Quote from: ffe on March 06, 2015, 03:37:34 PM

Quote from: johnyj on March 06, 2015, 03:09:39 AM

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So, the claim of deflation's negative impact is just based on a stubbornly hold belief that currency is a benchmark of value. In fact the whole modern monetary theory is constructed on this blind belief

By this argument inflation is irrelevant since inflation's "negative impact is just based on a stubbornly held belief that currency is a benchmark of value".

By this argument all the "benefits" of deflation are an illusion.

The observable fact is that the adjustment from mild inflation to mild deflation is painful. People lose jobs because both employees and employers do not reduce salaries fast enough and loans are paid off in fixed amounts and end up sucking more resources than expected to pay off and therefore reducing investment.

The ironic thing is you are right that, theoretically, the value of money does not matter and is quite arbitrary. It's the unforeseen changes in the rate of change of money value that causes problems. Steady is best. You can write contracts (loans and employment contracts) that take a steady %2 inflation or a %2 deflation into account.

So, given that we were at %2 inflation, why not just leave it there since contracts already take that into account? Why call for unneeded pain by calling for switching to a currency with deflation when the benefits are an illusion?

Exactly, if you get rid of the illusion of stable value of currency, then all the talks about inflation or deflation will be dismissed. In fact, even if you use currency as benchmark of value, in a same day, something's price is going down and some other things' price is going up, inflation and deflation happens at all levels at the same time in the economy due to supply and demand change, it does not matter

But saying that deflation will destroy job and create recession is some kind of political campaign: Banks want to create more money for themselves, so they prefer an inflative model, so they first inflate it and then stop printing and crash the economy, and tell people that deflation is bad, so that they could print more money for themselves. Considering that FED has successfully printed money of future 30 years and handed them to commercial banks, the success of this political campaign is enormous

If the mainstream economists insists on a deflative model, the world will be a totally different world, at least banks won't get a chance to rob during a financial crisis, and there would never have been a financial crisis in the first place