Holding on to currency or shiny objects is just another form of speculation. Maybe the bank fails. Maybe your house burns down and melts the contents of your safe. Maybe you're robbed. Maybe trade wars massively reduce your purchasing power. Maybe a new source of the shiny objects gets found and it's not are rare as you think. Maybe less people care about that shiny object in the future. Maybe that gold certificate was really just a fraud.
Your argument isn't really related to whether we should incentivize people to bury paper in their backyard or if they should hold bonds or other investments. The answer to your problem is to have better social safety nets.
Of course there is always risk. But one of the supposed goals of fiat money and property rights is to reduce that risk, ensuring the ability to save into the future.
There are countless examples of countries where that trust was broken.
Lets assume the FED makes 0% inflation a policy objective. As the US and the rest of the developed world continues to age, more and more retirees are supported by fewer and fewer working people. In other words a massive portion of the population is spending money, and soaking up resources, while producing nothing. Obviously this is profoundly inflationary but to maintain 0% inflation, the productive members of society will have to work a great deal more and endure policies which are explicitly designed to artificially suppress the value of their labor.
Yes, that scenario is bad and it happens when the Fed is still trying to control inflation.
The people who presented as arguing for 0% inflation are actually more often arguing for a lack of inflation targeting at all, and an end to the practice of creating money. In other words they argue for 100% reserve banking and abolition of the legal right of the central bank to issue new money.
In such a system prices might go up or down, depending on whether the underlying economy is doing better or worse, and governments would simply ignore it. In the case of demographic decline that would mean prices do indeed go up and that would correctly reflect the fact that resources have become scarcer.
vel0city|1 year ago
Your argument isn't really related to whether we should incentivize people to bury paper in their backyard or if they should hold bonds or other investments. The answer to your problem is to have better social safety nets.
bsdpufferfish|1 year ago
There are countless examples of countries where that trust was broken.
SubjectToChange|1 year ago
mike_hearn|1 year ago
The people who presented as arguing for 0% inflation are actually more often arguing for a lack of inflation targeting at all, and an end to the practice of creating money. In other words they argue for 100% reserve banking and abolition of the legal right of the central bank to issue new money.
In such a system prices might go up or down, depending on whether the underlying economy is doing better or worse, and governments would simply ignore it. In the case of demographic decline that would mean prices do indeed go up and that would correctly reflect the fact that resources have become scarcer.