Topic: Efforts made by the US actually provide a new problem for inflation. (Read 398 times)

But new money also comes into existence through loans and mortgages.  It's not just the government and their stimulus packages.  Banks are creating new money too.  And (although most governments neglect to include the cost of housing in their published inflation rates) it absolutely does have an impact on the true rate of inflation.

The only way to avoid inflation is to stop printing the money but no government is going to do it and US printed more money in the 2020 year for stimulus and as temporary solution to bring money flow in their economy but the effect will stay for longer period even for a decade.

Well, inflation will always be here, at least for as long as the current economic paradigm is in place. Money will always have to weaken regularly. That's necessary in the economic model that is prevailing right now. What is important, though, is that the level of inflation should fall within the range which is considered tolerable for any economy to continue to thrive.

However, things are not smooth nowadays with the pandemic wreaking havoc in economies around the world for years now. That's true even in rich countries like the US. It must be hard even for them to somehow strike a balance between keeping the finances of the country afloat at the same time tempering inflation in the midst of health lock downs.

The central banks purposely target inflation to be at 2 percent, so even in a perfect world the money supply coincided perfectly with GDP, it'd be difficult to pull off. You're one economic dip away from ruining the entire system before the central banks panic and begin injecting money into the economy to save industries that would have probably crashed had it not been for intervention. Just use COVID as an example, debt of most countries began to sky rocket. The US in particular has their inflation rate out of control so it isn't merely just a problem with supply chains.

That's the issue with centralized economics, the entity in control inevitably loses control.

I have noted inflation being just everywhere in different countries and this causing instability in economy and getting countries to disagree because of the choice of world economic policies. Poor countries want more realistic policies but relying on economic theories to developing countries not solving the problem of inflation but increasing it more and affecting tax rate.

Actually, you can, and it's not the government who can stop this but poeple themselves, and the perfect example is one of the biggest economies in the world, Japan. Although you have money printing, a lot of printing, consumer prices haven't grown simply because there is no extra demand for those goods so there is no way for them to raise the price, since the cost isn't going up either then there is nothing forcing the price up either, the only thing that can influence this is a rise in the imports costs or energy, that's why actually covid helped them get out of continuous deflation, to which probably they will revert back by the end of the year.

The government can print trillions, if those trillions are not making their way back into consumption it will have no effect whatsoever.

Let's assume the government pays 2000$ to everybody, if poeple decide it best to spend it on pizza and phones you have a demand of 200 million  Iphones and 4 billion pizzas, surely making the price skyrocket. But if all of them would put the money under their bed, you would have nothing, it would be like that money never existed.


Not that simple.
Inflation is unavoidable when there are major changes in the economy, you can't do anything against it if it's triggered by an energy crisis, even without money printing you will have inflation if the cost of gas or electricity goes up. The exact opposite is perfectly true also, you can have deflation with money printing too, just as I mentioned above.

Inflation is the effect of an unbalanced demand and offer market. Money printing can and usually does increase demand, but it doesn't have to always be like that.

In theory.  But I suppose in practice it's unlikely to happen that way.  Partly because new money issuance can arise from many sources, but mainly that it's not always possible to accurately forecast the real level of demand. 

On top of that, there's also the issue of governments with their (arguably absurd) notions of chasing perpetual economic growth forever, but perhaps that's another discussion altogether.

You can perfectly avoid inflation in fiat and it does not need to have a limited supply. It is a simple as printing money based on the real growth of the economy so that the monetary mass is in sync with the real demand for money. To explain it for a 9 year old: You print the money that is required. If you print less, there is deflation, if you print more there is inflation.

Bitcoin is NOT inherently deflationary.

Wait, 400%? I don't even know what M1 is but that figure don't look good. And despite all this Biden is still flying in illegal immigrants into the country in the dead of night. Seems like they only care to let people in to vote (that non-citizens apparently can coz they don't require IDs to vote now is shocking in itself) coz they don't want to let Cubans in.

this is what will be a problem because there will always be some parties who take advantage of things like this and one of them is what China is doing.
they did look pretty good at first by lending but in the end they took the opportunity and took advantage of it.
actually this is like the law of nature that preys on each other and small countries are only trying and preparing to accept the worst possibility of inflation attacking

Fortunately or unfortunately, this is already for everyone, but for the United States there is no longer a good way out of the inflation-related problem that has arisen. Yes, of course, they are trying and will try to reduce it, but as I wrote above, they will not succeed. Of course, they will try to show as much as possible, informationally, that inflation is not so big, but judging by the situation both in the USA and in the world, we can say that inflation is very high, on average, about 25%. The situation is aggravated by the fact that in the US in 2022 the election race begins, which means that the opponents of the current power in the US will crush their rivals with great force. But what will happen next and what to do in this situation? According to one economist, the solution to this problem is the collapse of the international dollar system into currency zones, and hence the complete collapse of US dominance in the world. If you take a different path, that is, to preserve the world dollar system, the United States will completely lose its economy, and therefore also influence in the world.

That is what it always happen, in theory fiat currencies work if governments could stop themselves from printing all the currency they want, but since their power is centralized the temptation to abuse it is simply too strong, so eventually they will find themselves in a situation to do so and slowly but surely they will begin to walk the path of hyperinflation, this is why it is so important that money is outside of their control so we can avoid that scenario.

