Show of HandsShow of Hands

Praetorianus November 4th, 2019 2:25am

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?

11 Liked

Comments: Add Comment

DiQuellaPira
11/04/19 6:18 pm

Inflation is simply caused by too much money in circulation...blame the FED which prints it out of thin air

TK421
11/04/19 11:29 pm

Not so simple. The Fed does not print money and monetary policy is appropriate reactionary measures to inflationary or recessionary gaps.

TK421
11/04/19 11:30 pm

And the Fed helped us out of the recession and outperformed most economies

JPA1960 Illinois
11/04/19 5:10 am

Can’t explain it... just know it happens.

mark4
11/04/19 4:46 am

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.

Reply
TK421
11/04/19 9:46 am

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.

mark4
11/04/19 12:02 pm

Yes, but what would be different?

Diogenes Lagoa Time
11/03/19 10:53 pm

The Federal Reserve

Reply
qmastrangelo back again one day
11/03/19 10:16 pm

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

Reply
DJ13
11/03/19 9:55 pm

Greed .

Reply
ConservativeD Libertarian in disguise
11/04/19 4:29 pm

Riiiiiiiiiight, let me know when you can produce some, more than happy to debate you on facts......feelings?.......not so much.

DJ13
11/04/19 9:34 pm

Haha. You can't argue facts or feelings because you have neither.....lol

ConservativeD Libertarian in disguise
11/04/19 10:11 pm

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.

...

DJ13
11/04/19 10:19 pm

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.....🤔🤔🤔

jgf I have a few questions
11/03/19 9:15 pm

Don't know but one dollar in 1850 is worth 30.73 now

Reply
Praetorianus Fair enough.
11/03/19 9:00 pm

Change isn't always progress.

youallarewrong
11/03/19 9:02 pm

Then why change

youallarewrong
11/03/19 9:06 pm

Company change their products and say it is new and better. People buy it because they want the new and better.That is progress

Praetorianus Fair enough.
11/03/19 9:23 pm

"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.

youallarewrong
11/03/19 9:26 pm

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

youallarewrong
11/03/19 9:27 pm

I don’t get a new cell phone because of that and my cell phone still works

rons on top of the world MA
11/04/19 6:31 am

My first TV in 1964 was two weeks pay. A new car was a years salary.

youallarewrong
11/03/19 8:40 pm

Capitalism.

Reply
ConservativeD Libertarian in disguise
11/04/19 12:58 pm

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??

....

RussianThunder Russia and USA
11/03/19 8:28 pm

That’s math and numbers. I just ran and hid, so no. Sorry. Ugh

Reply
Americanophile Venezuelan
11/03/19 8:00 pm

MV= PQ

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.

Reply
ozzy
11/03/19 7:57 pm

A lot of it is because of government interference. MW laws and regulations

Reply
shygal47 Florida east coast
11/03/19 7:56 pm

One reason: No standard ... we left the golf standard decades ago.
Another reason, talk to the IMF

Reply
shygal47 Florida east coast
11/03/19 7:57 pm

🤣😂 golf! GOLD!

ConservativeD Libertarian in disguise
11/04/19 12:59 pm

Why does Venezuela have the highest inflation in the world? They never had the gold standard.

shygal47 Florida east coast
11/04/19 1:24 pm

Guess you’ll have to ask them. I assumed the poll was about the US.

ConservativeD Libertarian in disguise
11/04/19 2:05 pm

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.

TK421
11/03/19 7:42 pm

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.

Reply
credo Vote your conscience
11/03/19 7:33 pm

This is an interesting question and I look forward to reading the responses.

Reply
Liberty Lets Use Logic
11/03/19 7:29 pm

Currency loses value due to mismanagement and intentional devaluation.

Reply
TK421
11/03/19 7:43 pm

Wrong.

Liberty Lets Use Logic
11/04/19 5:50 am

Any cogent thoughts, or just blind disagreement?

TK421
11/04/19 9:43 am

No, see my comment above. Inflation is a natural economic phenomenon. Without it, you get deflation, which is far worse.

Liberty Lets Use Logic
11/04/19 10:38 am

It isn’t, and you could have stability rather than inflation or deflation.

TK421
11/04/19 4:13 pm

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.

Liberty Lets Use Logic
11/04/19 7:47 pm

Umm...no. Obviously not. What would give you such an absurd notion?

TK421
11/04/19 11:25 pm

www.investopedia.com/ask/answers/111414/how-can-inflation-be-good-economy.asp

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.

TK421
11/04/19 11:26 pm

You’re also not proposing any notions.

Liberty Lets Use Logic
11/05/19 4:32 pm

You’re not saying anything different, and the notion in question is your own; I didn’t “propose” any, haha.

TK421
11/05/19 5:14 pm

Fine, “you’re not suggesting any alternate notions to the contrary”

Liberty Lets Use Logic
11/05/19 5:19 pm

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.

TK421
11/05/19 7:14 pm

Currency naturally loses value as an economy grows. Hyperinflation occurs from hysterical governments who haven’t a clue what they are doing.

Liberty Lets Use Logic
11/05/19 8:34 pm

It doesn’t have to. The value can be kept stable by not overly increasing the supply.

TK421
11/05/19 9:53 pm

Keyword- “overly increasing”
Let’s say, a price level change of about 2% per year?

Liberty Lets Use Logic
11/06/19 6:20 am

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.

TK421
11/06/19 7:18 am

“Gaining value” means there is deflation, ie a money shortage. Gaining value is not growth.

Liberty Lets Use Logic
11/06/19 7:28 am

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.

Praetorianus Fair enough.
11/03/19 7:27 pm

No idea, seriously.
Input from economists appreciated.