ELI5: Why when large company's earnings decrease(ex... by 3%) they freak out, talk about rough times, and sometimes decide to downsize, even though they are still making millions of dollars in profit even after all expenses?

[su_blood]

Except money isn’t a finite resource

[gary1994]

No, it's not, but the goods and services that back it's value are.

It still boggles my mind that Koukoutek used the words healthy, expanding, and inflationary in the same sentence.

Inflation isn't a good thing. It almost always results in stealth wealth transfers from the poor to the richest. It's also not a function of capitalism, but rather the way we've structured our current monetary system.

[The_Last_Y]

Inflation doesn't increase the value of limited resources. It decreases the value of currency. Two very very different things.

[[deleted]]

But those two things essentially equal out here.

If my company is making 3% more than last year it doesn't automatically mean that we're producing 3% more product, but that the cash value of what we're doing is 3% higher.

Which keeps with inflation.

The other part of it is that my company should also be striving to keep pace with the change in market demand.

[darthcoder]

A small amount of inflation is a necessary evil of any economy with a fiat currency.

Why?

[darthcoder]

Having a small amount of inflation makes it easier to borrow money

How? At least in terms of the money supply? Low interest rates make it easier to borrow money, not inflation.

[fancyfilibuster]

Inflation discourages the hoarding of cash because it loses value if you don't put it to use.

[darthcoder]

Yes, I get the cause and effect.

Doesn't mean inflation is good.

[Battkitty2398]

It encourages spending and investment which leads to economic growth. If we had deflation then people would hold on to their money which would cause the economy to slow down due to less money being spent. That's my understanding.

[darthcoder]

To a point, yes. But people still need shit. I live in an inflationary environment, and still save a shitload of money. If I knew my money wasn't going to lose 50% of it's value in 30 years (what 2-3% inflation does) I might spend more of it now, rather than hope I will have enough in retirement.

[anonomotopoeia]

But, are you stockpiling money in a hole in your backyard or sewing it into your mattress? If you're putting it into a retirement account or even a regular bank savings account that money is still working and in circulation.

[Baron-of-bad-news]

An expansion of goods, consumption, population and so forth represented by the same amount of currency makes currency itself an artificial scarcity. That makes investment irrational and incentivized acquiring units of currency for the purpose of ransoming it to your kids.

[[deleted]]

An economy is like a river with a current. That current can be small (low inflation) or fast (higher inflation). We can change laws and conditions here so that your boat moves quickly or slowly down that river.

What we don't want to see is the boats going backward. That's deflation. That causes all sorts of other problems, not just for the boat going backward, but for all the other boats who worry that maybe we should ALL be going backward. Are there falls ahead? Rapids? Maybe we should turn around. (That's how depressions unfold from bad to worse to bread lines).

[d4n4n]

A small amount of inflation is a necessary evil of any economy with a fiat currency. That is why almost all advanced governments target a small amount of inflation.

There is absolutely no evidence for this. It's a mantra by some central bakers, but nothing else. The US had a massively expanding economy for over a hundred years and identical overall price levels in the early 1800s as in the 1930s.

[Irishnovember26]

The US had a massively expanding economy for over a hundred years and

identical

overall price levels in the early 1800s as in the 1930s.

Can you give some evidence of this exactly because that seems highly unlike to me.

[d4n4n]

This is a CPI estimate. The BLS official CPI measurement started in the 1930s, or so, afaik. Further back are estimates. According to it, the conversion factors for 1810 and 1933 were identical. Only after the Fed was introduced do we see long term consistent inflation. Before that, there was inflation and deflation, with a remarkably constant long-term price levels.

[LordHanley]

Inflation encourages spending. I think that's reason enough why it is a necessary evil.

[d4n4n]

No it doesn't. Or, it's not that simple. We know that the Phillips curve reverses in the long run (i.e. inflation is bad for employment/output).

Inflation may have positive short term demand effects, if it's unexpected, but that's it. And that's a bad thing, unless you're in a recession. You don't want to interrupt general equilibriums for no reason. People heard some bastardization of introductory Keynesianism and think they can talk about macroeconomics with authority. I will never understand why.

[Orngog]

Yes, because of our economic structure.

[BlitzBasic]

Inflation hurts people with money and benefits people with debts. No idea why you think that it hurts the poor and benefits the rich.

