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How does an economy with no inflation/deflation function?
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Alberta Farmer
Posted 12/26/2013 22:43 (#3549672)
Subject: How does an economy with no inflation/deflation function?



West Central Alberta Coldest, wettest edge

Sounds like a silly question, I know.  But in my lifetime, I have not been aware of any economies without the constant threat/promise/fear of monetary debasement or the unspeakable opposite.  It must have existed at some time in history, a society or country with a steady predictable currency?

What most of us consider to be increasing our wealth, is simply keeping up with inflation(think farmland).  We are all proud of our astute investments in these things, even though we really haven't created or increased any actual wealth one iota.  But it has been like this for so long that everything we do is based on the growth model, everyone expects a raise to keep up with inflation, borrowing money is idiot proof when the asset increases even if it never makes any money, and you can pay it back with currency worth less.

So how do we function if currency fluctuations disappear?  Does all investment suddenly need to find a home where it will be productive, ie manufacturing or adding value to something, and likely resulting in a dividend?  Or does investment cease to be a necessary evil, as money in the mattress is suddenly safe from loss of value?  Does debt really have a purpose when it is possible to save ahead without eroding the value of the savings?  How do you satisfy peoples desires for betterment when the same job pays the same wage for a lifetime?   Would a stock market still go up over time, assuming that balance of trade improves, and standards of living improve, or would the market be mostly static even as the individual constituents migrate up or down?  Does business suffer from a lack of investment, or flourish due to increased savings looking for a productive investment?

If the supposed one world electronic currency should become a reality, and if the designers have learned from history, and have honest intentions, one would expect they would want to avoid the vagaries of a fiat currency, but not sure how we sheeple would adapt to that after generations of this.

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