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rising/falling prices feels like an imperfect model of buying power (though useful, similar to newtonian physics) this is bc money is always being injected into the system. e.g. no one waits for houses to fall to 1800s prices to "buy the dip"
this one way upwards ratcheting of prices is "bad" from the individual's perspective bc they always have to be "doing" something to keep up however it is good from a systems perspective because it rewards optimism (inflation preference)
a deflationary asset rewards pessimism. at the extremes, nothing happens because nothing is worth it e.g if holding bitcoin allows you to increase buying power at 20% yearly, then the only business opportunities that have access to capital have to have greater expected return
so businesses like pet grooming and avocado toasting becoming "hobby" businesses. you have to actively choose to have less future buying power to work doing what you love the same way a hobby drains your wealth
when cost of capital is lowered, the barrier to entry is reduced. remember, a state literally creates money, it doesn't care about it. all it cares about is getting people to work and be productive
so looser monetary policy at the state level is basically saying "look, if blah is too difficult and soul sucking, you can also do blahblah, here, have some free money, go toast that avocado"
the conservatives here shout "no! they have to learn something like engineering, math, coding, or finance! if u encourage avocado toasting then we'll have nothing of value to provide to the world and will lose competitive advantage"
there are 2 failure points here. one is that when the cost of capital is too high the people simply cannot do anything. very few people will know how to get greater-than-holding-bitcoin returns no matter how much they are incentivized & beaten
another is that when monetary policy is too loose, it incentivizes net negative business behavior (zombie companies) even though they are "producing" measured by money output
e.g. the avocado toasting company makes a nominal PROFIT but the cost of imported soybeans is rising faster than the profit can be made the buying power of the business owners is going down & they will eventually die from soybean starvation
so loose monetary policy masks inefficient businesses that may actually be losing money while tight monetary policy makes everyone depressed because they tried learning to code once and it made them feel stupid and worthless
e.g. u buy avocadoes for 1 and sell the toasted for 3. that's 2 of profit but then an 8 yr old asian child figures out that toast goes really well with mozart. they r buying at 1 and sell toast at 1.5 but with mozart added they can sell at 2
so the small child is being incentivized to figure out more and more ways to add value while also getting really good at piano when this discrepancy is discovered, the knee jerk reaction isn't "oh wow what a talented kid!"
it's "they're stealing my secret avocado toast recipe while beating their children like forced labor to be good at piano! damn i wish my parents were more strict with encouraging me to play an instrument, now it's too late for me"
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