On reflection, there’s more complexity to inflation and deflation than the simplistic few paragraphs that I wrote a couple of days ago. However, there’s no reason to jump all the way to “just trust Paul Krugman,” yet. As I think about this stuff, I become more and more convinced that it’s really, really important that more Americans get a better picture of what money is and why it matters (and doesn’t).

Inflation is a decrease in the value of money relative to time and stuff. Inflation means “salaries go up” and “prices go up.” Fundamentally this sounds like an observation of what happens during “productive economic times.” Put another way, inflation feels good. I get a raise, or I’m confident and busy enough to charge more for my time. When items are flying off the shelves, I raise prices and pay bonuses.

Deflation is the opposite. I bite the bullet and take a salary hit when I’m deeply unhappy with my job, when I’m unemployed, or when I need money *now*. When inventory is sitting on the shelves, stores have sales first. Only when the sales don’t work do they actually lower prices to get things moving. Deflation *feels* like failure. Deflation *feels* like hard times.

For people who live mostly without money, they situations are identical. The ratio of “time / hamburger” remains pretty constant either way. The difficulty and frustration come from measuring things in money. Recall that money is useful because it allows you to, quite literally, save up some time. I do not advocate going entirely without the stuff – but it’s sometimes useful to get rid of the abstraction and notice that the two things that actually matter didn’t move around – even though our system did.

I’m reading a bunch of articles about how the US economy is failing to thrive this year – how the Fed is arguing amongst themselves about raising vs. lowering interest rates – how there’s the “risk” of deflation, as opposed to the “risk” of inflation.

I think that this is an opportune time to review some basics.

First off, let’s talk about money for a moment: Money is nothing more or less than crystalized value. It’s a way to avoid having to barter directly with everyone. It’s also a standard unit that’s (ostensibly) hard to forge. I create a certain amount of value for a small number of people by doing things for them. They give me money – and then I give that money to other people who do things of value for me. The important bit is that money has no inherent value, except insofar as I’m willing to take it in exchange for my time and stuff. Historically, I have accepted money in return for my time. In the future, I hope that I can trade it back for someone else’s efforts.

In a fair system, the money and property that I have at any given point really ought to be related to “the value that I provided to other people” minus “what I consumed.” We can tinker with that equation a little bit – throwing in concepts of leverage and compound interest. However, really seriously, the wealth on which I expect to retire is related directly to the value that I brought to other people, minus what I consumed along the way.

I think it’s appropriate to generate value for other people when you’re young and fit, create a pile of crystalized value, and then trade it back later in life. That way you can relax a bit in your later years. I think it’s appropriate to have societal mechanisms, including a stock market, to help accomplish that goal. It is also appropriate to tightly regulate such a market. Indeed, we’re talking about “my time,” at root. What worse thing could you waste or screw away?

So we’re led to talk about the stock market. How should it work?

Assume for a moment that the market doesn’t affect the supply of money. In this case it’s just a casino. Everybody brings chips to the table. Some people leave with more – others leave with less. Measured over sufficiently short time periods, the money supply in the market *is* fixed. That’s why day traders are assholes – and why “high speed trading” needs to be abolished. Both are just mechanisms to extract money from the economy without adding value in return. That’s stealing.

Assuming that the money supply is *not* fixed, then one hopes that the stock market is adding value to it. This means “more money in the system,” perhaps balanced by “more goods and services out there.” Put in my terms from above: Ideally, the more that people are *doing* for each other (trade), the more *money* we might expect to see in the system – but there will also be more *stuff* in the system. The balance between time, money, and stuff will be maintained.

That’s where inflation and deflation come in. They affect the time/money and stuff/money ratio.

More briefly: The money supply ought to keep pace, more or less, with the total productivity that’s in the economy … i.e: More work being done by more people means more money and more stuff.

Now, onward to inflation:

Inflation means a *decrease* in the value of a unit of money. The usual way to get inflation is by introducing more money into the system. Inflation is *good* because you get a raise at your job, but it’s *bad* because a hamburger costs more. Inflation is *awesome* if you’re holding debt (more salary to pay down a fixed debt), and *terrible* if you’re trying to retire on your life’s savings (less hamburgers).

Deflation means an *increase* in the value of a unit of money. You get deflation (fundamentally) by taking money *out* of the system. Say, for example, that a massive real-estate run-up evaporates, and banks have to write off nearly a trillion dollars of bad debt. Lots of money left the economy. Deflation means that your paycheck goes down – but also that hamburgers are cheaper. Deflation is *awful* if you’re holding debt that you plan to pay. Deflation *rules* if you’ve got lots of money.

