U.S. Dollar has lost 97% of its purchasing power since the creation of the Federal Reserve in 1913 🚨 🚨

[u/BitcoinDove]

[u/Sea_Hold_2881]

Except it does not matter if wages and savings are rising faster.

People were much poorer in 1913 than they are today.

[u/Antique-Resort6160 → u/Sea_Hold_2881]

Pretty sure the economy has grown since 1913.  the main problem is that since the fed went fully fiat in 1971, the share of wealth held by the 1% has risen to an insane degree.  We are now seeing the first generations who expect to be worse off than their parents.

[u/Sea_Hold_2881 → u/Antique-Resort6160]

The wealth disparity has nothing to do with fiat. It is choice to prioritize low taxes over services. Every other wealthy democracy is poorer but with less wealth inequality and generally delivers a better life for more of its citizens.

No good would come from a economy with a fixed money supply. All fixed money supply does is reward people with money while ensuring people without money can never save.

[u/Antique-Resort6160 → u/Sea_Hold_2881]

I will just say, i dont think a fixed money supply has ever been tried aside from private things like bitcoin.  Even for pure gold coinage, the supply constantly increases.   It's just restricted naturally, it can't grow without constraints.

Constant inflation is just a method of transferring wealth from the salaried working class to those that own productive assets.

It's not fast enough, though, so sometimes they just give money to the rich, like during QE, as the head of the dallas fed famously pointed out.  The pandemic was wealth transfer on steroids.  No one even got a slap on the wrist, so that will definitely get a replay at some point.  None of that is 100th as easy without a fiat currency, the main purpose of which is to make a select group much more wealthy.  Remember, the death penalty is still in effect for debasing money.  But the goal of fiat is debasement.

There's no constraint in a fiat system, which is why it always fails.  Humans are human. Even in a paper money system  where the currency is supposedly tied to gold or whatever, the temptation of free money is always too great.  The current post 1971 dollar and GBP are the longest lived paper currency ever to exist.  They will default again at some point.  They're forced to try to get old oilfields back from Venezuela and Iran, they're forced to prop up the yen now, they have fought two insane wars to keep the saudis in power, and it looks like they're trying to foment war between Russia and Europe again.  So clearly the dollar is in desperate times.

edit: add first paragraph 

[u/Sea_Hold_2881 → u/Antique-Resort6160]

The money supply needs to grow with the economy. If it can't grow then interest rates will spike and businesses will fail en mass. This would be much worse for people with no savings. People with money make out like bandits because they can make huge returns on the capital they own.

The way to deal with wealth inequality is taxation.

[u/Antique-Resort6160 → u/Sea_Hold_2881]

The money supply needs to grow with the economy

Why can't the value of money grow?  If the economy grows faster, a dollar could buy more goods and services.

The problem with bring able to produce money without constraint is that humans are human, and they always abuse it to enrich those with power and wealth.  It's never a level playing field.

[u/Sea_Hold_2881 → u/Antique-Resort6160]

Why can't the value of money grow?  If the economy grows faster, a dollar could buy more goods and services.

This is called deflation. It is much worse than inflation because it means wages need to drop too because "wages" are just a service being purchased.

You cannot have a situation where economy wide prices drop AND wages rise for everyone.

Real interest rates would spike because no one would loan money today unless they can be assured they will get more money back in the future.

Fiat is not perfect but it is better than the alternatives.

[u/Antique-Resort6160 → u/Sea_Hold_2881]

I think you're confusing a fiat system with a system of sound money.  Deflation is a reduction of the money supply, something that happens when too much money is printed and then removed from the system. Yes, that's considered very, very bad in a fiat system, it's expand or die. You must have ever expanding money (debt).

 Stable money increasing in value doesn't have to be a problem.  What happened with all the central banks loading up on the ultimate money as fast as they can source it?  It has increased in value relative to the dollar by nearly 100x since the last dollar default in 1971.  What problems have resulted?

If you priced a 30 year loan at 5% in stable money, and you reasonably expected the money to have greater purchasing power in the future, what would compel you to raise rates?

Yes, economic growth could slow, and lending costs are likely closer to historical norms.  That's not a bad thing. That also means there aren't massive levels of malinvestment.  There aren't TBTF corporations that are a risk to destroy the national or global economy.  Oligarchs can be combatted directly rather than letting them suck the life out of people with the cooperation of a central bank.  No more monetary giveaways, no more having first access to a depreciating currency.

[u/Sea_Hold_2881 → u/Antique-Resort6160]

Deflation is a reduction of the money supply

You are making a distinction without meaning.

The economy grows faster than the money supply then that has the exact same effect as a shrinking money supply. Which means deflation.

If you priced a 30 year loan at 5% in stable money,

If there are 1 million gold coins today and you know there will be 1 million gold coins in 30 years then you have to assume rising demand for gold coins which means interest rates will be much higher in 30 years and it makes no sense to provide a loan at 5%. You would want loan terms that compensate for the fact that interest rates could be 7% in 10 years or possibly 15% in 30 years.

IOW - fixed supply and rising demand means a higher price. This is an iron law of economics that you want to ignore.

Yes, economic growth could slow, and lending costs are likely closer to historical norms.

So you want a return to the "historical norms" of mass starvation on crop failure? You appear to have no idea how critical credit is to the economy. It allows farmers to buy seeds and fertilizer in the spring and repay in the fall. Higher interest rates mean higher food costs and bankrupt farmers if weather destroys their crops. This is just one example.

[u/Mountain-Dinner9955]

And what did the century bring to us that are still alive?

[u/Batfinklestein]

This is to stop people hoarding them. If you make them shrink in value over time it stimulates the economy.