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[JoshuaFH]

I've been watching "Economics Explained" videos for the last few days, and I guess anyone with more knowledge than I have can correct me, but that lowering interest rates seems like a bandaid that doesn't solve the problem? Like, the economy wasn't slowing down/stagnating because the interest rates are too high, it was *insert reason because I don't know*. Though it is a little irritating that the default 'response' to stimulate the economy seems to be to push the economy a little further towards lawless anarcho-capitalism; when that seems to me to be just digging deeper into a hole you want to be digging your way out of.

I'm probably talking out of my ass.

[Reelya]

I've been watching "Economics Explained" videos for the last few days, and I guess anyone with more knowledge than I have can correct me, but that lowering interest rates seems like a bandaid that doesn't solve the problem? Like, the economy wasn't slowing down/stagnating because the interest rates are too high, it was *insert reason because I don't know*. Though it is a little irritating that the default 'response' to stimulate the economy seems to be to push the economy a little further towards lawless anarcho-capitalism; when that seems to me to be just digging deeper into a hole you want to be digging your way out of.

I'm probably talking out of my ass.

No, it actually works very well to stabilize the economy. Better than anything we had before, basically. That's why almost all countries use it as one of the main levers.

What you're missing here is what happens if they don't drop the interest rates. You then get negative inflation, i.e. deflation, and you get a deflationary death spiral, which would take you 25 years to dig your way out.

There's a simple reason for this. If the price tomorrow will be less than the price today, then everyone decides to hold off buying stuff, only spending the exact minimum they can get away with, because tomorrow you'll be richer if you didn't spend it today. This then amplifies the deflation problem. Another aspect is that if the real value of money is increasing, then the real value of debt is also increasing, so anyone/anything with a debt will find it increasingly difficult to pay it off (wages will fall, prices will fall, money gets hoarded), thus you'll see a mega-run of foreclosures and loan defaults along with the deflation: i.e. the price of your house will fall quickly relative to the value of your homeloan, while you income is also falling. So you'll default on your homeloan to save money.

[JoshuaFH]

Isn't deflation good for anything? Like making USD more competitive in the international money market, popping economic bubbles before they grow out of control, incentivize more prudent and less speculative behavior (I.e. curbing the self-destructive assumption and desire that growth must be infinite)? Or is the threat to investors simply too large to ever even get near the idea of deflation? Can't you have a little deflation without a death spiral?

[Reelya]

You got that the wrong way around. Deflation means prices are falling over time. That means that each USD is more valuable (in terms of what it can get), so the USD would be rising again other currencies.

This means people would buy more imports, since those would now be cheaper, which is another way deflation would tank the economy that I forgot about.

[JoshuaFH]

I meant, that as far as foreign exchange goes, deflation would cause other countries to want to exchange for more USD to place into their coffers, as the value of dollar is increasing and therefore having stockpiles of the dollar would be advantageous, giving the dollar a premium compared to other currencies that are inflating. Wouldn't that be how it works?

[Yoink]

Holy crap, that book I just read. Left me feeling about as shell-shocked as the characters would have been.

[ChairmanPoo]

Holy crap, that book I just read. Left me feeling about as shell-shocked as the characters would have been.

Which?

[TamerVirus]

The vaguebook

[Reelya]

I meant, that as far as foreign exchange goes, deflation would cause other countries to want to exchange for more USD to place into their coffers, as the value of dollar is increasing and therefore having stockpiles of the dollar would be advantageous, giving the dollar a premium compared to other currencies that are inflating. Wouldn't that be how it works?

But that's a bad thing. People hoarding the currency during deflation is what causes the spiral of death. The deflation is because there's not enough currency in circulation, which causes it to rise in value over time, which then causes hoarding, including by those other nations, who see hoarding your money as a get-rich-quick scheme. This then causes more deflation and sucks yet more currency out of circulation. The fix is to expand the money supply. And that's exactly what the interest rate cut does.

