Topic: Real Inflation only happens when Central Banks print High Denominated Notes? (Read 409 times)

I think this would be irrelevant.

Inflation happens when there is an abundant supply of cash in the market with only less demand. Due to the amount of cash circulating, the value of the goods will definitely increase which translates to inflation. If the government opts to print cash in the process, the amount of cash circulating would skyrocket, increasing further the amount of goods which then translates to high denominations of money.

It would be irrelevant if bills are printed only as $100 since the value of goods in the market would not change. Instead of paying one coffee for $1000 (assuming hyperinflation), you would pay the coffee ten (10) $100 bills in the process.

Hyperinflation happens when the government of a particular country overproduces money just to aid the budget deficit they are currently facing. Whenever the government decides to print excessive money without matching the resources, products, and services offered, we must anticipate inflation soon after. Printing a lot of money isn't always the answer, but most leaders tend to do this without even thinking of the consequences it will cause their constituents and their whole country's economic state in general.

Even if the highest denomination bill will remain to be $100, if the government will print so much of it without proper regulation, inflation can still possibly happen. If a country is already experiencing hyperinflation, printing larger denominations would be one of their possible options. However, this could just cause greater trouble since hyperinflation is already existing, and printing additional money with larger denominations won't solve it that instant. All the money they will produce will be rendered worthless as long as there is a huge imbalance going on in the economy. Full dollarization would be one of their best options, but it has so many consequences to be think upon as well.

This is the correct answer right here. If you do not print high denomination while there is a high inflation that means the money will not be enough, and you will have people begging for food instead of dropping the inflation, you are not fighting inflation and winning just because there is a limited amount of cash in the market, you are still having a battle with poverty while people failing to find any money to pay, something that became a billion when it was just few thousand due to Zimbabwe level of inflation will not be dropping down to thousands just because there is no cash for it.

Governments and mainly central banks are just helping people to survive at that point, keep printing that high denomination so that you can help people. Don't get me wrong I am not saying keep doing that only to print more money, that is devaluation, I am saying do that because people do need that in paper, when it is already in the books.

Ofcourse. As long as your citizens are producing Good Things (more like good trees producing good fruits) in sufficient quantity.    Your printing should go into rewarding those producing enough good things, and can also be based on the number of people the good things have changed their lives for good. There are several ways to test and see how many people your fruits have really blessed .

You don't necessarily have to sell your fruits and you need to make sure the fruits get to everyone who needs them

If you must print , be very transparent and make sure the money is put to good use and bears much fruits. Any country that can guarantee this should be able to print.  And i believe there are system/tools like decentralized system that can help make safe printing possible if developed the right way

IMO, a low rate of inflation is neither bad, nor good. It doesn't mean that salary increases only occur when inflation is there. In high-inflation countries, salary increases have no value, because the purchasing power goes down even with higher salary. Also, if the argument is true, then there should not be any salary increase in countries with almost zero inflation, such as Japan and Switzerland. Ideally I would prefer 0% inflation, so that the value of our savings remain intact. But anything less than 5% is OK under current circumstances.

This is absolutely ridiculous.

You're getting cause and effect mixed up here. The reason why central banks would print high denominations in the first place is due to inflation. Printing high denomination notes itself does not necessarily cause inflation - just look at the Titans and Giants that are issued by the British government to facilitate interbank transactions.

The U.S. dollar is bound to decline to its intrinsic value of zero as a matter of time. Think of it as exponential decay whenever you store value in cash.

Nope you are describing a hyperinflation, inflation happens all the time, a normal and stable inflation rate is a sign of growth in the economy of a country plus it's not as bad as you think it is, if it is stable and a controlled inflation that is, because it's one of the many reasons for salary hikes and increase in your investment values because they keep up with inflation. Inflation isn't as bad as many think it is.

To become richer, a country must produce and sell something. It can be in the form of products, services, or natural tourism potential. If this goes well, it will be safe for a country to print more banknotes. So that people can increase their purchasing power.

But, if a country just prints more paper money without producing or selling anything, what will happen? As a result, there will be no state income and prices will immediately rise. This will make it more difficult for the people. Because if left unchecked, prices will continue to rise rapidly.

This is really funny and the analysis of the wealthy with the devalued notes carried around by the Zimbabwean kids  
Zimbabwean currency have been devalued as a result of inflation. This has brought extreme poverty to the them.
America has done well to keep the dollar currency stable and not devalue it by printing higher denominations. America print notes during Trump and Biden currently but they have also brought policies to reduce inflation by introducing taxation. Printing of notes isn't really the big issue but to have a proper plan not to allow devaluation.

The inflation comes when government prints huge amount of money not from the highest denomination number, if a government prints more money just because there is not enough circulation in their economy will leads to hyper inflation.

But every government is printing money but at certain rate which keeps  the inflation under control, so governments which are experiencing inflation should generate income from someway instead of just printing it.

This isn't true at all.  If anything, the incentive not to enter hyperinflation would outweigh printing money just because you can.  Despite what you must think, the federal reserve isn't run by people with zero economic knowledge who just can't resist creating money for the sake of it.

I do remember that, though I'm not convinced that anyone in the government (or at least anyone who would have final say in the matter) was seriously considering that coin.  I didn't click on that wikipedia link, but if my memory serves me correctly that idea was floated around the time when precious metals were skyrocketing in 2011 or in the years when they were declining but still very high-priced (2012-2014).

I also remember reading a lot of criticism of that trillion dollar coin and ended up agreeing that it would have been a silly idea indeed.  But hey, the Fed is printing money like there's no tomorrow so if you look at it in that context, a $1 trillion coin/banknote isn't completely outrageous.  They've proven that they can create money out of thin air with no immediate consequences, so why not?  Makes me wonder why we're all still paying taxes.