But the problem is, most of the elites would just probably shrug off this issue and appear concerned, while in actuality they couldn't care less about the situation as long as they're making money. The government bailed some of the industries biggest players countless of times, yet these players wouldn't even do something in return. For them, it's just business and expansion, nothing more.

Perhaps the central bank and the feds can come bite these huge players' hands while they're at it, and make them 'help' ease inflation or at least the economic situation of the country they operate in, but that would be a reach.

It's very hard to avoid inflation regardless. The best that the governments can do is attempt to control inflation instead of wholly prevent it. When you have President Biden dishing out $2 trillion in COVID relief funds - I don't know what they expected to happen. The main problem with fiat currency in my opinion is that it can be manipulated effortlessly. Politicians can just print more money out of thin air to fund their campaigns in order to yield short-term benefits with no regard for macroeconomic repercussions in the future. If I'm not mistaken, approximately 1/3 of the USD supply to ever exist has been issued in the last 18-24 months - it's no coincidence that ever since 1971, an increasing number of countries have experienced hyperinflation.

A good way to think about money and its desired attributes is/are in 3 hypothetical levels:

Fundamental Layer - Level 1: Store of Value, Means of Exchange, Unit of Account
Quality Layer - Level 2: Transportability, Divisibility, Fungibility, Durability
Economic Layer - Supply (Fixed/Deflationary or Inflationary), Credit, Debt

Credit & debt can be up for debate, but all other boxes in that hypothetical model are ticked by Bitcoin. For example, Gold could never be a true reserve currency because of transportability and divisibility issues. Fiat currency has its limitations in supply - money can be printed out of thin air at will, driving inflation and also calling into question as to whether it's a reasonable store of value at all anymore.

Off-topic of the US but on the topic of inflation - I live in England, and I was thinking about whether CBDCs and fiat currency could genuinely and successfully co-exist? If done incorrectly, it could just spike inflation due to x amount of (digital) £Sterling (Sterling/Pound = issued by the Bank of England) being authored out of nowhere. Talking of inflation had me also thinking that it's a shame that the Basecoin concept didn't amount to anything - the premise was/is extremely intriguing and something that I've been thinking about recently. It almost seems too good to be true to be honest. I believe they stopped their research due to increasing legal pressure from regulators but I might be mistaken. Basecoin intended to be a price-stable cryptocurrency with an algorithmic central bank. You could theoretically peg this asset to the value of a country/economy and program smart contracts to burn or mint the currency depending on the current state of that in which it was pegged towards. Taking elements of the Basecoin concept and Djed on Cardano could amount to something interesting potentially?

Regardless, inflation issues were practically inevitable under the Biden Administration. He was handed a somewhat stable economic situation considering the circumstances, an economy which was set for a boom, he was handed somewhat peace in the Middle East, a stable situation in Afghanistan, a clear distribution plan for the vaccines, a world where Russia and China were basically stagnant and so on. Since I live in England, I do not claim to be an expert on the current situation in the US, but from where I stand, Biden has failed on all fronts and has sent the economy tumbling with his reckless spending.

It does seem like quite a few scholars have looked into the connection between demographic changes and inflation.  Some of them suggest it can go either way in terms of a positive or negative effect on inflation, depending on what proportion of the population are working versus retired.  But it'll depend just as much on other economic factors as well.   

Yeah... the M1 supply of US Dollar went up by 400% or so in the last 3 years. I checked similar numbers for other fiat currencies such as GBP, EUR and JPY, and with none of these currencies the situation was this bad. On top of that, the crude oil prices have breached the $90 per barrel level and are surging towards the three digit mark. That should further magnify the impact of inflation in the United States. Biden needs to act now, as the elections are only 9 months away (Senate/House). There is a real chance that Dems may lose a few important senate seats this time.

It is the easy method but it also means that they will crash down eventually. We all remember the 2008 period where everyone got a house, or they refinanced it or whatever and they just kept up buying houses like crazy.

People who couldn't afford houses all ended up buying houses, it was a reality and in the end the crash came up. This is quite similar, inflation allowed people to get "richer" in a way where the purchasing power stayed the same but the amount rose, which allowed people who had mortgages to pay it off easily, and they used that to get another or whatever which will eventually result with people not being able to pay eventually.

I don't know much about formal economics but even I believe just making the money printers go brrr will make not inflation go away. Heck, could make it get even worse. What I saw from videos about the topic is they basically printed a whole bunch of money, like 80% of all the dollars in circulation, in a span of few months. Unbelievable. Oh that definitely wouldn't cause problems later....

Not all countries were able to escape the crisis due to the pandemic at that time, even to stand up to overcome inflation, only a few of these countries finally submitted to developed countries. China offers loans that will only exacerbate the economic problems of a country that is willing to so much want to stabilize the economy from the pandemic. US inflation has not yet recovered, not a few of them now also have to prepare to experience dollar bleeding because they print more paper money while the underlying dollar is now a big question where the US is looking for it.

Inflation is already inevitable, because for the last three years all states have been fighting the coronavirus pandemic by taking unprecedented economic measures. Forced isolation led to large losses in the economy of all states without exception. Therefore, there will be a large world inflation, and maybe a global economic crisis, but it will all pass. The world always alternates between periods of economic recession and recovery, as in cryptocurrency. But for cryptocurrency, this is a good chance to increase its capitalization and liquidity.