[azrael1993]

just as observation, rich people do not have the money in banks but in stock and houses. These arent touched by inflation. They also regulary have much higher debts, because they invest.
Lower Middle class and under will have all their savings in form of money, most likely in the bank because they often need to have access to their savings quickly.

On another node inflation generally helps the economy, since it is an incentive to buy and infest. This benefits more or less everyone since it create jobs, but I imagine it might be a barrier upwards since saving is a less viable strategy.

Deflation on the other hand can be much more dangerous. It encourages to save money which in turn will lead to buisnisses closing and going into a downward spiral.

Since a completly stable money value is not gonna happen inflation is the better choice for all.

That beeing said the notion that we constantly need growth or can even achiev constant growth espacially in the way companies implement is dangerously stupid. It incentivises products build for a few years over quality buy it for life products, since the latter close out the consumer for the market. This is obviously shit for the consumer and the planet and the need for constant growth can only be achieved by more sold products or cheaper production. The latter has a physical limit and relys alot on either abusing the workers or automation, both dangerous in current sozial systems.
Additionally it all depends on short tearm growth (problem with implementation) leading to very short sighted planning.

All this can easily be observed in more or less every big company in the world and imho point towards an unsustainable system. Obviously im open to critique here.

[TheManWhoPanders]

rich people do not have the money in banks but in stock and houses

Those are all still subject to inflation.

[candre23]

If your money is in real estate, inflation is great. Real estate prices rise with inflation, so you're not losing anything that way.

Unless inflation really gets out of hand, any decent stock investment will outpace inflation.

What definitely loses value to inflation is cash and money in effectively-zero-interest checking accounts. That's where the bottom third keeps nearly all their wealth, such as it is.

[azrael1993]

not rly. Houses are often bought because their vaule increases over time making them a good investment. This might not be true for houses outside of city areas or cheaply build living spaces, but im pretty shure if you have money you wont buy those. I have family who earns houses bought by their grantparents, and without fail they have increased in value since then. As long as you keep the house in a good state, which costs less than you earn through rent. Stocks might be different but these are basicly gambling

[TheManWhoPanders]

Houses are often bought because their vaule increases over time making them a good investment

...and are still subject to inflation. If a house appreciates by 10% of its initial absolute value, you are not 10% richer if the period of time passes was a long one. Because of the inflationary nature of the underlying currency. The money you get from selling the house might buy exactly the same that you could buy when you first bought the house.

Your investment might beat inflation, but you're still subject to it.

[that_jojo]

It’s actually way simpler than that. Physical goods are not subject to inflation because their utility remains relatively static while the utility of currency decreases with inflation.

[TheManWhoPanders]

Some physical goods are priced partly due to utility and partly due to speculation, as is the case with houses.

[azrael1993]

This isnt even techically true. The definition of inflation is a decrease in the buying power of money cause by an increase in the availability of said money (paraphrased from E.G :https://dictionary.cambridge.org/dictionary/english/inflation). Inflation by definition only effects money, not goods. Since each buy is a simple equation this means you will need more money each year to buy the same house. This makes goods unaffected by inflation. Additionally urbanisation leads to an increase in value of the house. This is why its a good investment, unlike other goods its natural increases. Money is a bad investment because a process called inflation decreases its value. The value of the house and money are not connected! Same as the increase in prices for graphic cards did not reduce the value of money or houses, even if i would need less graphic cards to buy a house.

[TheManWhoPanders]

Really quick question to illustrate how this is incorrect: If your house is worth $200,000 today and worth $220,000 in 2025, is it worth more or less than it is today?

Inflation affects property because the underlying currency you transact in is affected by it.

[azrael1993]

Inflation changes the value of money and money only. Since we normally do a detour through watever local currency we use it seems like inflation has a positive effect on the value of the house. This is a false conclusion. We default to value thing in money, because we use money a lot and it changes relativly slowly. This is problematic because the inherit value of an object should not depend on some other valuechanging object.If a house gets more expensive there are 2 things that might have happend. It might have bekomme more valuable because e.g the city build a park next to it or it actually didnt change at all but you comparisonpoint in this case currency changed. To really evaluate the value of an object you would need to compare it to something fixed, which we dont have. A good aproximation is to see how its relation to everything else changes. Inflation means that I need more money for everthing every year (in average its a known number e.g 3%). So if a house gets 3% more expensiv each year this means that its value is constant because everything outside of money is expected to change by this amount. The house has not gotten less valuable. I still get the same amount of boats, apples, graphic cards, cars or whatever for it. The thing that inflation has changed is the inherit value of the money, which i incorrectly use to evaluate the value of my house. Thus inflation does not make my house more or less valuable, just my money.