Let me say that again: Deflation is *bad* if you’re holding debt (negative money), and *good* if you’re holding money. However, in a *fair* world – the value at which I redeem my money would map (more or less) with the value at which I obtained it.

Neither inflation nor deflation is inherently bad. If you live in the day to day of “time traded for hamburgers,” without much of your effort locked up in money – they’re both kinda-sorta okay. The more money you have, piled up, (positive or negative) the more they matter. If you’re debt heavy and planning to work for a long time – inflation is a winner for you. If you’ve got a bunch of cash and don’t want to work anymore – pray for deflation.

For the US as a whole right now? I think we want inflation more than we want deflation. We’re a nation of workaholic debtors. Interestingly, if you posit a wealthy cabal of shadowy, wealthy world rulers – they would universally be in favor of deflation.

Me? I bought a chest freezer and I’m stocking up food for the winter. Hamburger, anyone?

Growing up surrounded, by hateful people’s stares
You won’t let the sound of it turn hope into dispair
Through all the provocation, through all that you have seen
To hold your tongue, not load your gun,
You’re a better man than me.

Though every hour in this town is drenched in mortal sin
They pelt your home with bricks and stones, still you won’t let them win
Despite all these temptations you turn the other cheek
No you won’t crack, you won’t fight back
You’re a better man than me.

Despite that generation and all their wicked dreams
To turn your face and walk away, you’re a better man than me.
Despite all these temptations, you turn the other cheek.
No you won’t crack, you won’t fight back
You’re a better man than me.

Through all the provocation, through all that you have seen
To hold your tongue, not load your gun
You’re a better man than me
You’re a better man than me.

Better man than Me, the Biblecode Sundays.

In each other’s shadow, we grew less and less tall
And eventually our theories couldn’t explain it all
I’m recording our history, now, on the bedroom wall
And when we leave the landlord will come and
and paint over it all.

Both Hands, Ani DiFranco

I currently run Quicken for Mac, 2007.

A couple of weeks ago, I purchased Quicken for Mac, 2010. I downloaded it, and tried to add an account. When it got to the part about downloading transactions from my bank, I entered exactly the same information that (still) works in the old software. Rejection.

Feeling a little silly, I verified with my bank that the authentication info is the same – and that there’s not some stupid distinction between a PIN, a passcode, and a password. Nope. All correct.

So I wrote to Intuit (who make Quicken), described the situation, and said “if this cannot be made to work, then I would like a refund.”

Just got a note that my refund is on the way.

In other words, the stone cold CORE functionality of this product (get my transactions electronically, save me typing) not only doesn’t work – but it’s so broken that customer support has been told to just give me my money back rather than trying to get it working.

Damn shame. Intuit was one of the few companies ever to go head to head with Microsoft – on an identical product – and win. They won by being smarter about why people use their software. However, apparently Mac is dead to them.

Hopefully something that doesn’t suck will come out before Quicken 2007 dies on me. I’ve looked at the alternatives, and they’re worse.

We had three houseguests last night. One of them was two (and a half!). The adults, of course, were very fun to have over. I want to talk about the little girl.

She spent dinner sacked out on the couch. Sound asleep, being occasionally investigated by the cats.

After dinner, the adults had settled in the front room with our tea, and the girl woke up. She was contentedly wandering around, looking at things, and she saw the smaller cat.

“CAT!” (pointing)

The cat froze in horror, then sprinted for the door. Cats (even ones with naturally bobbed tails) apparently have an instinctive horror of children.

To which we’re like “very good! That’s a cat. Her name is ‘Minnow.'”

“Mee-know?” (wandering after the cat, voice echoing through house): “Mee-know? MEE-KNOW?”

In short order, the little girl was back, at my knee. “Uncle? Cat.” Very serious.

I was like, “sometimes cats hide. Did you look for her?”

“Cat. Mee-know, uncle.”

“She likes this toy,” (hand her the cat toy), “can you find her?”

Shakes head. Points the toy at me. “Cat. Uncle. Cat.”

So I spent the next hour or so wandering around my house with a two year old, looking for the cat – while the grown ups talked about boring stuff. One high point was when we were on our bellies, looking at Minnow who was under the farthest corner of the sofa. Each of us had a toy, hers was a little stuffed mousie. Again, very serious.

“mouse.” (yes). “cat”. (yes).

Long pause.

“animals.”

I sorta dig this kid. She can hang out anytime.

