Inspired by a hundred year old sign offering "a full breakfast for 75cents." Prices creep up, wages follow. Going way back, a $ in 1850 was worth $100 in today's money. Can you explain why inflation happens, why prices aren't stable?
Inflation is simply caused by too much money in circulation...blame the FED which prints it out of thin air
Not so simple. The Fed does not print money and monetary policy is appropriate reactionary measures to inflationary or recessionary gaps.
And the Fed helped us out of the recession and outperformed most economies
Can’t explain it... just know it happens.
Innovation naturally produces a drop in prices, but our oppressors er government has found a way to tax us without the input of our "representatives" by changing the money supply.
The job of the Fed is to regulate the money supply and nominal interest rates. Without them you would see bank runs, usury, and unpredictability from the economy.
Yes, but what would be different?
The Federal Reserve
The Fed tries to keep the money supply at a low but constant rate of inflation since it incentivized the greatest amount of investment (it becomes expensive to simply hold money that will lose value due to inflation, so you choose instead to invest it and counteract inflation) and therefore leads to the optimal rate of economic growth
You see bad guys everywhere.......
No, just facts....
Riiiiiiiiiight, let me know when you can produce some, more than happy to debate you on facts......feelings?.......not so much.
Haha. You can't argue facts or feelings because you have neither.....lol
Riiiiiight - I believe I have provided you with a myriad of facts. Just because you lack the coherence to understand them doesn’t negate the fact that they are facts.....
And your right - I have very little feelings......you in the other hand have a lot of feelings when we debate, and you lack any measurable facts.
Well, since you have no feelings, you are like a robot, therefore your only facts are what someone programs into you. Who might that be... Trump....are you a Trumpbot.....🤔🤔🤔
Don't know but one dollar in 1850 is worth 30.73 now
Change isn't always progress.
Then why change
Company change their products and say it is new and better. People buy it because they want the new and better.That is progress
"New and improved" ☺
Or they just (with computer technology) force you to upgrade because otherwise, you're not compatible anymore.
Has little to do with inflation though.
The computer technology is new and improved that is why they made a new phone. Are you saying that the technology is not new and improved
I don’t get a new cell phone because of that and my cell phone still works
My first TV in 1964 was two weeks pay. A new car was a years salary.
Weird, inflation happens in communist/socialist countries too - case in point Venezuela, China, etc...
North Korea is probably the only country without consumer inflation........maybe we should do more things like that success story??
That’s math and numbers. I just ran and hid, so no. Sorry. Ugh
Where M is the money supply, V is the velocity of money, P is the price level, and Q is the level of real output.
Assuming V and Q as constant, the price level (P) varies proportionately with the supply of money (M). Until prices had risen by this proportion, individuals and firms would have excess cash which they would spend, leading to rise in prices. So inflation proceeds at the same rate at which the money supply expands.
If V varies without necessarily increasing the money supply, which occurs when confidence in the currency is lost and people rotate it more quickly, usually to buy other more stable currencies, P also varies proportionately.
If Q fall, the economy loses intrinsic value and each existing currency unit moving will only represent an unsupported instrument that inflates the market value.
A lot of it is because of government interference. MW laws and regulations
One reason: No standard ... we left the golf standard decades ago.
Another reason, talk to the IMF
🤣😂 golf! GOLD!
Why does Venezuela have the highest inflation in the world? They never had the gold standard.
Guess you’ll have to ask them. I assumed the poll was about the US.
It’s probably a fair assumption I kind of read it as why does inflation exist which is a global epidemic not unique to America.
The money supply, and in our system, fiat money, is demanded by businesses and households to make transactions. Money is also loaned by banks, at an interest rate. The Fed controls the money supply through open market operations such as buying or selling government securities, or changing the discount rate or reserve requirements to banks.
To track inflation you must track the price level. This can be done on the Aggregate demand vs Aggregate Supply curve. Very hard to describe what exactly happens without it, so I’ll make it short.
If we are in a recession, the fed can assist aggregate demand by increasing the money supply to drive down the interest rate. This makes it easier for firms to do business and increase real gdp.
There is no immediate inflation, because wages and contracts are “sticky” to the past. But once these are adjusted to the new price levels, the inflation effect is seen.
Healthy inflation is theorized to be about 2 percent.
This is an interesting question and I look forward to reading the responses.
Currency loses value due to mismanagement and intentional devaluation.
Any cogent thoughts, or just blind disagreement?
No, see my comment above. Inflation is a natural economic phenomenon. Without it, you get deflation, which is far worse.
It isn’t, and you could have stability rather than inflation or deflation.
Then no business would get done, as without interest rates there would be 0 velocity of money. Banks would close and people would horde cash.
Umm...no. Obviously not. What would give you such an absurd notion?
A simple google search shows.
And for negative effects, well of course any form of hyperinflation will crash an economy.
And possibly rates of return, let’s say you earn 5% on an investment, but inflation is at 2%. Your real return would be 3%. This is a consideration to not undervalue or overvalue your securities options.
Healthy inflation is what allows banks to exist. That is what allows businesses to loan capital. Otherwise, we would be in a money shortage as people would horde cash. This is called a bank run, and is what assisted the crash leading to the Great Depression.
You’re also not proposing any notions.
You’re not saying anything different, and the notion in question is your own; I didn’t “propose” any, haha.
Fine, “you’re not suggesting any alternate notions to the contrary”
My initial comment...
Not that it bears any relevance towards the refutation of your assertion that there can only be extreme inflation or deflation over the long term, and not stability.
Currency naturally loses value as an economy grows. Hyperinflation occurs from hysterical governments who haven’t a clue what they are doing.
It doesn’t have to. The value can be kept stable by not overly increasing the supply.
Keyword- “overly increasing”
Let’s say, a price level change of about 2% per year?
If it lost 2% one year and gained 2% the next but stayed relatively stable over time, that’d be fine. Something extreme like losing 2% every year perpetually is obviously extreme mismanagement or intentional devaluation.
“Gaining value” means there is deflation, ie a money shortage. Gaining value is not growth.
In simplistic terms, perhaps. In any case, as I said a few times now it would be a bad thing if continued over the long term, just like a loss of value.
No idea, seriously.
Input from economists appreciated.