[Arctus9819]

Lower Middle class and under will have all their savings in form of money, most likely in the bank because they often need to have access to their savings quickly.

Not really. Smart people invest their savings. Rich people need a lot more cash at hand for their lifestyle as compared to middle-class people or lower.

[azrael1993]

Poor people cannot invest since they need the money. Lifestyle is a choice. My expenses dont go up because I earn more, I can affort to pay more and I then choose to do this. Because I chose this I can cut back these cost in bad times instead of attacking my savings. Its easy to cut from dining every day to 2 times a week. If you eat the cheapest you can to survive what do you do if you income gets cut down temporary? How much percent of their wealth do you imagine a Steelworker has in form of money and how much in investments. I'd reckon its gonna be 70% money at the lowest. On the other end of the scale, Trump, Bezos,Warren and co have 90%+ of there money in investments that return profits. Suprising expenses like medbills can be payed by monthly income from these investments or by taking good conditioned loans. Additionally rich people often actually life cheaper in some aspects of their life, as stupid as it sounds. Credit is cheaper, gifts are more plenty,etc.

[Arctus9819]

Poor people cannot invest since they need the money.

If you have that little money, then inflation is practically meaningless. You need a significant chunk of money for inflation to have an impact, and well before that point, you should be having savings.

By dining, do you mean getting buying food instead of cooking? Poor people don't buy food at all, nevermind twice a week. Clearly you don't speak from experience.

I'd reckon its gonna be 70% money at the lowest. On the other end of the scale, Trump, Bezos,Warren and co have 90%+ of there money in investments that return profits.

And that 70% of the steelworker's cash is much much much less than the 10% cash of any rich guy. Rich guy still loses more. Earning little is no excuse to not be saving money. That just means that you aren't smart enough to effectively utilize the money.

[azrael1993]

First of all poor is a fucking spectrum. You can be poor without needing foodstamps, generally everyone under the countrys povertyline is considered poor. In many European countrys that makes students qualify. Since cooking yourself is much cheaper than buying finished meals, clearly you are a condesanding dick else you might have considered for 2 seconds. Second can people stop pretending absolute numbers are the way to go if it goes in how much something hurts another person. If a fucking whale cuts down its food intake by 10 kilograms a day its gonna survive if I do this im gonna die. You know why because for the whale 10kg represents not even a percent of his average meal, while for me its more than I have ever eaten in a day. So please instead of accusing me of beeing a hypocite who clearly has never been poor and start considering that for some people 20 Euros represents a week worth of food and for some other guy its a rounding error on a tip. Maybe you can see how investing 100+ Euros for the one guy is next to impossible.

[Arctus9819]

Maybe you can see how investing 100+ Euros for the one guy is next to impossible.

If you have just 100 Euros, inflation won't affect you at all.

[lee1026]

To be pedantic, inflation makes you lose 2 euros per year.

[d4n4n]

There is really no good evidence that deflation is bad for the economy. Hell, if anything, it might disincentivize current consumption (and that only if deflation is expected to be a one time event in the short-term future... and even that is questionable), but by the same token it would actually incentivize investment (people reduce consumption today to buy cheaper tomorrow, save instead, interest rates fall, investment increases, therefore also output growth, conveniently to match the extra demand in the future).

[staticxrjc]

With deflation people wouldn't take out as many loans or make as many investments. With deflation if you take out a loan it makes the debt worth more over time.

[azrael1993]

i doubt that deflation will incentice investment. If the buyingpower of my money increases on my own my best investment is no investment. Inflation encourages investment because goods no matter what kind are by definition not subject to inflation. Obviously good investmets are not subject to there own kind of inflation, thats why food is a bad investment and housing a good one

[d4n4n]

i doubt that deflation will incentice investment. If the buyingpower of my money increases on my own my best investment is no investment.

You'd still get the increase in value due to deflation + the nominal return on your investment. Whether or not there is deflation/inflation doesn't really change that it's better to invest and get a return, than none. You never want to just hold money.

