[ARCHIVED THREAD] - Inflation (Page 1 of 2)
Posted: 7/26/2013 11:12:47 AM EDT
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Like all wise and prudent people I have come to ARFcom GD for answers to the really important questions.
Explain to me me (only me, fuck the rest of you  ) why we have inflation.
My opinion is greed. It starts that someone wants to be given more for doing the same thing, hence a price increase, which is passed along. So now you smart people, and dumb ones too, explain why I'm wrong. |
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Inflation is a natural phenomenon that's required for an economy to grow. Inflation itself is not a bad thing, and a steady inflation rate is necessary to maintain economic growth over time.
Inflation is basically the compounding result of society adding value to goods and services over time. The money supply has to grow along with an economy, and as the money supply increases, so does inflation. Third party intervention (government) and restrictions on free markets can negatively impact the rate of inflation, making it too high, too low, or too inconsistent for an economy to grow at a steady pace. ETA: The Wiki Article for inflation is actually a good place to start. I predict this thread is going to get very interesting, with a lot of misinformation being posted by people who don't understand inflation or other basic economic concepts..... 
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Inflation is a natural phenomenon that's required for an economy to grow. Inflation itself is not a bad thing, and a steady inflation rate is necessary to maintain economic growth over time. Inflation is basically the compounding result of society adding value to goods and services over time. The money supply has to grow along with an economy, and as the money supply increases, so does inflation. Third party intervention (government) and restrictions on free markets can negatively impact the rate of inflation, making it too high, too low, or too inconsistent for an economy to grow at a steady pace. ETA: The Wiki Article for inflation is actually a good place to start. Well put. It also makes people want to buy homes with fixed rate mortages. You lock in your payment for say 30 years, but get raises, so your payment becomes less and less a portion of your income. Look at it another way. Nobody wants deflation. Our economy cannot stay the same, so the best choice is to have low inflation. The Fed has proven tools to manage inflation....not so much with deflation. |
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Well put. It also makes people want to buy homes with fixed rate mortages. You lock in your payment for say 30 years, but get raises, so your payment becomes less and less a portion of your income. Look at it another way. Nobody wants deflation. Our economy cannot stay the same, so the best choice is to have low inflation. The Fed has proven tools to manage inflation....not so much with deflation. Quoted:
Quoted:
Inflation is a natural phenomenon that's required for an economy to grow. Inflation itself is not a bad thing, and a steady inflation rate is necessary to maintain economic growth over time. Inflation is basically the compounding result of society adding value to goods and services over time. The money supply has to grow along with an economy, and as the money supply increases, so does inflation. Third party intervention (government) and restrictions on free markets can negatively impact the rate of inflation, making it too high, too low, or too inconsistent for an economy to grow at a steady pace. ETA: The Wiki Article for inflation is actually a good place to start. Well put. It also makes people want to buy homes with fixed rate mortages. You lock in your payment for say 30 years, but get raises, so your payment becomes less and less a portion of your income. Look at it another way. Nobody wants deflation. Our economy cannot stay the same, so the best choice is to have low inflation. The Fed has proven tools to manage inflation....not so much with deflation. I want deflation. It will reward everyone who saves their money and doesn't go into debt. Prices are becoming ridiculous relative to income. |
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I want deflation. It will reward everyone who saves their money and doesn't go into debt. Prices are becoming ridiculous relative to income. No it doesn't. Deflation is more detrimental to an economy than inflation. Keep in mind that inflation/deflation applies to all goods and services. During a deflationary period, your labor and your possessions become worth less, incomes fall, and you become poorer. Deflation isn't some magical concept that makes everything cheaper and everyone else richer. Deflation is a sign of a shrinking economy and/or a money supply that isn't keeping pace with the economy. |
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I want deflation. It will reward everyone who saves their money and doesn't go into debt. Prices are becoming ridiculous relative to income. Quoted:
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Inflation is a natural phenomenon that's required for an economy to grow. Inflation itself is not a bad thing, and a steady inflation rate is necessary to maintain economic growth over time. Inflation is basically the compounding result of society adding value to goods and services over time. The money supply has to grow along with an economy, and as the money supply increases, so does inflation. Third party intervention (government) and restrictions on free markets can negatively impact the rate of inflation, making it too high, too low, or too inconsistent for an economy to grow at a steady pace. ETA: The Wiki Article for inflation is actually a good place to start. Well put. It also makes people want to buy homes with fixed rate mortages. You lock in your payment for say 30 years, but get raises, so your payment becomes less and less a portion of your income. Look at it another way. Nobody wants deflation. Our economy cannot stay the same, so the best choice is to have low inflation. The Fed has proven tools to manage inflation....not so much with deflation. I want deflation. It will reward everyone who saves their money and doesn't go into debt. Prices are becoming ridiculous relative to income. Deflation punishes people who buy with borrowed money. Reducing purchases made on credit would cause our economy to spiral downward to about 40% of its current size. Everyone in the world would suffer the effects. Massive unemployment and starvation would ensue. |
