Warren Buffett’s Recent Explanation of How Money Now Works Is the Most Important in History

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[–]AsInBeer 2 insightful - 1 fun2 insightful - 0 fun3 insightful - 1 fun -  (4 children)

The unanswered question is this- how much money should there be ? Because if you keep printing it but people keep earning it and it keeps moving through the economy then there's just more of everything without inflation. More money CAN lead to inflation OR it can be used to fund economic activity and new businesses and business models which would not have otherwise existed.

People who assume that there ought to be just X number of dollars ever printed , or we should peg ourselves to gold, create "more" money when they're forced to charge less and less for new goods and services. Bitcoin has this built in- it can be decomposed into tiny fractions each of which has more value as time goes on.

Yes it has happened in the past that governments attempted to solve a depression via money printing with hyper-inflation as a result. That is always a mistake!

But there's another possible narrative- there are economic actors (people lol) sitting on the sidelines unable to add new value which did not previously exist via new economic activity. In that scenario, they're starved for oxygen and the potential value they would have added is never realized.

So given an ever changing set of actors who have ever changing new ideas for services and products in a technology-scape which brings down the cost of everything even as it opens up new worlds of possibilities for making new things, enabling new services, creating new raw material which economic activity will transmute into value, just how much money should there be in the world?

What is amazing to me is that anyone ever seriously thought they could answer this question definitively. In my view, thinking you have a model which can answer this question is a lot like Communism with its top-down economic planners. No, Commies, you can't plan an economy. No, you can't think through the problem of supply and demand and tell people how much of what to make and what to charge for it. Like Hayek proved, that's a completely hopeless endeavor.

So also with trying to answer the question - how much money should even exist? Yeah, we just can't model that problem.

[–][deleted] 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (3 children)

I think it's a red herring: who cares if a dollar is worth a dollar or worth 0.000001$? Obviously people who hold actual nominal dollars do, but they are the only ones. The problem occurs with hyperinflation: when you are paid at midnight on Wednesday and by the time the shops open on Thursday your paycheck has already lost 25% of its value, that is a huge problem. It's happened before, and it's going to happen again, this time in developed nations.

[–]AsInBeer 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (2 children)

I addressed that. Hyperinflation is a problem you don't want to trigger, we all agree.

I was making conceptual theoretical space between increasing the money supply and hyperinflation. Can you speak to that?

[–][deleted] 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (1 child)

Well that's where the Fed is trying to head: to a place where inflation is high and debt in nominal terms becomes irrelevant. But it doesn't work, since all currency in developed countries is BORROWED upon creation. So you wanna print 100 trillion? Cute, but you'll add 100 trillion in debt foremost.

You literally can never win with banksterism.

[–]AsInBeer 1 insightful - 1 fun1 insightful - 0 fun2 insightful - 1 fun -  (0 children)

I feel like you're not repsonding to anythng I said. You're ignoring what I actually said and giving back to me some extreme consequence of something I never said.