The final result of hyperinflation is that money becomes as worthless as the Zimbabwean currency. That's what we see in the country's economy. 100T is not a normal value but if converted it doesn't even reach 1 USD, until their government passes a lot of currency to deal with its hyperinflation. Yuan, USD, even the rupee, are very unique.

               This may prove to be true but quite a shallow way of looking at it. Trees can be replanted, yes. But it is not instant, and the land for these trees aren't being maintained thus it reduces due to modernizations. And with this we are seeing even stricter regulations in an attempt to preserve or minimize the abuse on using not just lumber but a wide variety of raw materials. Now, while it is true that fully automated manufacturing using AI and smart machineries is the trend nowadays, it doesn't mean that everyone has already adapted to it, nor does it mean that adopting such manufacturing methods are cheap. Not to mention it's lack of availability for certain parts of the world. That's how I understand our today.

And they seriously considered minting a Trillion Dollar Coin*

* but that, in fact, had nothing to do with inflation

Nowadays we often talk of Quantitative Easing, but bear in mind that QA is just one of many tools a central bank may use to inflate the money supply.
The only reason we talk about it so much is that it was the tool of choice after the 2007/2008 banking crisis.

Also, as a reminder to everyone: inflation is just colloquial for price increases.
Literally, inflation stands for the much narrower fact of an increase in money supply.
"Inflation" in the form of "everything getting more expensive" can also be a result of a higher throughput of money (velocity of money), i.e. people spending their money faster, instead of holding it. This can be a result of a lack of trust in price stability, but may also have other causes, e.g. low wages, high living costs etc.
"Deflation" on the other hand may result from people holding on to a lot of their money in the form of savings, which can be a result of higher wages, lower living expenses (e.g. housing costs, gas prices) and may also be due to a lack of opportunities to spend money (e.g. less travel during Covid-lockdowns).

Basically, there can be a huge number of reasons why we experience "inflation" or even "deflation".
Central banks on the other hand only have a limited toolbox to fight either, and all the tools are clumsy and work their magic comparatively slowly, if at all.
That's why Quantitative Easing was the level of choice to fight an impending deflationary phase after the massive contraction of money supply after the breakdown of the US housing market.
It was an appropriate, and most of all, fast response to the massive failure of the private banking sector.
We have yet to experience an inflationary "fallout" from the massive QA post-2008 and so far the "best" we can hope for is a slight increase of inflation post-Covid.

No, you've got the cart before the horse.  High-denomination banknotes are printed because there's hyperinflation, not the other way around.  Those notes are printed to make spending huge number values of whatever currency is hyperinflated more convenient than, say, carting around a wheelbarrow full of cash.

You know, they used to print very large dollar value banknotes in the past, no?  I'd have to look this up, but I'm pretty sure the US used to print $100,000 bills (or at the very least there used to be $10,000 bills).  There wasn't a hyperinflation situation then, and those banknotes were only really ever used for large cash transactions between banks and such.  They existed well before money was electronic, so it was the best they could do at the time.

In any case, I'm pretty sure the US would have to experience a severe inflationary episode (or flat-out hyperinflation) before the government started printing those high-value banknotes again, because the reason they stopped making them in the first place was to make it harder to transact illegal business with cash--to the best of my knowledge at least.  That's why $100 is the largest denominated note in circulation, despite the fact that a $500 or $1000 bill would probably be useful to many people.

Take into account that if we talk about "printing money" most of the time we are talking about Quantitative Easing. In this concept, in theory not a single banknote has to be printed, because all the magic occurs between banks and the central bank, and digital money is used.

Basically, Quantitative Easing means that the central bank increases their buys of bonds issued by 1) the government or 2) local businesses (the central banks always buy a certain quantity of these bonds, but in QE phases, they strongly increase these buys). As these assets are bought from banks, this increases the liquidity of them, making it possible to give out more loans (this has only secondarily related to fractional reserve, liquidity is far more important, and some countries like the US have abandoned fractional reserve anyway). This is what can be (a part of) a cause for strong inflation.

So there can be "emission-based" inflation without any physical banknotes being printed.

But there are often several factors. In countries like Venezuela, and to a lesser extent Argentina, there is little confidence in the local currency, which creates an artificially low demand for it (and high demand for dollars, euros and sometimes Bitcoin). In this situation, QE fastly leads fastly into more inflation. But this is not always the case. The European Central Bank tried to rise inflation for the last 10 years with QE but rarely reached their goal of 2% annually in the euro zone - currently it seems 2% could be reached or surpassed, due to the post-corona boom.

What is the point in having trillions if it does not have an intrinsic value .

Inflation can be different types and hyper inflation is a direct result of a government printing too much money and the valuation of goods and services keeps on increasing and bad government policies for years are one of the major reasons for every country that suffered hyperinflation around the globe.  

It is not directly affecting with a government printing notes of higher denomination but it has an indirect impact because once hyper inflation sets in the government will be forced to print out notes of higher denomination to balance the ease of spending in the market.

When hyperinflation sets in people usually dump their local currency to something stable and usually they go for USD or EURO and now with BTCitcoin they can very well choose them rather than looking for other fiat currencies.

The lumber prices had nothing to do with inflation, just like the chip shortage.
This is one of the few really good articles about his, pointing out he obvious causes:

https://www.forbes.com/sites/billconerly/2021/05/22/why-lumber-and-plywood-prices-are-so-high-and-when-they-will-come-down/

Low-interest rates, higher demand, the inability of increasing capacity short term, disruption at mills because of sporadic covid cases shutting down production, basically the perfect storm. Besides, lumber prices have dipped again below 900, down from 1670, they are at January levels, a few more months and they will drop more, next year after we have a dad season in construction but still full capacity production they might return to normal levels.