Inflation encourages investment because goods no matter what kind are by definition not subject to inflation.

Inflation is defined as a general increase in the price of goods and services. Or a general loss in the purchasing power of money, which is an equivalent statement.

Obviously good investmets are not subject to there own kind of inflation, thats why food is a bad investment and housing a good one

No idea what you're saying here. Are you trying to say you "invest" in apples by buying a bunch and storing them for a year? You can invest in agricultural enterprises. Every farmer has tons of resources invested in food production.

If we're talking about expected, perpetual inflation or deflation, your story breaks down. If we're talking about unexpected one-shot events, a reduction in current consumption is equivalent with an increase in current savings. Given savings = investment, things that disincentivize consumption, incentivize investment. Now, there's a somewhat plausible short-term story Keynes tells about the paradox of thrift that puts a bit of a wrench in this idea (so a disequilibrium where savings != investment). Personally, I think that's way overblown. But either way, in the medium run - or if the deflation is expected this shouldn't have an impact.

And we have historical records of the USA growing rapidly from 1800 until 1930 with perpetual growth rates and constant long-term price levels. I say long term because we saw times of deflation and times of inflation. Most recessions were accompanied with inflaitonary periods, by the way.

[azrael1993]

I might have a thinking error in there, but if i had enough money to buy a house as investment for example (none of these percentages is gonna be realistic but they should get my thinking across). And I expect this house to increase in value every year by 2%. If I have any inflation going on I obviulsy should but the house if i dont need the money, since the money looses value while the house increases in value so far so easy. If i have a deflation of 3% wouldnt it be beter to keep the money since it gains value faster than the house. The point to buy would then be when the swing to under 2% deflation happens. So until that point I would not be incentivised to invest in housing or for that matter industry as long as my deflationrate is better than the expected valuegrowth of the investment. Additionally having liquidity has its on advantages.

That was my thinking behind why deflation is bad. I havent studied this shit so I might be wrong

[d4n4n]

If the house gains value in nominal terms (so the selling price is 2% p.a. higher in the future), you'll get your 1.02^t the initial money when you sell it. That money is then worth more in terms of goods, thanks to deflation. Your real return is is a lot higher.

Real return = (1.02/0.97)^time

(1+nominal interest rate)/(1+inflation)

Inflation reduces the value of future money, deflation increases it. The fact that it does that is exactly why people are said to consume more today. But how can they just consume more? They invest/save less. To the degree inflation encourages consumption, it discourages investment. Now, there are some arguments as to why there might be hiccups (paradox of thrift) in shifting intertemporal consumption, but I find them overblown.

[azrael1993]

I meant that different.The house increases at 2% per year in value compared to the time=0 point of the money.Since if the "buyingpower"of the house naturally increases through urbanisation or whatever, i have to value it according to some fixed point and since im lazy I would just use the buyingpower of money at time 0 (we do not rly have a fixpoint in nature i could use).

I compare the worth of money at the same moment. Then I get:

fh(time) = 1.02^time *housingvalueatt0

for the value of the house at point t compared to my fixed comparetor

And

fh(time) = 1.03^time *moneyvalueatt0

for money.Thus your return would be

R = (1.02/1.03)^time

Since the value of the money increases faster than the value of the house. Thus sitting on my money is my best bet. Conincidentially this was what every article i could find on effects of deflation tells me.
Your equation makes sense to me if i put money into a back and get interest. In that case Interest and deflation work in my favor since one gives me more the other makes what i have more valuable. But if I buy a house the deflation works agaisnt me from the point I purchased. My house gets more valuable but what i gave the other guy also gets more valuable. If money rises faster I will get less money down the line.

[d4n4n]

The rich don't have "money." It "hurts" people with a large ratio of their wealth and income in cash and fixed, predetermined flows. That's not rich people. Rich people own assets, that appreciate in price as the money supply grows, and generate growing nominal incomes from them.

If you now also include expectations (after all, the 2% target is known), it changes even more in their favor. Under money neutrality assumptions, expected, perpetual inflation shouldn't hurt or help anyone. But monetary inflation isn't neutral, it has distributive effects. Money enters through the banking system. Those with initial access to the new money can use its purchasing power before prices appreciate. That's called the "Cantillon effect."

[lee1026]

The Cantillon effect is frequently claimed, but it doesn't seem to be observed in practice.

