long term and predictable they will absolutely change people’s behavior. 2% may not be much year over year, but over a 30 year mortgage you can expect to take a bath on any house you buy, even with 1% interest rate. And people, rich and poor, do horde cash when they think that returns are going to become negative. In a very mildly deflationary world this happens much more often than in an inflationary one.
Just thought you’d want to know that you probably meant “hoard” as in “accumulate (money or valued objects) and hide or store away” instead of horde, which is a crowd or equivalent.
Say you owe the bank roughly a million dollars and the house is only worth half a million. If you continue to pay the bank, you are paying double price for your house, plus interest.
Material cost or anything spent never change? We can’t regret buying expensive computers in past? Everything, even if loan. Loan only default on bankruptcy, “no property ownership ban”? Do people want that?
There no investment, no economic growth, no liquidity.
Incentive of “profit” system. Until it backfires with overloaded money. Active income generate economy of production + money. Passive income skip production, overloaded money, inflation. Without profit system, big projects can only funded by slower tax/donations. But no one creating extra profit/inflation.
So you now get my point? Deflation happens because of good automation (slaving machine). Stopping passive income investment stops inflation. While waiting new automation, things get lesser labour and no inflation to demand additional income.
I agree, it’s only natural a house would decrease in value after it’s been built. Just like cars or anything else. You could mitigate that by renovating etc of course.
I don’t understand much. What so bad about house losing value, if we never intended it as capitalistic investment?
Everything suppose to be “utilitarian” basis instead of ever-inflating “profit” basis that hurt majority, no?
Just my curiosity why deflation is a bad thing, other than monetary incentive system broke down and no one working (right now, monetary system still broke down on opposite spectrum due to purchasing power collapse, I assume?)
Im not sure what you are trying to say exactly. If you are running your responses through a translator you might try using smaller words so more of the meaning comes through.
Say you owe the bank roughly a million dollars and the house is only worth half a million. If you continue to pay the bank, you are paying double price for your house, plus interest. If you defaulted on the loan you could show up at the bank auction in a fake mustache and get it for half price. There are people out there who would work themselves to death to pay their mortgage because they see it as their sacred duty to the bank. Those people are suckers, and they end up very poor in this scenario.
Now keep in mind that this isnt just house prices were talking about. Stock prices, salaries, food, land, machines, fuel, clothing, vehicles, every month the price of all of it goes down and the value of little slips of paper goes up. This is the ultimate passive income. If you are rich you cash out everything, put your paper in a vault and each month you become richer. There no investment, no economic growth, no liquidity. The economy strangles to death while the people with all the paper control everything thats left.
This is the dream of all the gold, silver, crypto bugs trying to create deflationary currency. They figure they can stockpile enough of the new currency now and come out the other end of the disaster as the new owners of everything.
Even if the value of money goes up, it’s by a paltry 1-2% and it still wouldn’t seem to make sense to hoard rather than invest, unless I’m missing something. In what scenario would any rich person just sit on their money? Likewise, the impact of 2% deflation on a bank loan is well within the variance in rates we see today, and I imagine in such an economy the rates would be adjusted somewhat to compensate.
Simply put, the difference between an inflating vs deflating currency doesn’t seem enough to drastically alter people’s behavior. In the short to medium term it seems almost a non-issue, at least for regular people, and in the long term people won’t get fucked out of their life savings. I imagine the vast majority of the population doesn’t invest their money. Which policy would they prefer?
Tiny short term changes either way will not be enough to drastically alter people’s behavior. If those changes are long term and predictable they will absolutely change people’s behavior. 2% may not be much year over year, but over a 30 year mortgage you can expect to take a bath on any house you buy, even with 1% interest rate. And people, rich and poor, do horde cash when they think that returns are going to become negative. In a very mildly deflationary world this happens much more often than in an inflationary one.
Just thought you’d want to know that you probably meant “hoard” as in “accumulate (money or valued objects) and hide or store away” instead of horde, which is a crowd or equivalent.
Let me try understand this.
Material cost or anything spent never change? We can’t regret buying expensive computers in past? Everything, even if loan. Loan only default on bankruptcy, “no property ownership ban”? Do people want that?
Incentive of “profit” system. Until it backfires with overloaded money. Active income generate economy of production + money. Passive income skip production, overloaded money, inflation. Without profit system, big projects can only funded by slower tax/donations. But no one creating extra profit/inflation.
So you now get my point? Deflation happens because of good automation (slaving machine). Stopping passive income investment stops inflation. While waiting new automation, things get lesser labour and no inflation to demand additional income.
Where’s the loophole in my opinion?
I agree, it’s only natural a house would decrease in value after it’s been built. Just like cars or anything else. You could mitigate that by renovating etc of course.
Thats depreciation, not deflation.
Well yes. I have a cold and can’t think but I mean inflation makes the price go the other way.