In your "What is Money" video you said that more gold can be mined to stop deflation in a gold standard. In your "How Inflation Works" video, you explained the difference between deflation and goods/services becoming less scarce causing their prices to decrease.
What is the practical difference--how do I tell the difference during my everyday life--between an increase in the value of money (deflation) and the decrease of the value of goods/services?
I'm kind of tired, so that might be worded poorly.
Regardless, this has been confusing me for some time now. :\
Especially the idea of if we were on a 100% reserve gold standard, and how to tell the difference.
In short, how, exactly, do we determine the value of money?
How do we know if the decrease in prices across the board is because of increased efficiency or deflation.
I know you said it frees up capital and everything in your Inflation video, but I mean in the context of how to know the value of money.
Sorry if the wording is confusing.
The difference to you is, over the long run, with deflation you aren't able to buy as much stuff as you were before; with decreasing real value, you can buy more.
Now, of course, it isn't that simple in the real world; even with all the inflation, economic progress has made the real value of many goods and services drop. You have to look at everything in aggregate.
Quote from: MrBogosity on January 28, 2010, 06:37:00 AM
The difference to you is, over the long run, with deflation you aren't able to buy as much stuff as you were before; with decreasing real value, you can buy more.
Which makes sense, after some thought. With Deflation, there is (normally) a decrease in the money supply (and probably your account and pay as well), which means (going by your Inflation video) that there is little if any capital to be invested to grow the economy and so it shrinks, just like in the Great Depression when the Fed had their hands on the throat of the money supply. It also examples your shirt example of say, the shirt being at first, $10, but after deflation, that same shirt being only $5. But having two shirts each $5 after a decrease in real value.
Quote from: MrBogosity on January 28, 2010, 06:37:00 AMNow, of course, it isn't that simple in the real world; even with all the inflation, economic progress has made the real value of many goods and services drop. You have to look at everything in aggregate.
So basically, all the stuff together.
That's what I figured (after the fact)...
It sounds complicated. Like more of a Wisdom of Crowds thing, than something to be done via a bunch of suits in Washington...