Topic: Inflation and Deflation of Price and Money Supply - page 34. (Read 1424685 times)

I really think at this current rate bitcoin is producing over capacity output which also makes the demand for it lower. I think the value of it will start to slowly depreciate

You are referring to chronic inflation/deflation which lasts for longer than 5 years. I agree. Ongoing chronic inflation has real effects on purchasing power of fixed incomes. Fixed incomes/expenditures slowly adapt to rapidly raising overall prices. If possible it's better not to be in the fixed income side in a chronic high inflation economy.

Why does it happen? Sometimes governments use inflation as another form of tax. They might enjoy earning more tax and may not be willing to solve it in favor of fixed income people. Then chronic inflation occurs. In my opinion, inflation/deflation is mostly a political choice of governments rather than an economic cause and effect.  Sometimes politicians target high growth and less unemployment to win next election. Artificially accelerated growth with insufficient resources eventually ends up with accelerated debt burden. Injection more cash into economy to sustain growth by state expenses/investments ends up with higher inflation and higher debt burden. Then governments try to look like very busy with fighting with inflation and curing deficits as if they have no role in the result. Governments fully know, aware of and control everything in economy.

In fact inflation/deflation is purely theoretical, scientific and simple thing. When inflation is used as a political choice it's advertised as if it's very complicated and difficult to solve. Politicians usually tell voters what voters want to hear. If voters want conflicting things that is impossible to achieve, it's a bit understandable how politicians react to such unbalanced requests. If voters want more jobs, the solution is simple: higher growth. But unnatural-artificial growth will bring many side effects. İnflation is just one of those side effects. Natural growth is possible by better qualified workforce. Better qualification needs better education and more time. In most countries elections repeat in every 4-5 years. You can't improve workforce qualification in less than 20 years if you start today, therefore you can't solve unemployment in a couple of years. You can do it in short term artificially with side effects, one of them is inflation, another one is higher interests which blocks growth in long term, another one is instability for debt burden-deficits. Even if unemployment is reduced today, it will be temporary solution unless qualification level of workforce is improved by providing more quality education to everyone.

Inflation is usually related to unemployment and it's related to workforce qualification and it's related to education quality. This direction is the way to natural growth. If you don't start from improving education quality, inflation shows up again and again.

Then forget about it


I understand what you meant to say (namely, that prices will ultimately rebalance according to the amount of money in circulation and quantity of goods in the economy), but you can't possibly say that inflation as well as deflation are imaginary. Obviously, their effects on the economy and lives of people are real and cannot be neglected. But even if you discard these effects entirely and consider the issue purely theoretical, you still can't just take and throw away the speed with which rebalancing is going to happen

Otherwise, it will be oversimplification

What's Imnotback? Is it a forum user? Sorry English is not my first language, couldn't get what you meant by Imnotback. If it's a forum user, no, this is my first and only one forum account in this forum. I don't know how can I assure you on this reality. But this is true. I am a completely new person in this forum.
Whatever am I using is my business. But I have never consumed drugs and will never do, if this is what you mean.

Yes it takes time to propagate. But in the short term (less than 1 year) market prices will definitely come to an equilibrium point where the monetary inflation/deflation has no effect in real life, real sectors. For sure, inflation/deflation creates a wave in the prices and affect financial sector profitability as they borrow-lend money based on the value of money. Apart from entities who do business in finance, who lend-borrow money, who hold financial assets, the effect is minimal, can be neglected.

However, real inflation affects everyone. For instance, quantity of oil affects oil prices. Oil is a real good, not virtual like money. Oil prices affect everyone, quantity of foods, cars, houses and all the other real-physical things create permanent and real life results.

Are you Imnotback in disguise (or whatever alt this dude has been recently using)?

