So (there are btw. two ACs responding to you here) if the interest exceeds inflation you are not losing money, so dollar savings value over your period can be said to be extremely stable. I don't see how this can be viewed as a huge problem, quite the opposite. Most economists agree btw. that a low steady inflation is good for economic growth, and that deflation can have a negative impact on economic development.
Agree, but it's not often you will get a 3% interest rate so inflation will still keep on eating it up the money.. Usual pure interest-rates are much lower, usually a bit lower than the current repo-rate. Btw, http://www.tradingeconomics.com/country-list/inflation-rate gives quite a good view of the current inflation-rates for most countries.
From wikipedia:
Inflation's effects on an economy are various and can be simultaneously positive and negative. Negative effects of inflation include an increase in the opportunity cost of holding money, uncertainty over future inflation which may discourage investment and savings, and if inflation is rapid enough, shortages of goods as consumers begin hoarding out of concern that prices will increase in the future. Positive effects include ensuring that central banks can adjust real interest rates (to mitigate recessions),[5] and encouraging investment in non-monetary capital projects.
And here are a few of the positive and negative sides. But IMO the positive sides are not enough for the negative effects.
Instead of adjusting interest-rates you can adjust taxation to mitigate recessions. But just the idea that adjusting interest-rages to mitigate a recession is a bad idea for society as a whole since it points to a society that is infested with loans..
If people would start to save up money before buying random crap people would actually afford to buy even more random crap..
Buy something for $1000 at %5 percent and a 5 year plan will cause you to pay $150-200 in interest. (too lazy to calculate the exact amount).
If you instead saved up to this, maybe having the money invested in something while saving, you would then have $150-$200 more to buy stuff with (not counting any payout from the investment).
Ie.. Promoting lending money for consumption is not a good thing IMO.
Lending money for a house can be good, but today most people never plan to pay off the mortgage. This is also not a good idea since in the long-term there will be allot of money paid to the bank in interest instead of buying new things that would speed up the economy.
Also if you save up and have a house your children can inherit something of value that they can either use to buy a new place or just stay in as is...
This is why i promote a currency without inflation. Deflation could maybe even be a good thing too by making people save up before buying, and while saving maybe have the money invested.
Not saying that any of my ideas are good/bad/insane, just good to have a discussion.. Maybe i/you/other readers can get new idea's and perhaps actually learn new stuff! :)
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