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it keeps the indentured servants at their post
wife enters the work force - costs go up use your house to borrow against - costs go up minimum wage is increased - costs go up govt has to get all that printed paper off the streets - costs go up there are the few examples of an item becoming rare and demand raising prices like Ivory and 22lr |
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I want deflation. It will reward everyone who saves their money and doesn't go into debt. Prices are becoming ridiculous relative to income. Quoted:
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Inflation is a natural phenomenon that's required for an economy to grow. Inflation itself is not a bad thing, and a steady inflation rate is necessary to maintain economic growth over time. Inflation is basically the compounding result of society adding value to goods and services over time. The money supply has to grow along with an economy, and as the money supply increases, so does inflation. Third party intervention (government) and restrictions on free markets can negatively impact the rate of inflation, making it too high, too low, or too inconsistent for an economy to grow at a steady pace. ETA: The Wiki Article for inflation is actually a good place to start. Well put. It also makes people want to buy homes with fixed rate mortages. You lock in your payment for say 30 years, but get raises, so your payment becomes less and less a portion of your income. Look at it another way. Nobody wants deflation. Our economy cannot stay the same, so the best choice is to have low inflation. The Fed has proven tools to manage inflation....not so much with deflation. I want deflation. It will reward everyone who saves their money and doesn't go into debt. Prices are becoming ridiculous relative to income. No you dont ,once a economy enters into deflation it is extremely difficult to get out of the cycle. |
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More money (let's be honest, DEBT) around = more demand = higher prices = inflation.
Less money around = less demand = lower prices = deflation. It's not just the fed printing money that causes inflation, it's also the regular banks creating debt. That's why houses doubled/tripled in value, farmland doubled, college tuition doubled, etc. |
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Fed prints money. Finance sector/political elite take advantage, and leverages new money 300x. Elitists spend their ill gotten gains, increasing money supply.
By the time it trickles down to us, the value of the dollar is on average less, and the reduction in purchasing power is the effect of inflation. In reality, health care costs and tuition costs are the two biggest inflaters yet are not considered in the official CPI. Thus the average American's real purchasing power is significantly less today than ten or even five years ago. |
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No you dont ,once a economy enters into deflation it is extremely difficult to get out of the cycle. Quoted:
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Quoted:
Inflation is a natural phenomenon that's required for an economy to grow. Inflation itself is not a bad thing, and a steady inflation rate is necessary to maintain economic growth over time. Inflation is basically the compounding result of society adding value to goods and services over time. The money supply has to grow along with an economy, and as the money supply increases, so does inflation. Third party intervention (government) and restrictions on free markets can negatively impact the rate of inflation, making it too high, too low, or too inconsistent for an economy to grow at a steady pace. ETA: The Wiki Article for inflation is actually a good place to start. Well put. It also makes people want to buy homes with fixed rate mortages. You lock in your payment for say 30 years, but get raises, so your payment becomes less and less a portion of your income. Look at it another way. Nobody wants deflation. Our economy cannot stay the same, so the best choice is to have low inflation. The Fed has proven tools to manage inflation....not so much with deflation. I want deflation. It will reward everyone who saves their money and doesn't go into debt. Prices are becoming ridiculous relative to income. No you dont ,once a economy enters into deflation it is extremely difficult to get out of the cycle. Do you think 2.3% inflation is good? The fact that everything goes up 2.3+% in price each year while average income doesn't? |
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Inflation is a natural phenomenon that's required for an economy to grow. Inflation itself is not a bad thing, and a steady inflation rate is necessary to maintain economic growth over time. Inflation is basically the compounding result of society adding value to goods and services over time. The money supply has to grow along with an economy, and as the money supply increases, so does inflation. Third party intervention (government) and restrictions on free markets can negatively impact the rate of inflation, making it too high, too low, or too inconsistent for an economy to grow at a steady pace. ETA: The Wiki Article for inflation is actually a good place to start. I predict this thread is going to get very interesting, with a lot of misinformation being posted by people who don't understand inflation or other basic economic concepts..... Quoted:
