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RE: Sharing Economy – Part of the Future?
One of the challenges of the sharing economy is that it's deflationary. Not a problem in itself, but a problem for asset class holders.
One of the challenges of the sharing economy is that it's deflationary. Not a problem in itself, but a problem for asset class holders.
Not an issue, if 1 asset goes down another has to go up, remember a market is a relative ratio between 2 things.
So if we are using a currency, and say we are sharing corn through that currency, then automatically the currency goes up, while the price of corn goes down.
Good point, there would definitely need to be consideration for transition effects, including possible inflationary or deflationary pressures. I think that asset class holders would be OK long term but that those heavily in debt would have greater difficulty, especially in any deflationary financial cycle.
If there is increased inflation, then a sharing economy may provide a means and tools (under the power of people) to help return balance via deflationary pressure. If people have more needs met through a sharing economy, they have more money to save, invest or pay down debt, along with consumption. Confidence in the economy and a restoring of the velocity of money could then increase inflationary pressures to restore any excessive deflationary inbalances.
Generational differences (boomers, millennials etc.) would need to be taken into consideration and monetary policy as well. However, I believe that increases in wealth inequality challenges not just the economy but also other aspects of humanity including social programs, sound money and environmental stewardship; and a sharing economy may be part of the solution to return balance.