Or put another way, punishes saving. Forcing people to "save" by loaning the money to businesses and governments bonds and equities is good for politicians who like to be measured by economic metrics. But it's bad for being able to actually save for the future, and reducing dependencies on banks, leading to the moral hazard (with 0% inflation you could have narrow banking without problems).
It's not good for a society to save by holding on to worthless pieces of paper or shiny objects. It's good for society to save by investing in productive assets.
Holding on to currency or shiny objects is just another form of speculation. Maybe the bank fails. Maybe your house burns down and melts the contents of your safe. Maybe you're robbed. Maybe trade wars massively reduce your purchasing power. Maybe a new source of the shiny objects gets found and it's not are rare as you think. Maybe less people care about that shiny object in the future. Maybe that gold certificate was really just a fraud.
Your argument isn't really related to whether we should incentivize people to bury paper in their backyard or if they should hold bonds or other investments. The answer to your problem is to have better social safety nets.
Of course there is always risk. But one of the supposed goals of fiat money and property rights is to reduce that risk, ensuring the ability to save into the future.
There are countless examples of countries where that trust was broken.
Your argument of governments are supposed to protect property rights still applies for bonds and stocks and other investments, so once again still not exactly an argument for incentivizing speculation on pieces of paper or shiny objects instead of productive assets.
The point of fiat isn't to give returns to those who worked hard by burying paper in their backyard, the point of fiat is to be an easy medium of exchange which does involve a certain level of value stability. A currency having a slow, predictable rate of inflation can still be considered having a certain level of stability, at least when concerning being a useful medium of exchange. I know that a loaf of bread isn't going to be $50 or $0.05 tomorrow, it'll likely be roughly the same as today. Over a long time scale sure that loaf will probably be more than today, but I'll be buying that bread in 2044 dollars not 2024 dollars, because in the end I shouldn't be incentivized to hold dollars.
And once again the only way to address "it's not good for society that ordinary people have to speculate" is by having strong social safety nets. Hoarding paper or shiny objects is still speculation with risks, as you just agreed.
No you are conflating two topics. Property rights is not propping up stocks and bonds. It's protecting ownership so you can invest in building things over the long term without them being taken.
Similar reasons encourage the government to protect the value of their currency.
> the point of fiat is to be an easy medium of exchange
The stated goal of the federal reserve is price stability, not exchange.
> Hoarding paper or shiny objects is still speculation with risk
Yep but it's a difference of how much risk.
> having strong social safety nets
Those carry their own kinds of risk.
> I shouldn't be incentivized to hold dollars.
0% is hardly a massive incentive to hold cash. If we can't agree on that then ill be incentivized to hold a currency that does care about its value.
> Property rights is not propping up stocks and bonds.
I'm not talking about propping up stocks and bonds, I'm talking about ensuring fair, open markets for such things. I'm entirely talking about "protecting ownership so you can invest in building things over the long term without them being taken." That same concept of the government protecting your ownership of some shiny objects applies to protecting shareholders from a company publishing fraudulent financial statements, or selling bonds that are actually objectively worthless with actual review, or shenanigans that effectively remove such ownership aspects.
> 0% is hardly a massive incentive to hold cash.
Negative rate bonds are (or at least were) a thing as well. If it costs more to put your shiny objects and fancy paper in a safe and protect it than having an account at a bank then there's incentive on it even if there are costs. And sure, even with inflation there's still some incentive to hold some amount of dollars. Liquidity has value after all. Even though I'm OK with some slight inflation on dollars I still tend to hold some amount of them. After all, I didn't buy lunch with stocks!
And even then, it is not about 0% being an incentive to hold, it is about not having an incentive to invest. As I already stated, IMO its worse for society overall to encourage people to hoard fancy paper and shiny objects compared to actually investing it. But hey maybe you'd prefer for people to not invest in bonds and what not and instead just have piles of fancy paper and shiny objects instead of roads and infrastructure and more productive enterprises. I'm sure that'll work out well for them.
Lets assume the FED makes 0% inflation a policy objective. As the US and the rest of the developed world continues to age, more and more retirees are supported by fewer and fewer working people. In other words a massive portion of the population is spending money, and soaking up resources, while producing nothing. Obviously this is profoundly inflationary but to maintain 0% inflation, the productive members of society will have to work a great deal more and endure policies which are explicitly designed to artificially suppress the value of their labor.
Yes, that scenario is bad and it happens when the Fed is still trying to control inflation.
The people who presented as arguing for 0% inflation are actually more often arguing for a lack of inflation targeting at all, and an end to the practice of creating money. In other words they argue for 100% reserve banking and abolition of the legal right of the central bank to issue new money.
In such a system prices might go up or down, depending on whether the underlying economy is doing better or worse, and governments would simply ignore it. In the case of demographic decline that would mean prices do indeed go up and that would correctly reflect the fact that resources have become scarcer.
Even with 0% inflation savings do have inherent costs and risks: you might die before you get to spend them, they might be confiscated by some future dystopian state, or society might just get poorer and the money buys less in the future than it does now.
Most obviously there is the time value of money. Money by itself isn't useful, only the things you can buy with it are. Something today is more useful than the same thing in a year.
Economists often act like none of the above is true. They argue that given an improving world people would just do nothing, hoarding money in the expectation of it being worth more in a year. For as long as I've been alive the 2% target has been justified with this sort of nonsensical circular pop psychology, in which supposedly devaluing savings was required to manipulate the people out of their naturally zombie-like state (which if true would obviously mean the economy wouldn't grow, acting as a negative feedback loop that would then make it immediately untrue again). The existence of counter-examples like Switzerland did not bother any of them. Now we read that this wasn't even the actual source of the number, it was just plucked out of the air and justified retroactively! Not really a surprise given the weakness of the original argument.
Or put another way, punishes saving. Forcing people to "save" by loaning the money to businesses and governments bonds and equities is good for politicians who like to be measured by economic metrics. But it's bad for being able to actually save for the future, and reducing dependencies on banks, leading to the moral hazard (with 0% inflation you could have narrow banking without problems).