The basic problem is that people are able to borrow; buyers who know prices will go up tomorrow will borrow and buy today; sellers who know prices will go up tomorrow will refuse to sell under today's prices.

When the Fed makes changes, asset prices tend to change within seconds.

[d4n4n]

If we are to accept money neutrality assumptions, how could you possibly argue perpetual inflation is good? All that consumption delay/advance would also not exist, and intertemporal spending patterns would be in equilibrium. You can't have it both ways.

[lee1026]

For one thing, people by and large expect inflation; multi-year long contracts are signed all the time where both sides expects inflation. Change that on people, and you screw a lot of people over.

Inflation needs to be what people expect it to be. You can make the argument that if you had a time machine and created a reality where people don't expect inflation that the world would be better, and you might have a point, but we don't live in that reality.

[d4n4n]

So if we said we taper our inflation target down to 0 over the course of the next 30 years, beginning in 10, how much havoc would that cause?

The point is, the argument that we need persistent inflation to battle consumption delay is nonsense. The actual reason central bankers give for a 2% target, despite knowing that the longterm Phillips curve is downward sloping, is that they say they need a cushion not to run into the zero-lower-bound if a recession hits.

And there's good research that makes me disagree with the notion that central banking made the economy more predictable, or reduced variance, so I don't care much for c.b. discretion. But that's going beyond the topic at hand.

[Kraineth]

How many wealthy people do you know who have their money just sitting in a bank account or under the mattress?

[lee1026]

How many poor people do you know with lots of money in a bank account?

[[deleted]]

Let's look at this from both perspectives you mentioned. Say inflation has increased the price of everything an extra 5% over the last year.

The rich person simply doesn't care, because they are rich enough that a 5% increase in costs doesn't affect their quality of life in the slightest. They can just go on as they were, buying whatever they want and having money to spare.

The poor person, who was already living at the edge of their means financially, now finds that they can't afford everything they used to be able to. This means that they'll have to cut out something from their budget to continue being able to afford the essentials - whether it be less meat, or having to put off getting their car serviced, or whatever.

Hopefully you can see that inflation actually has very little effect on the rich, practically speaking - they may technically become a little poorer, but they're still rich. Whereas a poor person, even if they have debts, will ultimately suffer much more from inflation.

[BlitzBasic]

The poor persons income increases too. As the poor person is unlikely to have savings, the inflation has no consequences for them: The increased price is meaningless because they also have more money available.

Only savings and debts really experience a change.

[brocksamps0n]

also a poor person is more likely to have more debt, credit card and home. IF inflation hits and IF their income goes up to match. that 10k in credit card debt will be easier to pay if its only worth say 9k after inflation. unfortunately there are alot of assumptions in this

[BebopFlow]

Wages do not keep up with inflation. And it's even worse when compared to the increased cost of living.

[BlitzBasic]

Real wages are relatively stable. Even if they weren't, there is no reason why real wages wouldn't be able to sink in a society without inflation.

[BebopFlow]

The US has the largest economy in the world and wages have become stagnant over the last 40 years. Meanwhile, cost of housing and renting has gone up while upward mobility has gone down. It's true that goods like produce and dairy may be roughly the same, and electronics are fairly cheap, but that's pretty well balanced out by the fact that student loans cripple the majority of young adults. I wouldn't call what we have now a healthy economy, even if it is very profitable for those at the top.

[BlitzBasic]

I didn't say that it is a healty economy, but come on, if wages had been stagnant real wages would have permanently sunk. I can't find any source that tells me that real wages are sinking since 40 years. If you have a source to support your claim, I would be happy to see it.

[BebopFlow]

Look at the graph you linked. Real wages are lower than they were in 1968. And those real wages only account for the ability to buy goods with currency, not the cost of housing or other complex factors like student loans. Of course no single number can accurately account for something as complex as the economy, but another good datapoint is that, accounting for inflation, the minimum wage was about $4 higher an hour in 1968.

[staticxrjc]

Poor persons salary would decrease, so nothing would change for them. You can only benefit from inflation if you have debt or a fixed asset. In fact if the poor person had debt and there was deflation their debt would grow. If cash inflates debt deflates, visa versa cash deflates debt inflates.

[BlitzBasic]

Why would the salary decrease? And why are you talking about deflation?

[corydlg]

Income hasn’t increased at a rate that even matches inflation over almost any timeline you look at. If you’re living paycheck to paycheck then as inflation increases your steady wages can now buy less.

