Paul Krugman -- Deflation is bad because that makes it hard for central planners to fiddle with the economy and trick people into working more than they need to and dumb irresponsible people who do pointless jobs and borrow money they can't pay back end up being worse off.

Here's a picture of forced monetary inflation:

Paul Krugman doesn't deserve credit. Just for you to have an idea of how bad he is, he still believes in the broken window fallacy, something already demonstrated as false by Bastiat in the 19th century! http://www.youtube.com/watch?v=QG4jhlPLVVs

He has been defied by Robert Murphy to a debate, if he accepts, a charity institution would earn something like $60K, and Krugman hasn't yet accepted. http://www.thepoint.com/campaigns/campaign-0-1240

Deflation is bad because it makes credits expensive, which discourages people from getting into debts and banks can't profit on them. It's especially dangerous if you combine it with decentralized currency like Bitcoin, because government can't make everyone poor by printing more money and bailout banks at will. As you see, it's very, very bad and for your own good you should stop using this evil cryptocurrency right now.

No. Precious metals, especially gold, can be spread pretty damn thin. Precious metals have been historically used as currency because they fit the bill. They are durable, hard to counterfeit/easy to recognize, internationally accepted AND easy to divide into lesser amounts. If the government wanted to support market liquidity by providing smaller units of exchange, they could have simply minted coins with lower gold and silver content.


One of the ideas behind fiat currency is to force the economy into a debt spiral. The fact that your dollars are steadily losing in value forces you to invest it somewhere. This spurs poor investing practices. The pretense that a deflationary currency would halt economic growth is ludicrous. It would limit malinvestment while switching the economy to a savings basis for investment. Only efficient businesses would be able to raise capital through debt, not to mention the superior buying power of the laboring classes.

Absolutely, avoiding malinvestment you help preserve the planet reducing waste of resources and less pollution.

Deflation is very destabilising on a system that can only function, by design, with inflation.  That system is debt based money.

If you generalize that to every money you have made a big mistake... Just because something is bad for one thing, doesn't make it bad for everything.

Deflation is bad when 'every' bit of money needs to be repaid.  Therefore you have a fixed monetary cost (the repayment of the debt), and a increasing real cost.

 

Any money that isn't debt based is immune to the so-called 'problems' of deflation, because as the buying power of the monetary unit increase, everyone who owns the money becomes richer and gains purchasing power, (even if the money is on loan, the person who has claim to the loan has more value).  This means that people who have money are 'encouraged' to spend it, rather than save it for the debt repayments.

Take it from another prospective. In a society that uses debt based money, (aka fiat money), the entire society is in debt to the reserve bank.  If the buying power of the money increased from shortage, the society still needs to pay back it's debt.  Thus reducing the available money supply again.  It is a viscous circle.

It is like holding all the food of the town on ransom, and issuing 100 credits for all of it.  If only one credit gets lost, somebody is going to have to starve, and the 99th credit is going have virtually unlimited value.  But It is worse than that, if somebody  somehow trade to get two credits (eg. a saver), they are holding the food for the last person at ransom and can set any price.

Debit based money is inherently evil, once you understand what it dose... It is a way for setting people against each other economically.

Deflation is good if you have good money.  Inflation is the lesser of two evils if you have evil money to start with.

Seriously? I did not know that! No wonder why such an incompetent "economist" won it then...

haha, the "economy Nobel prize" is given by a central bank.. how ironic...

It's presented by the same group.  It has some association, but it's completely separate.  It's like how the Paralympics has a loose affiliation with the Olympics, occur in the same city, but are different awards.

The name for the prize is actually something like "The Swedish Riksbank's economic prize in the memory of Alfred Nobel" roughly translated. The swedish central bank created the prize by donating a bunch of money to the Nobel committee on their 300 years jubilee. I'm not sure on who is actually choosing the winner, but the prize is a disgrace to Nobel's will regardless of who it is.