You might ask why they don't just print more money and scatter it around. That would solve the deflation, right? Without cutting interest rates. Yes, it would in the short term. But the reason they don't do that is that it's very hard to "unprint" money. You lose control over that lever. It's like having an accelerator but no brakes on your car, because you think it's efficient to always go faster. Yes, they could just print money to deal with slowdowns and throw it into the wind as stimulus, but the problem with that is that when it comes time to slow the economy down, they now have to jack interests rates up sky-high, since they never cut them in the first place when they needed to, right?

[JoshuaFH]

I meant, that as far as foreign exchange goes, deflation would cause other countries to want to exchange for more USD to place into their coffers, as the value of dollar is increasing and therefore having stockpiles of the dollar would be advantageous, giving the dollar a premium compared to other currencies that are inflating. Wouldn't that be how it works?

But that's a bad thing. People hoarding the currency during deflation is what causes the spiral of death. The deflation is because there's not enough currency in circulation, which causes it to rise in value over time, which then causes hoarding, including by those other nations, who see hoarding your money as a get-rich-quick scheme. This then causes more deflation and sucks yet more currency out of circulation. The fix is to expand the money supply. And that's exactly what the interest rate cut does.

but then doesn't that make printing more money that much easier, because the printed money isn't losing value because other nations are willing to take it off your hands for the supposed get-rich-quick scheme, cancelling eachother out?

And isn't USD pseudo-backed by oil, since OPEC only accepts USD, which would prevent the dollar from inflating or deflating too severely?

[Bumber]

The vaguebook

The Facebook

[BlackFlyme]

I have minimal training and I'm getting error codes that aren't even in the documentation.

Ah, so standard procedure then eh?

Oh it gets better. I spent about half of yesterday and most of today on the phone with their tech-support. It would have been all day yesterday, but I had to back off for a few hours when our company's IT needed the room to set up some unrelated stuff.

A few of my other coworkers were trying to help as well; it wasn't that helpful but one coworker said the tech support was useless, in less kind words. We gave tech supoort the error codes, but they couldn't recognize the codes either. We say that X part is marked as malfunctioning in the machine's computer, and they try to diagnose other parts that are marked as fine. And unfortunately, we can't use our old machine in the meantime because the contract was cancelled once the new machine was set up.

[Reelya]

I meant, that as far as foreign exchange goes, deflation would cause other countries to want to exchange for more USD to place into their coffers, as the value of dollar is increasing and therefore having stockpiles of the dollar would be advantageous, giving the dollar a premium compared to other currencies that are inflating. Wouldn't that be how it works?

But that's a bad thing. People hoarding the currency during deflation is what causes the spiral of death. The deflation is because there's not enough currency in circulation, which causes it to rise in value over time, which then causes hoarding, including by those other nations, who see hoarding your money as a get-rich-quick scheme. This then causes more deflation and sucks yet more currency out of circulation. The fix is to expand the money supply. And that's exactly what the interest rate cut does.

but then doesn't that make printing more money that much easier, because the printed money isn't losing value because other nations are willing to take it off your hands for the supposed get-rich-quick scheme, cancelling eachother out?

And isn't USD pseudo-backed by oil, since OPEC only accepts USD, which would prevent the dollar from inflating or deflating too severely?

Yes but at t he cost of your local industry collapsing. If other nations want yiur money It means you're being flooded with imports. By definition. Us industry becomes more competitive when the dollar is falling over time. Absolute valu doesn't really matter. Relative change over time is where it matters.

[Yoink]

Holy crap, that book I just read. Left me feeling about as shell-shocked as the characters would have been.

Which?

The Beach, by Alex Garland.   

Apparently there's a film adaptation as well, with Leonardo DiCaprio no less, but I've no idea how some of its themes and scenes would have translated to film. The author also did the adaptation of Never Let Me Go and wrote and directed the film version of Annihilation, both of which are movies I have seen and enjoyed, one moreso than the other.

[TamerVirus]

All I know of The Beach movie is that the beach it was filmed at became a tourist magnet, subsequently destroyed, and now closed to the public

And...this

Spoiler (click to show/hide)