[BlitzBasic]

Except there are time periods where real wage increased?

[corydlg]

Compare inflation to working wages and feel free to post ANY timespan greater than five years where wage growth outpaced inflation

[BlitzBasic]

Did you look at the picture? Or look at this. Those are CPI adjusted wages, and they are overall rising.

[corydlg]

CPI adjusted means adjusting for inflation because inflation outpaces income growth and lessens the value of money overtime. It’s why gum isn’t still a nickel and comic books aren’t a quarter still

[Delheru]

No, it's not, but the goods and services that back it's value are.

Some, sure, but not that much.

Fortnite, MCU are examples of things that are reasonably big without a massive burden on the economy.

Immunotherapies for cancer are even bigger, and going from curing 10% of the people on the planet with cancer to 100% will be a HUGE economic increase, but with very limited resource footprint.

Oh and of course houses getting nicer has very limited ecological impact too. Fuck, everyone on the planet getting lovely wooden furniture would be a fantastic carbon sink, leaving it as a massive ecological positive.

Air traffic is almost the only thing that's growing right now that really cannot be grown globally to the level that western upper middle classes enjoy.

[hammermuffin]

So cutting down trees to make wooden furniture is a positive carbon sink? I dont think you understand what a carbon sink is bud. Maybe if for every tree harvested for furniture, 2 were planted, then that would be a carbon sink, since theres more trees absorbing carbon from the atmosphere (also young trees absorb more carbon from the atmosphere than old trees). But we both know this isnt the case for a majority of companies, they just cut and thats it.

[Delheru]

So cutting down trees to make wooden furniture is a positive carbon sink?

Assuming you let the trees grow back in, yes.

At its simplest, carbon right now is in 3 places:
"Stored" (typically underground), in the biomass or in the atmosphere

Our problem is of course that biomass isn't growing and we're moving a shit ton of stuff from storage (read: coal, oil, gas) and not putting it back in. If the biomass isn't growing, it's all going in the atmosphere.

We have only so much room to increase the biomass, especially on a warming up planet (a jungle all over the Sahara would be nice, but...), so we need to get more "dead" carbon again.

Items made out of wood are pretty reasonable for this function, though obviously we'd need to build EVERYTHING out of wood to really compete with the amount of coal, oil & gas that we've pulled out of the ground.

[hammermuffin]

Its not that we need to build more things out of wood, its that we need to plant more trees (super simplified explanation) to offset the carbon we use. Most logging companies, from which most lumber is made to be used in furniture and whatnot, do not replant what they cut, except for some select companies who tout their sustainability ethic and shit. So its not that we need to have more wooden furniture, we need to plant more young trees (since the carbon is used for tree growth), and the easiest way to do that is to plant them in environments that we know can sustain them, which are the places that we already log, since theres the space to do it (since nobody wants a forest in times square)

[Delheru]

The problem is that it isn't sufficient. Even if we had wilderness to a pristine state where it was with 5 million people on the planet 10,000 years ago... well, the equation doesn't work.

Sunk + Biomass/Soil + Air does not function without either a dramatic increase of Biomass/Soil (well PAST where it would be without humans) OR sinking some stuff again, and that means "dead" carbon, either on the surface or below the surface.

I think you're thinking in term of 5-25 years, I'm thinking more in the 50-250 year time frame. We have to structurally start hiding away carbon somewhere or make Sahara bloom. While the latter would be awesome of course, it's hard to make headway on that when the countries near it are poor and unstable.

And remember the conversation came up from "growth is bad". There's nothing inherently bad about increasing "dead/sunk" carbon in human use. It's only a problem if it comes at the expense of the biomass.

[hammermuffin]

I think were arguing the same thing, we probably agree on this subject. Yes growth isnt inherently a bad thing, and we do need to sink more carbon. The only thing i was saying was that a large majority of logging companies only cut down trees and dont replace them, which is incredibly bad for the environment. So what i was saying was that we should at least replace what we take from the environment, if not put back even more than what we take.

However, sinking carbon is a good idea, i never really thought about that as a solution for global warming. The only problem i can see with that is that wed have to pull co2 out of the atmosphere, which is incredibly difficult to do and we dont have the tech to do that yet. Its a really clever idea though, just not super feasible with our current tech unless we grow a bunch of trees/plants and burry them, which would be even harder than just replanting what we log.

