Perceptions on average over time need to match reality.
i dont see how that realtes to what i asked??
This oversimplification is absurd. You arbitrarily set prices, costs, demand conditions, and the deflation rate. What are we supposed to do with this nonsense?
You’r implying that there is no such thing as value and only perceptions of value.
What I am saying is if economic actors don’t on average act according to reality you will have disaster? In other words. Perceptions do not trump reality. But Reality will trump perceptions if perceptions are not on average in line with reality to a sufficiently extent.
Got it?
Mansoor
No.
its simple. Just give up eating. You will eventually reach a point where you will see the difference between perception and reality:
A: Perception = I don’t need to eat to stay alive
B: Reality = You do need to eat to stay alive
A and B are not compatible. No matter how much I perceive B as A. If you don’t believe me. Try the experiment!
Mansoor
but I gave up eating, so, I don’t need to eat to stay alive.
We can go on and on with verbal games. You won’t know the truth until you experience it. Just give up eating.
Mansoor
that’s what you told me to do. you said “just give up eating”. How can a person who has given up eating - how can they eat?
This is a real philosophic discussion believe it not.
I care about hunger, pain, suffering, staying alive, bad dudes in the world trying to get me, cold in the winter, etc and not:
“This is a real philosophic discussion believe it not.”
Mansoor
We were not talking about caring. Now you’ve changed the discussion, again.
I had asked, how can a person who has given up eating - how can they eat?
My Perception: keynsianism is helping the populace
Your Perception: keynsianism is screwing the populace
If perceptions only matter and there is no such thing as objective reality.
Then. we are both right. And this discussion can be ended right now!
Mansoor
Mansoor. I ask of you. Focus. Please focus.
I asked one question. You brought up ‘caring’. And now you’re talking about this keynesian and objective reality, etc…
Why can’t you stick to the topic? How can a person who has given up eating - how can they eat?
Look. I am learning that Austrian’s whole way of thinking revolves around the belief that perceptions only matter. If that is the case what is motivation to run a website called mises.org and try to influence perceptions/opinions?
If there is no objective truth then why discuss anything and why run a website called mises.org? If in fact there is truth then lets talk about it and stop playing verbal games.
Mansoor
People have subjective values concerning economic transactions or economic evaluations but that doesn’t infer that the whole world is subjective and therefore nihilistic. One can believe in objective reality and subjective consumer preference.
What is value then , if not subjective value? Can a loaf of bread “actually” cost 3000 if there’s no one willing to pay more than 1200 for it?
I think this is the root of your problem. A loaf of bread in year 3 is still, like always, SUBJECTIVELY valued by people who need it relative to other goods, and not by starting with a year 0 price of 1200 and deflating it by 5% for two consecutive years. You (like Keynes) keep thinking in aggregates.
Aggregate deflation and inflation are only calculated as smokescreens in a world of central banking and monopoly money. In a free market, gold deflation simply means loaves inflation – the value of each unit of good/service (pound of nails, oz of gold, loaf of bread, hour of massage) fluctuates in relation to the rest, thus inflation in X is, by definition, deflation in Y.
In a free market, it is the SUBJECTIVE preferences of economic actors that create the REALITY of relative prices of goods and services (How many hours of massage for a loaf of bread?). Hence, by definition, the free market IS reality.
Now, if you introduce an entity that coerces all actors to use its fiat paper as the only legal tender, then goes ahead and manipulates its supply at will, THEN you need to start worrying about prices of things fluctuating way above and below “reality”. But you call this desirable, for some reason.
Z.
Ok. good. we are getting somewhere. What happens if consumer preferences are NOT in line with objective reality? Do you see an issue there?
Mansoor
This
I’m not playing a verbal game. I asked a question in order to see if you will give a response to something that is meaningful. I’m trying, if you want to call it such, to do an exchange with you. I’m trying to come to an agreement, no matter how small, to build upon that agreeable foundation and then maybe we can develop further upon it. If I ask you this, what color is a red apple - how will you respond? Or how about this? You ask me a question. I’ll give you a straight answer instead of jumping all around, deal? But give me a question as simplistic as the red apple example. Something you and I can both agree upon.
Not that it matters [after all, in the long run we are all dead[6]] but I believe you might be confusing cause with effect.
A Definition: Deflation = Increasing Per Unit Purchasing Power
As far as I am aware, the term “deflation” refers to an economic situation in which the general per unit value of the medium of exchange is increasing beyond previous levels relative to almost everything else [other goods, services] in production. [ie there is a steady increase in per unit purchasing power- less units now buy more goods/services than before].
[If you are using an entirely different definition then what follows below is probably irrellevant.[:)]]
Final Per Unit Value = Final Outcome of Supply and Demand factors
As LVM has shown, as with anything and everything else produced, at any point in time, the final purchasing power [ie price, or value] of a single unit of money is always the outcome of just two factors: [1] present supply of that unit, and [2] present demand for that unit.
Therefor, in a deflationary environment , the present demand for the supply of the unit of currency exceeds the present supply,[ for whatever reasons] but likely including a general hoarding preference by the majority of the population.
To put it another way, the desire by the majority of individuals to acquire and hold currency units [instead of spending them] is increased [ie there is an increased demand] to the point where that the total , present, collective demand outstrips the present supply of currency units.
Example: the money supply is being increased above previous production levels , but the demand for that increased supply [for whatever reasons] is still greater than that increased supply - therefor, increased supply, plus even more demand that outstrips that increased supply causes the economic effect of an increase in per unit purchasing power ,a deflationary, or at the very least disinflationary,* scenario.
Cause and Effect
Therefor, the hoarding of money [ie an increase in the general desire to hold cash instead of spending it], is a cause of deflation [ie an increase in per unit purchasing power] - a factor involved in producing the economic effect usually called “deflation”, not really a result of it.**
Why a Deflation?
The question then becomes: “what would cause a majority of people to change their behaviour and choose to hold onto more cash [causing deflation- or an increase in per unit purchasing power], instead of spending as freely as they have in the past?”
Anyhoo, thats my twisted logic[:D]
Regards, onebornfree.
.*“Disinflation”= a decrease in the rate of inflation
**Of course, once this hoarding behaviour is set in motion, that hoarding of money does become a self-fulfilling prophecy to an extent- up to an [undeterminable] point, money hoarding will encourage more hoarding.
P.S. Regardless of how you and I define deflation, and regardless of what measures you envision that can/will prevent/discourage the hoarding of money and promote its supposedly beneficial free circulation instead, and regardless of who it is you envision as being in charge of carrying out those envisioned measures , those envisioned measures will ultimately fail, as the market finally corrects and adjusts to them, perhaps as viciously, or perhaps even more viciously, than it is doing right now in its response to certain, er, “measures” already taken. [:)]