The problem with this logic is that in real life things don't happen along the lines you just outlined. In real life the price changes (like 1 beer was 1$ and then 1 beer drops twice in price) don't happen simultaneously in every part of the economy. It takes time to propagate through it (even speed of light had a finite value), and those who are using the same dollar but at different moments are using different dollar and, strictly speaking, not on equal terms. In this manner, the effects of both inflation and deflation are real, so you can't possibly claim that either is imaginary

@STT

Real price change occurs when money is not involved.

I will explain with an axample:

Assume;
1 beer = 1 apple = 1 hr work = 1 orange = 1 bread.  

If quantity of beer increased by 100%  in the market, real inflation occurs like this:
2 beer = 1 apple = 1 hr work = 1 orange = 1 bread

When money involved price change does not affect anything.

Assume;
$1 = 1 beer = 1 apple = 1 hr work = 1 orange = 1 bread

If quantity of $ increased by 100%  in the market, real inflation occurs like this:
$2 = 1 beer = 1 apple = 1 hr work = 1 orange = 1 bread

Since $ is not a real thing, real life didn't change by quantity of $.
Money when used as a means of exchange is just a virtual tool. Therefore if you price everything in money (as it's done everywhere for simplicity)  your pricing system, inflation, deflation are imaginary.

Some people in that scenario would send 8 dollars home to the country where beer is 1 dollar.   While they work they might make their own beer or just not drink any beer till they can return home again.     The currencies should be competing for value but in our current system alot is biased due to politics I think, part of the Trump rhetoric is the struggle with this kind of multi national competition and his idea of regaining an advantage for workers.   Im not saying he is right but thats how he got into power, people dont like this current currency system and feel poorer in favour of someone elses politics.

This I disagree with.  A system of circulating value, its very important where new money supply is.   Our western currency system now allows government to supply itself money and attribute value outside of capitalism.   This is inflation and deprecation of workers capital, capitalism is money and power of production with the people.  The west no longer has a capitalist system with integrity, it has bias and political advantage by some.  China favours such a system as they are not an equal nation in work (they are not communist) and capital attributed but I imagine they would rather have more control of power within their nation rather then go via dollars and bargain with foreign powers

Money and money supply (quantity of money) change prices (inflation/deflation) but does not change anything in real life.

Real inflation is not a money based price change. Real inflation is based on changes in real supply-demand movements in a barter economy where there is no means of exchange (money, credit card, gold, bitcoin, bank account, check, etc.)

Money based price is imaginary and usually misleading to measure value movements. Because money itself is imaginary and is not a reliable indicator of value.  Value is the key not "price" and "money". With money I mean everything including bitcoin that has same functionality of money (means of exchange, store of value, etc.)  

Real value of a good/service is different than its price label. Assume, you work for $1 per hour and a beer is sold for $1. You work 1 hour to buy a beer. Assume you moved to a different city/country and your new job pays $10 per hour but beer is $10, not only beer everything you want to buy is 10 times expensive in your new place. After receiving couple of paychecks, you won't be happy much about the extra 1 zero in your paychecks if you are unable to buy 10 times of everything.  

Real value, real inflation and real interest are related thing. For instance real interest  (interest minus inflation) is the real value of money. When it comes to interest, money is no longer money, money itself is a traded, ordinary commercial good.

Do we need price? Yes, just to make life easy. Money based pricing is needed to measure value easily. But price is just virtual numbers. In the real life we exchange real goods and services, not money (except lending-borrowing activities) In the real life, if you work 1 hr you buy 1 beer, you have to work for 2 hrs to buy 2 beers. Beer price and hourly rate of a labor don't change anything. This sounds so simple but it's actually simple as that. We give something real to buy something real. Money and price are imaginary.    

Bitcoin is very volatile and the market movements are faster compared to fiats.

Don't blame me for not watching and not believing for example the CEO of Master Card... Those are the big players and part of an economy that made thousands of millions around the world pure... Also taking profit from transactions doing absolutely nothing...

It's not that i not agree with you maybe you are right... i not agree with the system and when you ask simple questions you have simple answers with difficult words and there is a reason they do that...