Inflation is a natural phenomenon that's required for an economy to grow. Inflation itself is not a bad thing, and a steady inflation rate is necessary to maintain economic growth over time. Inflation is basically the compounding result of society adding value to goods and services over time. The money supply has to grow along with an economy, and as the money supply increases, so does inflation. Third party intervention (government) and restrictions on free markets can negatively impact the rate of inflation, making it too high, too low, or too inconsistent for an economy to grow at a steady pace. ETA: The Wiki Article for inflation is actually a good place to start. I predict this thread is going to get very interesting, with a lot of misinformation being posted by people who don't understand inflation or other basic economic concepts..... Agree that inflation is good. However, that is conditional. If inflation exists during good economic times, it's good. However, if the economy is stagnant or deflating, it's bad. If you want examples of bad economy plus inflation, look no further than the Arab Spring. It wasn't because of a sudden yearning to have a voice in government. That's the propaganda fed to us by the Whine Haus. The Arabs rose up because of inflation. In fact, inflation is the biggest export this nation has. SS109 said:
Easiest answer: More money chasing the same amount of goods. That is correct. Too much money chasing too few goods. The US Treasury issue bonds of which 95% are purchased by the Fed. Res. This is how money is created. It's not the printing of paper dollars by the Bureau of Engraving and Printing but the digital entries on the computers of the Fed. Res that creates money. Mind you, money and wealth are not synonymous. I have $500 billion Zimbabwe Dollars, but that won't buy me a stick of gum in America. It's "purchase power" that counts and our dollar is losing it thanks to QE 1-4. |
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Agree that inflation is good. However, that is conditional. If inflation exists during good economic times, it's good. However, if the economy is stagnant or deflating, it's bad. If you want examples of bad economy plus inflation, look no further than the Arab Spring. It wasn't because of a sudden yearning to have a voice in government. That's the propaganda fed to us by the Whine Haus. The Arabs rose up because of inflation. In fact, inflation is the biggest export this nation has. Quoted:
Quoted:
Inflation is a natural phenomenon that's required for an economy to grow. Inflation itself is not a bad thing, and a steady inflation rate is necessary to maintain economic growth over time. Inflation is basically the compounding result of society adding value to goods and services over time. The money supply has to grow along with an economy, and as the money supply increases, so does inflation. Third party intervention (government) and restrictions on free markets can negatively impact the rate of inflation, making it too high, too low, or too inconsistent for an economy to grow at a steady pace. ETA: The Wiki Article for inflation is actually a good place to start. I predict this thread is going to get very interesting, with a lot of misinformation being posted by people who don't understand inflation or other basic economic concepts..... Agree that inflation is good. However, that is conditional. If inflation exists during good economic times, it's good. However, if the economy is stagnant or deflating, it's bad. If you want examples of bad economy plus inflation, look no further than the Arab Spring. It wasn't because of a sudden yearning to have a voice in government. That's the propaganda fed to us by the Whine Haus. The Arabs rose up because of inflation. In fact, inflation is the biggest export this nation has. I thought it was a sudden spike in food prices, not related to normal inflation but to simple supply/demand issues. |
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I thought it was a sudden spike in food prices, not related to normal inflation but to simple supply/demand issues. Rising food prices today (or shrinking food packages) is attributable to inflation thanks to QE 1-4. There is over 3X the amount of US dollars on the books since 2008. |
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Rising food prices today (or shrinking food packages) is attributable to inflation thanks to QE 1-4. There is over 3X the amount of US dollars on the books since 2008. Quoted:
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I thought it was a sudden spike in food prices, not related to normal inflation but to simple supply/demand issues. Rising food prices today (or shrinking food packages) is attributable to inflation thanks to QE 1-4. There is over 3X the amount of US dollars on the books since 2008. Unless all other commodities jumped in those countries by a comparable percent, I wouldn't put it down to inflation. It's like when gas spikes up $0.30 in a couple of days and GD is filled with "Inflation!!!" cries. Anyway, I'm just putting out what I heard caused the initial Tunisian burning man incident. It's not a topic I've studied in depth so I could very well be wrong. Always willing to get more data on it, if you have it. |
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Do you think 2.3% inflation is good? The fact that everything goes up 2.3+% in price each year while average income doesn't? Quoted:
Do you think 2.3% inflation is good? The fact that everything goes up 2.3+% in price each year while average income doesn't? Inflation affects labor just as much as physical goods. Over time, income rises with inflation. The median individual income in 1950 was about $2,500. In 2013 dollars, that's the equivalent of about $24,000. Today, the median individual income is over $30,000. Labor is not exempt from inflation. And over the last 63 years, the US has experienced the exact opposite of what you claim. Labor rates have inflated faster than most consumer goods, resulting in greater purchasing power today. An average income in 2013 will buy you more today than what an average income in 1950 would have bought you back then. You can't look at short term trends (like the last 3-5 years) and extrapolate that logic to an entire economic concept. Quoted:
I don't want inflation/deflation. I want the money supply to match the GDP to ensure price stability; otherwise, my money is worth less today than it was yesterday. Assuming the economy grows, the money supply also needs to grow. Over time, you still have inflation. It's practically impossible for a growing economy to maintain no inflation. It doesn't matter if inflation is taking place, if income levels are rising at roughly the same pace (which they are). |
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Like all wise and prudent people I have come to ARFcom GD for answers to the really important questions. Explain to me me (only me, fuck the rest of you ) why we have inflation.