I have a lot of digital records. Not a lot by, like, Library of Congress standards – but more than most of the folks that I know personally. I try to maintain an email INBOX without a scrollbar – such that I have perhaps at most 20 messages hanging out at any given time. The two primary mechanisms I use for this are:

* If I’m saving it to reply to it “when I have time,” I go ahead and start the reply. Generally, I’m done with the reply before I feel the time crunch. Seriously, I used to spend more time worrying about how long it would take to write an email than actually writing the message. The “to do list” school of INBOX management is pretty silly – to my eye.

* I sort things that I ‘might’ need into a cunning array of folders. At the top level are things like “home finances”, “family and friends,” and “work.” Below those we sort by individual, by project, and so on.

My observation is that I very, very rarely go back and access any of these old messages. The ones I access are almost invariably receipts or password confirmation emails from various websites. The rest are just a big dusty heap. They’re indexed, yes, and electronically searchable …. but why do I keep them at all?

Am I thinking that perhaps I’ll write my memoirs? That maybe I’ll need a reference on that one time the technolope said “yeah, I’ll get the fish today?” I feel like I’m wasting energy here.

Okay, those of you who asked if I had run into scammers on EBay? I said, “no?” I would like to change my answer:

Dear fdmts,

Hello,i am the winner of your item so i want you to give me your pay pal email address or send me a payment request from pay pal,am very sorry for any inconveniences. I am a bonafide member of the USAID combating Hiv/Aids in Africa,i have been assigned to one of those countries in Africa for the vulnerable children and i will be taking my leave to Africa on the 2nd of this month which is tomorrow and i really need this item for my personal use over there so i have made inquiry for the shipment via EMS/USPS PRIORITY MAIL to Africa and i was told that it is $100 so i will be adding it to the item cost and i will contact pay pal for your money right now and i want you to ship out the item when you get notification from pay pal.

Thanks
God Bless.
Linda

It’s worth noting that part of the magic of the PayPal / EBay connection is that *I* don’t have to do anything. The seller can provide either their paypal account or a credit card – and it funnels into an escrow space on my account. Once I see the money in escrow, I ship the product. I don’t have to share anything out of band.

To their credit, EBay sent me the note below, a few minutes later:

Hello fdmts,

We’re writing to let you know that any recent bids by lindabenson1055 may have been placed by someone who was not authorized to use that account. We’re currently restoring the account to its true owner and have canceled all recent bids.

As a result of the bid cancellation, there is a possibility that the current high bidder has changed. You can always view the current status of any item by going to the individual item page. (Please be sure to refresh or reload the page to view the most up-to-date information.)

Thank you for your understanding.

Sincerely,

eBay Customer Support

Nice. Stay classy, internet.

So, I’ve actually received money for selling something on EBay. It was a shockingly positive experience, so I want to share.

First off, I’m not quitting my day job. I’m trying to de-clutter my life. Turns out that after a couple of years of deliberately giving away and not buying stuff that I don’t need, there’s a category of stuff that still lingers. It tends to be worth more than about $40. It tends to be electronic (though not always). It tends to be in those damn boxes in the office where I’m like “sure, someday I’ll get rid of that.”

So, as a test, I picked one piece of small electronics that hadn’t been turned on in over a year – made myself an ebay account, plugged it into my paypal account, and made a listing.

That one was dead simple, because they already had a database entry for the widget – and it’s still for sale on Amazon. “This type, this model, this color.” I just clicked on “gently used,” wrote a little story about how it totally works, and I have these two cables for it, and set my price. You could get it new on Amazon for $150.

I started the auction at $0.99, because supposedly that’s how you get hits on search engines.
I set a reserve price of $40 because that’s my threshold for not feeling screwed for the 15 minutes it took to set the thing up.
I said that the buyer would pay shipping, flat rate, $5.
I set a “buy it now” price of $120, which seemed fair – given that you could get it new for $150.

I got nothing but nibbles for the first 5 days, then I got a bid of exactly $40. The bids went slowly up to $55, and then it closed.

I logged back in to EBay, clicked the “print a shipping label” button (paid for out of that same paypal account), stuffed the thing in a flat rate box, taped the label on it, and walked to the post office.

EBay took something like 8%, so I got about $45 for something that was gathering dust.

Why do I like this? I like it beacuse I don’t have to wait at my house for some Craigslist jackass. I have a broker (paypal) to handle the money. I like a *lot* that I can click “print a label.”

So I’ve decided that I have a new chore. Once a week, I need to find something and make a listing. I bet that I can do this for 10 weeks without breaking a sweat. That’s (at current thresholds) $400 that I can drum up.

Easy.

Conference call. 9 participants. Meeting starts. Then this gem:

Tonya, you're not on the call, right.  Tonya?

Conclusion – no – she was not on the call.

I want my four minutes back.