Anyway i not agree with how the system work with you but there is no problem, we can both live with different opinions.

The problem is that we tend to believe what is being served to us from CEO and owners of big companies Banks etc... We know that the relation of gold and money is broken and we still have
 (not me) trust to the banks and the current economy model... at least is what they tell us on the media.. and they do so to manipulate the easy people...

I do believe the EUR is a model of German working money to give more power to who already have and failed miserably in any other aspect to all the other Countries.

Anyway i can' understand how the 500 EURO is used for black money and the 200 EURO or 100 EURO or even more the 50 EURO not....

Ugh... No mate, that's not how money works It's not about how much money is in the sock/under the bed, it's about how much money is in the market. I would suggest you to watch this video, it's quite a good one, explains a lot of stuff: https://www.youtube.com/watch?v=PHe0bXAIuk0

The reason why the 500 euro bill will be removed is because it's mainly used as black money for fraud and similar stuff.

And since we're talking about cash, here is also a good interview from the CEO of Master Card:
https://www.youtube.com/watch?v=9-tjY-DG5-0

thanks for your answers i appreciate.

Well what is happening when people come to work in Europe Countries and they getting paid in Euro and after go back to their countries (not Europe ones) and put the euro under bed for a couple of years etc.. i mean not going around to the market because not need etc...

Now in Greece for example i know there are not many Euro paper around the country. But many of those paper money have been traveling to Ukraine to Russia etc....

If you had a plan for do bad to this economy and somehow you could take the paper little by little over the years and keep it, they would need to print new but without recycling the old ones...

Is this the reason maybe the Europe is trying to fix when stopped the 500 euro paper? and also changing the 50 euro paper also the 20 euro? Maybe they try fix their problem??

I think what bitcoinvest meant is the Federal Reserve bank and all the problems around it ( https://www.youtube.com/watch?v=tGk5ioEXlIM )

So far as I know there is nothing like that in Europe, but I didn't do a proper research on it so can't write more...

They don't print money as they like even in America either

Since you refer to paper money, the feedback is done through banks since paper money is what people receive from their accounts when they cash out. A central bank (in this case the ECB) sees the requirements of commercial banks in cash, and if there is shortage of paper money, it prints more bills. On the other hand, commercial banks also change old worn-out bills for new ones, and these go to the nearest branch of the ECB (that would be a Federal Reserve Bank in the US) where they are destroyed. Obviously, banks receive new paper money bills instead. Once as a student, I took part in a street fight and had the largest denomination bill back then torn in halves (which was higher than my monthly scholarship)



When the dust settled, I went to the nearest bank office and exchanged it for a brand new bill without any questions

Money supply for sure is not (only) supply of paper money. Money is much broader term. Money is usually also the money that are created by commercial banks via fractional banking.

Either way there is no country where central bank has some specific number as a limit for how much money they can create.

Since this post is about money supply i would like to make one question.

I live in Europe, the EUR supply - the EUR money in paper that goes to people is a specific number? Or they can print how much they want like they do in America.

I have a second question but will do after i get an answer to this from somebody who really know this not read etc i heard....

Thats big and we all know that some of here earns that big amount of money! But it is very difficult to earn that here only in forum you cant earn that big i think. You should have sort of business in real life in term of bitcoin or sort of you are a online developer  and paid with bitcoin then you can earn a ton . .5 is big mine is only 0.09

If you are earning a .5 btc per month, you are earning so fast. It is just like you have a occupation. It needs a lot of time to earn .5 btc per month. You have to strategize your own ideas and plans to earn fast

Microeconomic theory guys where money supply increase at a certain level it will to inflation, while on the other hand when money supply in the market drops it creates deflation (e.g: Japan)

The drawback on these "deflation to da moon" believs is that there is exactly no shortage on crypto coins supply. There are more Altcoins in existance than currencies on earth do exist.

Hence the Hopium on scarity is flawed.