My opinion is greed. It starts that someone wants to be given more for doing the same thing, hence a price increase, which is passed along. So now you smart people, and dumb ones too, explain why I'm wrong. Holy fuck. Please google "central banking" and "fiat currency" and then "inflation" and you will have your answere. Try reading "Economics in One Lesson" by Henry Hazlitt. He has an excellent chapter on inflation, and the rest of the book is brilliant as well. In fact, Please Please PLEASE just purchase a copy of Hazlitt and read it cover to cover. This will correct all your misconceptions. Buy one NOW. |
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Inflation has nothing to do with greed and everything to do with shitty fiscal/monetary policy by the government. Greed is most certainly a core issue. I just does not manifest itself in the traditional sense which the OP has chosen to apply it. |
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Unless all other commodities jumped in those countries by a comparable percent, I wouldn't put it down to inflation. It's like when gas spikes up $0.30 in a couple of days and GD is filled with "Inflation!!!" cries. Anyway, I'm just putting out what I heard caused the initial Tunisian burning man incident. It's not a topic I've studied in depth so I could very well be wrong. Always willing to get more data on it, if you have it. Quoted:
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I thought it was a sudden spike in food prices, not related to normal inflation but to simple supply/demand issues. Rising food prices today (or shrinking food packages) is attributable to inflation thanks to QE 1-4. There is over 3X the amount of US dollars on the books since 2008. Unless all other commodities jumped in those countries by a comparable percent, I wouldn't put it down to inflation. It's like when gas spikes up $0.30 in a couple of days and GD is filled with "Inflation!!!" cries. Anyway, I'm just putting out what I heard caused the initial Tunisian burning man incident. It's not a topic I've studied in depth so I could very well be wrong. Always willing to get more data on it, if you have it. You can have inflation in commodities without seeing price increases. Producer costs continue to rise (inflation), but commodity prices continue to get slammed in the paper markets. This will trigger changes in the producer's capital and expense structures and will eventually lead to reduced production. Prices will eventually rise, but will lag the actual inflation. |
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Inflation is a natural phenomenon that's required for an economy to grow. Inflation itself is not a bad thing, and a steady inflation rate is necessary to maintain economic growth over time. Inflation is basically the compounding result of society adding value to goods and services over time. The money supply has to grow along with an economy, and as the money supply increases, so does inflation. Third party intervention (government) and restrictions on free markets can negatively impact the rate of inflation, making it too high, too low, or too inconsistent for an economy to grow at a steady pace. ETA: The Wiki Article for inflation is actually a good place to start. I predict this thread is going to get very interesting, with a lot of misinformation being posted by people who don't understand inflation or other basic economic concepts..... No. A money supply that increases with the growth of the economy will not result in any inflation. A money supply that grows in excess of the economy will result in inflation. Inflation is not necessary for the economy to grow. eta: this is just concerning the money supply, there are many other things that affect inflation. |
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Inflation affects labor just as much as physical goods. Over time, income rises with inflation. The median individual income in 1950 was about $2,500. In 2013 dollars, that's the equivalent of about $24,000. Today, the median individual income is over $30,000. Labor is not exempt from inflation. And over the last 63 years, the US has experienced the exact opposite of what you claim. Labor rates have inflated faster than most consumer goods, resulting in greater purchasing power today. An average income in 2013 will buy you more today than what an average income in 1950 would have bought you back then. You can't look at short term trends (like the last 3-5 years) and extrapolate that logic to an entire economic concept. Assuming the economy grows, the money supply also needs to grow. Over time, you still have inflation. It's practically impossible for a growing economy to maintain no inflation. It doesn't matter if inflation is taking place, if income levels are rising at roughly the same pace (which they are). Quoted:
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Do you think 2.3% inflation is good? The fact that everything goes up 2.3+% in price each year while average income doesn't? Inflation affects labor just as much as physical goods. Over time, income rises with inflation. The median individual income in 1950 was about $2,500. In 2013 dollars, that's the equivalent of about $24,000. Today, the median individual income is over $30,000. Labor is not exempt from inflation. And over the last 63 years, the US has experienced the exact opposite of what you claim. Labor rates have inflated faster than most consumer goods, resulting in greater purchasing power today. An average income in 2013 will buy you more today than what an average income in 1950 would have bought you back then. You can't look at short term trends (like the last 3-5 years) and extrapolate that logic to an entire economic concept. Quoted:
I don't want inflation/deflation. I want the money supply to match the GDP to ensure price stability; otherwise, my money is worth less today than it was yesterday. Assuming the economy grows, the money supply also needs to grow. Over time, you still have inflation. It's practically impossible for a growing economy to maintain no inflation. It doesn't matter if inflation is taking place, if income levels are rising at roughly the same pace (which they are). That is pure and utter moonshine. Could you please try and MAKE A MORE BROADLY ABSURD STATEMENT? Lets just dissect this interesting absurdity you have just vomited upon this thread: What if the economy grows .05%? How much shall the money supply need to increase? Here is a better question: How shall we measure growth in the economy? By that measurement, by what amount shall we then grow the money supply? |
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Rising food prices today (or shrinking food packages) is attributable to inflation thanks to QE 1-4. There is over 3X the amount of US dollars on the books since 2008. Quoted:
Quoted:
I thought it was a sudden spike in food prices, not related to normal inflation but to simple supply/demand issues. Rising food prices today (or shrinking food packages) is attributable to inflation thanks to QE 1-4. There is over 3X the amount of US dollars on the books since 2008. Devaluing the dollar, soon we will have wheel borrows full of money that will be worthless. 
