The British Government claims it wants to do more for the saver. Actually, it's already done a lot: the Daily Telegraph reports that the Halifax estimates house prices fell by 16.2% in 2008. Putting it another way, someone holding cash in a shoebox has made 19.33% tax-free, measured in house price terms; or 32.22% gross for a 40% taxpayer.
And that's a point: the government doesn't tax you on the gains of deflation. But I'm sure they're keen to rectify that: normal inflation will be resumed as soon as possible.
11 comments:
Good point!
Surely no one is arguing that deflation is a good thing?
Gary: thanks!
Sebastian: deflation appears to be an inevitable consequence of inflation, and bad bouts of either one are not desirable per se. But it's an ill wind... And The Mogambo Guru pointed out quite some time ago, that if the money supply were fixed, then as we continued to become more efficient in producing goods and services, money would gradually appreciate in value. Why would that be a bad thing? Isn't is time we weaned ourselves off the rave-up/hangover cycle?
deflation is bad because it rewards monetary rent seeking which destroys money velocity and thus comparative advantage.
deflation is good because it means goods and services are more affordable.
I personally favour a very low amount of deflation to reward saving investment over consumption.
I think I'm with you there, ACO. Gold standard?
Shall we strike a medal for Gordo?
A golden millstone, perhaps?
Money is the use of others productivity*time, so Gold is totally wrong.
Why do we save? So we can eat in our old age from food we made today. Except we can't keep food for a lifetime. So does that mean that pensions are a con? It seems to suggest that we are making money today to give it to our children when we are old when actually that cash is worthless since the work that was done to creat it is already long gone.
We save in the hope that money will store the value of the immediate spending foregone. Some hope, it would seem.
"Why do we save?"
The alternative is a debt based economy - where you borrow to gratify you immediate wants and desires, ultimately that leads to a credit c ..
Ahh! perhaps that is not such a good idea either.
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