Damus
Open in Damus

Recent Notes

ala ⚡💜 profile picture
I just used my new acquired AI skills to build an economic simulator!

Is deflation always bad for the economy?

I wasn't convinced either way, so I built an agent-based simulation with the pieces that actually matter: scarce money, rising productivity, trade, capital vs hoarding, and then the two channels everyone argues about: nominal debt (Fisher) and sticky wages (Keynes).

Result under default params:

Falling prices alone ≠ depression. Turn those rigid contracts off and deflation looks mostly like repricing.

Turn them on under a fixed money supply, and real output and survival get worse vs a price-level target (and vs the no-debt/no-sticky-wage ablation).

So the toxic combo isn't "Prices go down." It's "Prices go down while debts and wages don't."

I'm not claiming this proves the real world. It's a toy model. But it made my prior sharper:

Don't ask "is deflation good or bad?"

Ask "deflation with which contracts, and which monetary regime?"

If you are interested in playing with the model, I can send you...

#fixedsupply #bitcoin #deflation #inflation
note1rls58...
ala ⚡💜 profile picture
ala ⚡💜 @ala
I agree with the diagnosis more than the prescription.

Extreme wealth inequality is a real problem, and taxing wealth alone is unlikely to solve its root causes. Governments can and often do reinforce concentration of wealth through subsidies, preferential contracts, monetary expansion, and regulatory capture. That's a valid criticism.

However, it's an overstatement to say wealth taxes are ineffective or that "fixing the money" would solve inequality by itself. Empirical evidence suggests wealth taxes can slow wealth concentration when well-designed, even if they don't eliminate it. Likewise, sound money reduces some distortions (such as the Cantillon effect), but history shows that monopolies, political favoritism, and wealth concentration have existed under hard-money systems too.

The real issue isn't just taxes or money—it's the combination of monetary policy, government incentives, market structure, and political capture. Addressing only one of those factors won't be enough.