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No. A money supply that increases with the growth of the economy will not result in any inflation. A money supply that grows in excess of the economy will result in inflation. Inflation is not necessary for the economy to grow. Quoted:
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Inflation is a natural phenomenon that's required for an economy to grow. Inflation itself is not a bad thing, and a steady inflation rate is necessary to maintain economic growth over time. Inflation is basically the compounding result of society adding value to goods and services over time. The money supply has to grow along with an economy, and as the money supply increases, so does inflation. Third party intervention (government) and restrictions on free markets can negatively impact the rate of inflation, making it too high, too low, or too inconsistent for an economy to grow at a steady pace. ETA: The Wiki Article for inflation is actually a good place to start. I predict this thread is going to get very interesting, with a lot of misinformation being posted by people who don't understand inflation or other basic economic concepts..... No. A money supply that increases with the growth of the economy will not result in any inflation. A money supply that grows in excess of the economy will result in inflation. Inflation is not necessary for the economy to grow. Please, describe the precise measurement of the "growth of the economy" and the precise relationship of the increase of "money supply" to that growth. This argument is fundamentaly fraudulant. |
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Wow there is a lot of stupidity in thread so far.
First off, inflation in basic terms is an increase in the money supply. You can get a bit more detailed and say that inflation is the creation of an excess supply of money beyond the current demand for it. Rising prices are a symptom of an increase in the money supply. Rising prices in the U.S. are mainly due to the Fed increasing the base money supply (money created before entering into the fractional reserve banking system) from $800 billion to over $3 trillion in just a few years. To give you an example of why this would cause prices to rise, let's assume we're all at a rare art auction. There's some nice painting up for auction. Let's say that before true inflation (increasing the money supply) that everyone bids and the winner get's the piece of art for $1000. Now, let's assume that someone comes to the art auction and hands everyone $1,000,000 cash and they did the auction for a piece of art worth equivalent value as the first. It would likely sell for near $1,000,000. In short, when you have more dollars fighting over a set (or much slower growing) supply of goods, prices will naturally rise. Now, we haven't seen the full effects of the Fed's money printing scheme yet. Most of the currency that they have created is sitting in some accounts not being loaned out or used. When it starts filtering into the economy more, you'll see some massive price increases. I saw someone mention earlier that inflation has happened in prior cultures, and they're right. You can bet that any example of a country that has experience high or hyper inflation has or had a fiat currency (currency backed by nothing valuable). In fact, there's not a single historical example of a fiat currency (out of thousands) that didn't revert back to its inherent value of nothing. Also, whoever said that inflation is good for an economy has been spoon-fed a bunch of bull. Inflation encourages debt and spending while a stable money supply, or one that is slightly deflationary encourages savings and investment. Savings and investment are what drive healthy economies. Debt and spending encourage wreck-less consumerism. The most stable economies in history belonged to countries with a very high savings rate, low amount of debt and a stable, non-fiat currency. |
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No you dont ,once a economy enters into deflation it is extremely difficult to get out of the cycle. Quoted:
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Inflation is a natural phenomenon that's required for an economy to grow. Inflation itself is not a bad thing, and a steady inflation rate is necessary to maintain economic growth over time. Inflation is basically the compounding result of society adding value to goods and services over time. The money supply has to grow along with an economy, and as the money supply increases, so does inflation. Third party intervention (government) and restrictions on free markets can negatively impact the rate of inflation, making it too high, too low, or too inconsistent for an economy to grow at a steady pace. ETA: The Wiki Article for inflation is actually a good place to start. Well put. It also makes people want to buy homes with fixed rate mortages. You lock in your payment for say 30 years, but get raises, so your payment becomes less and less a portion of your income. Look at it another way. Nobody wants deflation. Our economy cannot stay the same, so the best choice is to have low inflation. The Fed has proven tools to manage inflation....not so much with deflation. I want deflation. It will reward everyone who saves their money and doesn't go into debt. Prices are becoming ridiculous relative to income. No you dont ,once a economy enters into deflation it is extremely difficult to get out of the cycle. Um. Or just print money? If prices were permitted to fluctuate at market rates, we wouldn't need to worry about assholes with million dollar homes suddenly "underwater" at $200k value. Manipulation begets manipulation begets bubbles begets more manipulation ad nauseum. |