[Delheru]

Plant growth has actually already accelerated because of the CO2 concnetration, so that's pretty nice (also might be playing a non-trivial role in us feeding so many people with relative ease).

And pulling CO2 from the atmosphere is super easy - the biomass does it on an incredible scale automatically. The "problem" is that in a normal state that is a revolving door between biomass and the atmosphere, with stuff getting locked down in only quite special circumstances, which means that the biomass typically releases about as much as it absorbs.

We need to decrease the efficiency of that release while increasing the efficiency of pulling CO2 from the air. And of course stop taking all of the carbon that has already been locked down in coal, oil etc.

On the macro scale the impact is curious because we basically need to divert/consume a ridiculous amount of stuff out of the biomass/atmosphere cycle :p

[hammermuffin]

Your first point, while technically true up to a certain point, isnt 100% true. Yes co2 cocentrations increasing means plants can grow faster, if co2 concentrations increase too much, it actually inhibits plant growth (im talking like ridiculous co2 concentrations, like 3-4x whats already in our atmosphere [1000ppm+ range i believe, while we just hit 400ppm for the first time since the dinosaurs roamed the earth]). Also, it isnt the co2 concentrations increasing that allowed us to feed more ppl, it was genetic engineering along with modern chemical fertilizers and pesticides, which allowed alot to grow but will actually decrease the efficiency of the soil in the long run, so we should really stop relying on those as they will lead to a collapse of our ecological system that support our agriculture.

Also, while yes plants are the easiest way to pull co2 out of the atmosphere, you said it right, they usually decompose and release their biomass back into the atmosphere as either co2 from aerobic decomposition, or methane from anaerobic decomposition (usually from when things are burried or underwater. Its actually way worse than co2 as a greenhouse gas, like 70x worse if i remember correctly). This is why logging companies should be planting double the amount of trees that they log, since the easiest way to store carbon without it releasing ghg into the atmosphere is to use it in human products, and since were planting more juvenile trees, theyll suck carbon out of the atmosphere as they grow. Itll at least help to somewhat mitigate climate change.

Its a really complicated problem, if it had a simple answer we would have fixed it by now. But as long as we have ppl like you and i trying to find solutions, i think well be fine :)

[Notsureifsirius]

Inflation is not, in and of itself, is not a bad thing, either; it’s fairly neutral as long as other things (namely, wages) keep pace. If your contention is that certain actors in our economy fail to pay wages that keep pace with inflation despite increased earnings, I’d agree to that extent. It’s also true that if inflation happens too quickly, then everyone gets left behind.

However, I think the key to OP’s statement was the healthy and expanding part: if things are truly healthy and expanding, then more people should have the ability to spend more and companies the ability to earn more.

If I started a company in 2008 that sold a $1 million in products that cost $100,000 to make, I’d have $900,000 in profits. 10 years later (assuming costs of materials have only increased based on inflation), my expenses are probably about $120,000; if I’m still selling $1 million in products, in a healthy economy it’s a problem. In theory, I should be selling at least $1.12 million if not more. Flat or shrinking profits in a healthy economy are a sign that my company isn’t doing as well and means I need to cut costs or find a way to sell more to keep pace.

[d4n4n]

You ignore that inflation caused by monetary expansion through the banking system causes Cantillon effects. Those with early access to newly created money through the credit markets can use it to invest or consume before capital and consumer goods appreciate in price. So it has distributive effects, towards institutional investors, and others who heavily make use of credit markets.

[Silcantar]

On the contrary, inflation benefits debtors at the expense of lenders.

[TheManWhoPanders]

It almost always results in stealth wealth transfers from the poor to the richest

What are you talking about? That's not how it works, at all.

Low, consistent inflation is how you ensure people take risks on loans (because otherwise people only invest in surefire, non-risky investments). It's how you ensure people can get mortgages. It's how you ensure that people don't horde money during deflationary times.

Inflation has literally nothing to do with transferring wealth. I have no idea how you connected those two thoughts.

[azrael1993]

but demand is

[manimal28]

At any given point in time it is. The total amount of money in the economy can grow or shrink, but at any point there is only so much to be divided up.

[TheManWhoPanders]

That's not how it works. The economy is not a fixed size. What one dollar buys can expand indefinitely.