Can there be not enough money? Can the amount of money be constant?
ฝัง
- เผยแพร่เมื่อ 6 ธ.ค. 2022
- Can there be not enough money, to prevent it to... be money at all? Can the amount of money be constant? How would non-inflationary money function?
Learn Austrian Economics in a fun way!
LINKS
BLOG:
ANIMATIONS: toin.pl/en/
SUPPORT our project: bit.ly/2fgJR9e
Visit our website: econclips.com/
Like our Facebook page: bit.ly/1XoU4QV
Subscribe to our TH-cam channel: bit.ly/1PrEhxG
★★★★★★★★★★★★★★★★★★★★★★★★★★
Music on CC license:
Kevin MacLeod: Home Base Groove - na licencji Creative Commons Attribution (creativecommons.org/licenses/...)
Źródło: incompetech.com/music/royalty-...
Wykonawca: incompetech.com/
★★★★★★★★★★★★★★★★★★★★★★★★★★
Econ Clips is an economic blog. Our objective is teaching economics through easy to watch animated films. We talk about variety of subjects such as economy, finance, inflation, money, investing, monetary systems, financial markets, financial institutions, cental banks, wealth, financial crises and business cycles. If you want to know how the economy works and understand why it works this way - join us on econclips.com and learn Austrian Economics in a fun way!
Congratulations for your first 100k subscribers. A really useful channel, I'm grateful for being a subscriber to this channel.
Thank you, from Ethiopia 🇪🇹
So the technical issue of deflation aside, isn't there an economic issue?
Meaning doesn't constant deflation mean you own money is a good long term investment meaning less incentive to invest in means of production meaning less production?
I've always been against stable quantity of money because of that very problem but if it was answered I would have changed my mind. This video however did not adress that problem at all.
Saving is good. It frees up land, labor, & capital to be used by demanded ventures through sound lending. You deter consumption today for future production, & thereby more consumption.
This stupid idea that nobody would spend has no evidence or logic behind it. People need to spend on necessities. Would you not buy a new game just because it's price will go down in the future? What's the point of money if you never spend it? Each person is at a different point in their lives. The old want to spend the savings they've accumulated over the years, while the youth are encouraged to save.
There's still a continuous circular flow of the currency. Necessities are prioritized. The elderly who've worked & saved their whole lives have more resources allocated to them.
*This is good.*
Let's say (for the sake of argument) that nobody ever spent, what do keynesians think that does? It hurts businesses, creates shortages, & they're forced to raise prices to have any chance of surviving. This encourages people to spend. Even if numerical prices fall from liquidations, *real* prices rise (as there's less stuff).
Even in the most extreme unrealistic scenario it's self correcting.
What's the alternative? Inflation merely encourages people to save in scarce assets. That reduces their supply for actual consumers & producers. People, especially the rich, flip & hold stuff like housing, that otherwise could've been used. Saving in the currency serves a valuable purpose for the whole economy.
Businesses forcast future demand & supply for it. People only save for future spending.
Through saving, many unnecessary present oriented ventures are either liquidated or restructured towards future profit. Since rates are lowered from increased savings, & land, labor, & capital are now cheaper, they can better produce for said future. Since there's no tug-of-war over resources between future & present oriented production, longer-term projects can reach their full potential.
- The fact that holding deflationary money is *one* good investment doesn't mean that it's the *best* investment.
- Take a look at the industry that is deflationary today - tech. Which mobile do you use? If you'd just held on to your money, you could have bought a better phone in almost the same cost in a few years (this has often been true in the past, don't ask me what will happen in the 8% inflation environment). Just because money is gaining in value doesn't mean people will indefinitely postpone spending that's more valuable to them than the money.
- What it will do is discourage senseless consumerism, to some degree: Better to burn my money on nonsense than hold on to it.
- When one person saves money, it's loaned out by the bank to another person who may spend or invest it. When invested, it goes towards longer term projects. This is what improves our productivity and helps crate more prosperity in the future.
Just like the unit of 1 mesisium is sub divided into smaller units further and further as the economy develops the modern currency on the other hand increases its unit designation. From my point of view if I buy 6 peices of pastry and combine to form a cake or if a buy a cake and divide it into 6 peices doesn't alter anything for me.
How do austrian economics explain bubbles forming in an economy? If more people are saving causing a reduction in the interest rate wouldnt this caused more risk of assets like land to form bubbles?
The answer depends only on if your money can be infinitely divided into smaller chunks. Good luck sharing one single dollar with a billion people even if you can exchange it for pennies, but if you can divide into pieces that are worth 1 quadrillionth of a cent, then there would be no problem to the world sharing a single dollar.
You just described bitcoin. If ever need be, they could update the blockchain for even more divisiblity. That'll be like a century from now though, considering how divisible it is.
@@generalsalami8875 Yep, that was my point. and that is why bitcoin is so awesome. Well one of the many reasons.
Yes this is it. This is why there have been lack of money throw history(This has nothing to do with a modern currency).
Yes definitely. Because money is a medium of INDIRECT exchange its quantity should remain constant.
No matter how much money do we have, we still don't have enough. It was, it is and it will be.
Cuz 1% of people has 40% of it
@@LIVdaBrand No, it's because people can't get enough of anything
yes
No, but it should be regulated by the market not a central bank.
bitcoin sounds so perfect
Cute but way to complicated
Just say the price of gold can go up without increasing the supply of gold and be managed by simply dividing the currency into smaller denominations
I agree. Waaay too complicated to follow.