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Wow there is a lot of stupidity in thread so far. First off, inflation in basic terms is an increase in the money supply. You can get a bit more detailed and say that inflation is the creation of an excess supply of money beyond the current demand for it. Rising prices are a symptom of an increase in the money supply. Rising prices in the U.S. are mainly due to the Fed increasing the base money supply (money created before entering into the fractional reserve banking system) from $800 billion to over $3 trillion in just a few years. To give you an example of why this would cause prices to rise, let's assume we're all at a rare art auction. There's some nice painting up for auction. Let's say that before true inflation (increasing the money supply) that everyone bids and the winner get's the piece of art for $1000. Now, let's assume that someone comes to the art auction and hands everyone $1,000,000 cash and they did the auction for a piece of art worth equivalent value as the first. It would likely sell for near $1,000,000. In short, when you have more dollars fighting over a set (or much slower growing) supply of goods, prices will naturally rise. Now, we haven't seen the full effects of the Fed's money printing scheme yet. Most of the currency that they have created is sitting in some accounts not being loaned out or used. When it starts filtering into the economy more, you'll see some massive price increases. I saw someone mention earlier that inflation has happened in prior cultures, and they're right. You can bet that any example of a country that has experience high or hyper inflation has or had a fiat currency (currency backed by nothing valuable). In fact, there's not a single historical example of a fiat currency (out of thousands) that didn't revert back to its inherent value of nothing. Also, whoever said that inflation is good for an economy has been spoon-fed a bunch of bull. Inflation encourages debt and spending while a stable money supply, or one that is slightly deflationary encourages savings and investment. Savings and investment are what drive healthy economies. Debt and spending encourage wreck-less consumerism. The most stable economies in history belonged to countries with a very high savings rate, low amount of debt and a stable, non-fiat currency. What he said! Right now the velocity of the money supply is low, but as people loose faith in the dollar (and it will happen), that velocity will increase as people spend it as quick as they get it. The faster that happens, the higher the inflation rate will be. |
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Please, describe the precise measurement of the "growth of the economy" and the precise relationship of the increase of "money supply" to that growth. This argument is fundamentaly fraudulant. Quoted:
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Inflation is a natural phenomenon that's required for an economy to grow. Inflation itself is not a bad thing, and a steady inflation rate is necessary to maintain economic growth over time. Inflation is basically the compounding result of society adding value to goods and services over time. The money supply has to grow along with an economy, and as the money supply increases, so does inflation. Third party intervention (government) and restrictions on free markets can negatively impact the rate of inflation, making it too high, too low, or too inconsistent for an economy to grow at a steady pace. ETA: The Wiki Article for inflation is actually a good place to start. I predict this thread is going to get very interesting, with a lot of misinformation being posted by people who don't understand inflation or other basic economic concepts..... No. A money supply that increases with the growth of the economy will not result in any inflation. A money supply that grows in excess of the economy will result in inflation. Inflation is not necessary for the economy to grow. Please, describe the precise measurement of the "growth of the economy" and the precise relationship of the increase of "money supply" to that growth. This argument is fundamentaly fraudulant. There isn't a precise measurement. Macroeconomists try to measure these things in many different ways (GDP, MB/M2, CPI). None of them are very precise. Just because a figure is not measurable does not that figure does not exist. |
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No. A money supply that increases with the growth of the economy will not result in any inflation. A money supply that grows in excess of the economy will result in inflation. Inflation is not necessary for the economy to grow. eta: this is just concerning the money supply, there are many other things that affect inflation. Quoted:
No. A money supply that increases with the growth of the economy will not result in any inflation. A money supply that grows in excess of the economy will result in inflation. Inflation is not necessary for the economy to grow. eta: this is just concerning the money supply, there are many other things that affect inflation. Inflation is necessary to stabilize economic growth. Even if the money supply keeps pace with economic growth, you will have inflation as the economy gets larger. It's a naturally occurring phenomenon and requires manipulation to maintain zero inflation, which is why most free market economists agree that a consistent 2-3% inflation rate is ideal for the US economy. Quoted:
That is pure and utter moonshine. Could you please try and MAKE A MORE BROADLY ABSURD STATEMENT? Lets just dissect this interesting absurdity you have just vomited upon this thread: What if the economy grows .05%? How much shall the money supply need to increase? Here is a better question: How shall we measure growth in the economy? By that measurement, by what amount shall we then grow the money supply? 
