About Inflation, Academy and other Morasses


#1

The thing that attracted me the most to Cardano was the focus on academy and peer-reviewed research, but then I saw Charles Hoskinson presentation at LSE and several points got my attention, like credit, emerging economies, central banks, QE, price volatility and inflation, and it got my attention because some of the opinions expressed there are either not backed by academic research or have been proven false by facts. So I decided to write a post and focus in one of then: Inflation.

Inflation is a complex matter, and since the becoming of Crypto, it has been promised as a panacea against the evils of inflation but it’s far from clear how. Here is where it comes my first confusion because ‘inflation’ and ‘devaluation’ seems to be used Interchangeably, and this is a big issue, first because devaluation is a feature of the currency and inflation one of the economy, then they’re not just the same, you can have devaluation without inflation (QE for example) and vice versa. And this matters a lot because it’s clear how cryptocurrencies can help with the issue of devaluation but it’s not clear how it can help with the “issue” of inflation, since competition, taxes, bad crops, political instability and poorly implemented macro-economic policies are beyond the scope of what can be fixed by implementing a cryptocurrency. So, I’m not sure why they’d say this, especially in a room full of economists, sounds more like a trivial political statement than a fact-backed assertion.

Then there’s the value judgment about inflation, it’s pictured as something bad or evil, so I wonder compared to what? Do they mean that deflation is good? Is zero-inflation good? what’s exactly the target inflation of a crypto-based economy? Under the current framework of growth there’s strong evidence that deflation is a bad thing, so is it inside the scope to change the global economy status-quo to zero-growth? How is “inflation is bad” backed by academic research?

I firmly believe in the transformative power of DLTs and I’m sure Cardano’s approach makes a lot of sense, but I also think that it perhaps is only focusing on the very technical matters and is not being consistent from the economics side of the equation and I think this is a conversation worth having.


#2

Inflation by the original intent of the word, go look in a old dictionary, is about the money supply, it wasnt referring to price-increase. The money supply inflates and deflates. Hence increasing the money-supply is by definition inflation. Prices dont inflate, they increase/decrease. Prices were a mere consequence of the money supply inflating. When most people use the word inflation today they are referring to price increase, and thats
very convenient for those inflating the money supply.

Its a interesting topic. Much to be said here, Ill definitely get back to this and with the majority of economist being Keynes most of the information and theories regarding inflation are wrong, completely wrong and that is due to Keynes theories about inflation are pro-socialism and government - hence why the theories have been corrupted by ideology rather than fact and evidence. Apart of from the nature of humans to fall prey to the most intuitive path, but this would be fault of evolution.


#3

Btw you got the definition correct - it was for anyone else reading to set the definition for this threat as “inflation” as to mean monetary/unit expansion to disquisition from price increase as a separate mechanism.


#4

Hello @jb455 thanks for the comment, yes I agree inflation can have different meaning for different people. I’m using it in the same context Charles Hoskinson used it in the LSE presentation, i.e. the rate at which the general level of prices rises.


#5

Ok so you are using it as price inflation (which is the wrong definition in terms of Austrian Economics) It was just a little confusing since in your original thread you actually distinguish the two, perhaps this was not by intent. So for the basis of this thread lets Choose to Call it Inflation monetary inflation and price inflation. I will formulate a reply soon.