Hey are you fine why you have stopped uploading new videos?
How would loans work in fixed supply?
Someone would have to save first, then loan you money. That's how things worked until the "modern" era. The rate of interest on the loan would be based on the prevailing rate of interest, factoring in the particular risk that the borrower appears to be to the lender.
@@acem82 suppose i borrow 100 from a bank and promised to pay back 101, wouldn't it be harder for me to pay back 101 with falling prices over time
@@kiran8656 Yes, it would. But, the rate of price inflation/deflation is already factored into the nominal rate of interest. So, if the real rate of interest were 5%, but price inflation is expected to be 2%, the nominal rate of interest would be 7%.
It is the same way with price deflation, but in the opposite manner. If price deflation is expected to be 2%, at a rate of interest of 5%, the nominal rate of interest would be 3%.
If you now think to yourself that the rate of price inflation is 8% and the rate of interest on a home loan for 30 years is 6%, and that can't possibly work, congratulations, you are correct! The world goes absolutely insane when there's fractional (or zero) reserve banking, and the central bank tries to hold the rate of interest artificially low.
@@kiran8656 No because you would simply have to save up money to pay off the loan.
@@kiran8656 you must earn that interest, yes. That's good
Money is a tool. A tool of exchange and store of value. Fortunately gold is infinitely fungible with modern technology. You can buy plastic enclosed gold bills that contain 1/1000oz of gold. They sell for about 5$ and the brand that i prefer are called Goldbacks.
Still how would you fix defalation ?
Deflation isn't necessarily bad
Deflation is great
Technically speaking, there are 2 types of inflation and deflation.
1. Price inflation/deflation, a change in the price of a product.
2. Monetary inflation/deflation, a change in the amount of money in the economy.
In the case of Misesium, there is no change in the money supply, so you are (apparently) speaking of price deflation.
So, my response is to ask another question, what is bad about price deflation? Every unit of money can now buy more goods. How is that bad? Any amount of time that the money unit isn't spent it becomes more valuable. That's a good thing!
The reason why "economists" (not worth the name) complain about price deflation is because:
1. They think that people will immediately spend more if their money unit is losing value (which is sort of true).
2. They recognized that price deflation correlated to "busts" in the economy.
Point 1 is true, in that people don't hold money that is losing value. The reason they think spending is good is because spending is their "god". They have no concept that it's saving that allows the accumulation of wealth, not spending.
Point 2 is simply correlation, not causation. Price deflation doesn't cause economic downturns, it's the mechanism by which the economic downturn is dealt with by those living through it and what causes the downturn to cease!
If you still think price deflation is bad, ask yourself this, if you had to choose between 2 mediums of exchange, one has 100% price inflation per year, or the other that has 100% price deflation per year, which one would you choose?
-An Economist
The market regulates itself...
@@neonschaf indeed
“Misesium” lol
Nice video, hire a new narrator though
completely wrong view of what money is, what it represents... look up 'debt theory of money' and please realize it is nothing else than institutionalized IOUs.. or in more simpler words - promises. Money simply enables DELAYED exchanges of products between market participants (one participant hands over product while the other hands over promises.. one becomes the creditor and the other the debtor - this is what elevates our economies above barter and makes highly specialized product chains possible that make our economies so efficient and comfortable).
Our centralized fixed exchange rate monetary systems who do NOT consider the limited validity of the time-span of the promise cause misallocations of resources and ultimately market failures, as the people who are put in charge of it do not understand how it works unfortunately..
Oh yeah fair point, banks also help allocate resources to profitable ventures by giving bank loans while they create more money/credit. That function can't be played by fixed money supply if I understood it correct
@@ajinkyapathare isn't this why we have financial crisis in the first place? Banks are getting too powerful
@@Omer1996E.C IDK bro I'm still learning & trying to understand
Joan you are incorrect. Sound money is the only way
1. One of Say's Laws can be summed up as "nothing can be consumed until it's produced". That is to say, thinking that debt explains exchanges of goods puts the cart before the horse.
2. Rather than a theory about money, why not study where money actually comes from. Wouldn't that be more helpful? So here's a video on that:
th-cam.com/video/sbi6UZQmJUc/w-d-xo.html
No. The money supply should not be constant. The wild swings in the purchasing power of Bitcoin occur precisely because the supply does not adjust to match the changing demand to hold Bitcoin.
So who will get the privilege of spending the newly minted currency units? You? Your friends? Your friends in the government mafia?
There will always be inflationary theft from the poor with the mindset that you have put forward.
Bitcoin is not (yet) money, which is to say it isn't the commonly accepted medium of exchange. It isn't (yet) widely held. It is still in its infancy as a medium of exchange. People still aren't sure about it and governments haven't yet decided how hard they are going to make it for people to use it. That's why there are wild swings in its purchasing power.
Bitcoin is not a currency right now, it is a stock. That is why it behaves like a stock and not a currency.
@@MegaLokopo Then why are they called "cryptocurrencies"? What does the stock own and what dividends does it bring?
You see, when you actually analyze things, you get to the truth.
@@acem82 The name of something does not determine what it is. Most stocks are meaningless in "what they own" unless you have almost all of them.
Besides the name what makes it a currency? What percentage of the people who own a portion of it, actually use it as a currency.
You see, when you actually analyze things, you get to the truth.
You can't judge a book by its title.
Misesium... I see what you did there