Please explain what's wrong with my statement? As the economy grows, the money supply should increase relative to the economic growth. There are hundreds of different ways to measure economic growth, and probably a dozen ways to analyze a simple statistic like GDP. There are hundreds of ways to manipulate the money supply and how to measure it. But that's not relevant to discussion. My post wasn't intended to incite a technical discussion of how to control the money supply. It's an explanation of what inflation is and why it's not the horrible boogeyman that the average layperson believes it is. What matters in the context of this discussion is the size of the money supply over time, relative to economic growth. Quoted:
Please, describe the precise measurement of the "growth of the economy" and the precise relationship of the increase of "money supply" to that growth. This argument is fundamentaly fraudulant. The precise measurement of the "growth of the economy" is completely irrelevant. Do you really want to argue over how to accurately measure the GDP (or some other statistic defining economic size) of a nation? That's a concept that consumes entire college level economics classes. This is the General Discussion forum of a gun website. My statements are outlining the overall concept of inflation and how it relates to the money supply and economic growth, the exact information the OP was looking for. |
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Rising food prices today (or shrinking food packages) is attributable to inflation thanks to QE 1-4. There is over 3X the amount of US dollars on the books since 2008. Quoted:
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I thought it was a sudden spike in food prices, not related to normal inflation but to simple supply/demand issues. Rising food prices today (or shrinking food packages) is attributable to inflation thanks to QE 1-4. There is over 3X the amount of US dollars on the books since 2008. To make it more complicated, you can also talk about the velocity of money. If you take a $20 bill and it changes hands 12 times a year, that is a high velocity. But why inflation isn't much over 2% is because too many people are sitting on their cash. that $20 bill stays in the gun safe all year long, maybe even two years. So the Feds have been turning the spigots on full blast since 2006 and inflation is only around 2.5%. But now that Bernanke has said he is starting to turn off the pumps, mortgage interest is starting to rise. This is encouraging people to actually get off their butts and buy homes, or the car they always wanted, etc. Sort of like the gun panic this year, told you can't have something, or that is will cost you a lot more, you might be inspired to open that wallet and spend that $20. |
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To make it more complicated, you can also talk about the velocity of money. If you take a $20 bill and it changes hands 12 times a year, that is a high velocity. But why inflation isn't much over 2% is because too many people are sitting on their cash. that $20 bill stays in the gun safe all year long, maybe even two years. So the Feds have been turning the spigots on full blast since 2006 and inflation is only around 2.5%. But now that Bernanke has said he is starting to turn off the pumps, mortgage interest is starting to rise. This is encouraging people to actually get off their butts and buy homes, or the car they always wanted, etc. Sort of like the gun panic this year, told you can't have something, or that is will cost you a lot more, you might be inspired to open that wallet and spend that $20. Quoted:
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I thought it was a sudden spike in food prices, not related to normal inflation but to simple supply/demand issues. Rising food prices today (or shrinking food packages) is attributable to inflation thanks to QE 1-4. There is over 3X the amount of US dollars on the books since 2008. To make it more complicated, you can also talk about the velocity of money. If you take a $20 bill and it changes hands 12 times a year, that is a high velocity. But why inflation isn't much over 2% is because too many people are sitting on their cash. that $20 bill stays in the gun safe all year long, maybe even two years. So the Feds have been turning the spigots on full blast since 2006 and inflation is only around 2.5%. But now that Bernanke has said he is starting to turn off the pumps, mortgage interest is starting to rise. This is encouraging people to actually get off their butts and buy homes, or the car they always wanted, etc. Sort of like the gun panic this year, told you can't have something, or that is will cost you a lot more, you might be inspired to open that wallet and spend that $20. I think most of the "inflation potential liquidity" is currently captured in the US Equity & Bond markets, and the rest offshore. But someday, that potential energy is going to go to work! |
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Also, whoever said that inflation is good for an economy has been spoon-fed a bunch of bull. The vast majority of modern free market economists believe that a steady 2-3% inflation rate is ideal for our economy. Very few economists believe that our goal should be zero inflation. It's a difficult standard to maintain and can easily result in slow or inconsistent economic growth. I have an economics degree from a fairly conservative business school and every Econ professor I had in college agreed with this viewpoint. I don't remember anyone preaching the "zero inflation" concept in school. |
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............Look at it another way. Nobody wants deflation. Our economy cannot stay the same, so the best choice is to have low inflation. The Fed has proven tools to manage inflation....not so much with deflation.  I'd love for the purchasing power of my filthy lucre to increase, year in and year out.
I've got mine, Jack! 
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Quoted: Inflation is a natural phenomenon that's required for an economy to grow. Inflation itself is not a bad thing, and a steady inflation rate is necessary to maintain economic growth over time. Inflation is basically the compounding result of society adding value to goods and services over time. The money supply has to grow along with an economy, and as the money supply increases, so does inflation. Third party intervention (government) and restrictions on free markets can negatively impact the rate of inflation, making it too high, too low, or too inconsistent for an economy to grow at a steady pace. ETA: The Wiki Article for inflation is actually a good place to start. I predict this thread is going to get very interesting, with a lot of misinformation being posted by people who don't understand inflation or other basic economic concepts..... |
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Quoted: I want deflation. It will reward everyone who saves their money and doesn't go into debt. Prices are becoming ridiculous relative to income. Quoted: Quoted: Quoted: Inflation is a natural phenomenon that's required for an economy to grow. Inflation itself is not a bad thing, and a steady inflation rate is necessary to maintain economic growth over time. Inflation is basically the compounding result of society adding value to goods and services over time. The money supply has to grow along with an economy, and as the money supply increases, so does inflation. Third party intervention (government) and restrictions on free markets can negatively impact the rate of inflation, making it too high, too low, or too inconsistent for an economy to grow at a steady pace. ETA: The Wiki Article for inflation is actually a good place to start. Well put. It also makes people want to buy homes with fixed rate mortages. You lock in your payment for say 30 years, but get raises, so your payment becomes less and less a portion of your income. Look at it another way. Nobody wants deflation. Our economy cannot stay the same, so the best choice is to have low inflation. The Fed has proven tools to manage inflation....not so much with deflation. I want deflation. It will reward everyone who saves their money and doesn't go into debt. Prices are becoming ridiculous relative to income. The perfect cure for inflation.
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Inflation is necessary to stabilize economic growth. Even if the money supply keeps pace with economic growth, you will have inflation as the economy gets larger. It's a naturally occurring phenomenon and requires manipulation to maintain zero inflation, which is why most free market economists agree that a consistent 2-3% inflation rate is ideal for the US economy. Quoted:
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No. A money supply that increases with the growth of the economy will not result in any inflation. A money supply that grows in excess of the economy will result in inflation. Inflation is not necessary for the economy to grow. eta: this is just concerning the money supply, there are many other things that affect inflation. Inflation is necessary to stabilize economic growth. Even if the money supply keeps pace with economic growth, you will have inflation as the economy gets larger. It's a naturally occurring phenomenon and requires manipulation to maintain zero inflation, which is why most free market economists agree that a consistent 2-3% inflation rate is ideal for the US economy. I don't necessarily disagree with anything you wrote. I would like to point out that inflation is due to many reason other than the money supply. My comments were restricted to the money supply in response to the comment that an increase in the money supply will result in inflation. That simply isn't the case. |
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The vast majority of modern free market economists believe that a steady 2-3% inflation rate is ideal for our economy. Very few economists believe that our goal should be zero inflation. I have an economics degree from a fairly conservative business school and every Econ professor I had in college agreed with this viewpoint. Quoted:
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Also, whoever said that inflation is good for an economy has been spoon-fed a bunch of bull. The vast majority of modern free market economists believe that a steady 2-3% inflation rate is ideal for our economy. Very few economists believe that our goal should be zero inflation. I have an economics degree from a fairly conservative business school and every Econ professor I had in college agreed with this viewpoint. I have similar degrees and I concur with what you are saying. The problem is that we have higher than 2% inflation, but we lie about it and pretend we only have 2% - 3% inflation. |
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The vast majority of modern free market economists believe that a steady 2-3% inflation rate is ideal for our economy. Very few economists believe that our goal should be zero inflation. I have an economics degree from a fairly conservative business school and every Econ professor I had in college agreed with this viewpoint. Quoted:
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Also, whoever said that inflation is good for an economy has been spoon-fed a bunch of bull. The vast majority of modern free market economists believe that a steady 2-3% inflation rate is ideal for our economy. Very few economists believe that our goal should be zero inflation. I have an economics degree from a fairly conservative business school and every Econ professor I had in college agreed with this viewpoint. There's your problem. There are very, very few universities that will even let you know that Austrian economics exists. I've met tons of people with economics degrees from good schools that have never even heard of adam smith, rothbard, mises, hazlitt, hayek, etc, let alone read them. The same people that spout off about inflation being a good thing probably also think fiat currency, deficit spending and central banks are a good idea too. |
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I don't necessarily disagree with anything you wrote. I would like to point out that inflation is due to many reason other than the money supply. My comments were restricted to the money supply in response to the comment that an increase in the money supply will result in inflation. That simply isn't the case. Quoted:
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No. A money supply that increases with the growth of the economy will not result in any inflation. A money supply that grows in excess of the economy will result in inflation. Inflation is not necessary for the economy to grow. eta: this is just concerning the money supply, there are many other things that affect inflation. Inflation is necessary to stabilize economic growth. Even if the money supply keeps pace with economic growth, you will have inflation as the economy gets larger. It's a naturally occurring phenomenon and requires manipulation to maintain zero inflation, which is why most free market economists agree that a consistent 2-3% inflation rate is ideal for the US economy. I don't necessarily disagree with anything you wrote. I would like to point out that inflation is due to many reason other than the money supply. My comments were restricted to the money supply in response to the comment that an increase in the money supply will result in inflation. That simply isn't the case. Unless there is a material swing in the production supply or consumer demand, the inflation is a result of the money supply. |
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I don't necessarily disagree with anything you wrote. I would like to point out that inflation is due to many reason other than the money supply. My comments were restricted to the money supply in response to the comment that an increase in the money supply will result in inflation. That simply isn't the case. True, I was making the assumption that all other things remain equal. There are thousands of things that can influence inflation, but I'm trying to keep it to the basics. Macro-economics was always interesting to me, because the concepts are so intricate and complex, but practically impossible to accurately observe in the real world. You simply can't track and manage all the possible variables to provide an accurate test of economic concepts on a macro-scale, which is why a huge chunk of economics consists of theories and opinions. |