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Topic: What is Inflation? A Crash-Explanation - page 2. (Read 383 times)

legendary
Activity: 2156
Merit: 1622
October 07, 2022, 11:50:36 AM
#8
Inflation happens when the demand/supply equilibrium of money is disrupted through numerous causes.

Supply/demand AND velocity (the rate of currency circulation). If we print 20% more money but lock people in homes (covid) or we make them fearful about future, we will not see an inflation because people will not spend their extra money. But as soon as we will let them spend their savings inflation will explode. Thats what happened in 2020-2022.

One thing to remember about money printing and inflation is that it doesn't have to happen immediately. For example a part of inflation in US today is because of the money printed in 2020 pandemic.

Yep. It takes a lot of time to cause/stop inflation.

1-print
2-house/stock bubble
3-weath effect (https://www.nber.org/digest/aug19/new-estimates-stock-market-wealth-effect)
4-more spending
5-prices goes up
6-stimulus checks
7-more spending
8-prices goes up
9-more income for companies
10-more spending from companies workers/invesors
11-prices goes up
12-more income for companies
13-more spending from companies workers/invesors
14-prices goes up
15-production does not catch up
16-prices explode
17-salaries does not catch up
18-demand goes down
19-companies goes bust
20-supply drops
21-prices explode
22-everything breaks

22 points. Looots of time. Years.
legendary
Activity: 3472
Merit: 10611
October 07, 2022, 01:32:20 AM
#7
Government prints fiat --> fiat value drops --> inflation goes up
Government prints more fiat --> fiat value drops more --> inflation goes higher
Government prints even more fiat while playing with interest rates --> fiat value drops eve more --> inflation happens with recession

One thing to remember about money printing and inflation is that it doesn't have to happen immediately. For example a part of inflation in US today is because of the money printed in 2020 pandemic.

https://www.usdebtclock.org/ shows the US national debt and how it is constantly going up. It recently set a new ATH at $31 trillion!!!
The site also has a list of other countries, none of them look good.
hero member
Activity: 1064
Merit: 843
October 07, 2022, 01:12:54 AM
#6
I don't think there's a user who didn't even understand what inflation is, so I don't see any point from your post.

In short, inflation always happen if the currency has an unlimited supply. Bitcoin has a limited supply for 21 Million and no one can extend Bitcoin supply except you're forking Bitcoin with your own protocol.

Right now is the right time to accumulate Bitcoin to hedging against inflation.
full member
Activity: 400
Merit: 105
October 06, 2022, 11:53:51 PM
#5
tell me how you and your family is being affected by today's inflation rate!

My countries fiat currency lose its value more than 40%. Not only that the increase of oil price leads to a massive price hike in every sector of the economy. Food price increases 100% and other goods as well. Consumers failing to live their standard life due to this. Unemployment problem is at is pike than ever. Education system totally collapsing. Everything seems unreal to me but it is the truth.
legendary
Activity: 2576
Merit: 1860
October 06, 2022, 10:10:56 PM
#4
The truth is that inflation is a constant in our monetary system. It is a built-in feature, so whether or not there is a pandemic or a war or whatever, there is inflation. The rate rises and fall but it is there. Whether money is printed more than the usual amount or not, inflation is there. Money is devalued little by little all the time. Prices of goods and services rise little by little all the time. Overprinting of money, as a matter of fact, isn't even the primary reason for inflation. The point is that inflation is there because it is intentionally designed so. Inflation is desired.
hero member
Activity: 3024
Merit: 745
Top Crypto Casino
October 06, 2022, 07:34:11 PM
#3
tell me how you and your family is being affected by today's inflation rate!
Formula milk has increased its price due to the supply issue that has been triggered by the Russia-Ukraine war. It's because main ingredients for formula milk comes from Ukraine and we know how affected they are and that's why it's triggered and made the price to increase, that's one of the inflation that we're dealing with in our family. We're also now limited to go outside and dine and we're choosing to cook our own food because it's cheaper although not really cheaper because food is also affected by the inflation and I have seen the price to increase as well. We're still surviving despite all of these harder situations that everyone is dealing with.
copper member
Activity: 2856
Merit: 3071
https://bit.ly/387FXHi lightning theory
October 06, 2022, 11:52:59 AM
#2
There's two types of inflation also:
One is set by money supply as you said, the other is determined by a rise in prices (the two are often used interchangeably but the first is hard to measure and normally doesn't get mentioned by the media).

For example, the first type of inflation increased dramatically over the pandemic but the second wasn't noticed until much later (the prices of most things dropped at the start of the pandemic and continued to stay low throughout - this is also why the current inflation could be reported as being even higher than would have been expected if we just had a normal recession).

The other thing to explain is WHY we have inflation and that's generally become harder to explain. It was initially thought that inflation would cause people to spend their money rather than holding onto it (which it does) but it also disproportionately affects those who work for their income compared to those who invest for it. If you invest for a stable income, workers pay you for the product (in dividends) and likely also pay you by buying similar stocks (in things like a pension). This means a lot of big investment funds are able to perform at 8-20% a year (matching US monetary inflation with the 8%), but workers don't normally see that sort of growth in their salaries.

I left out the idea it promotes the economy to grow by giving a few % instead of a flatline when the economy is stable (for values like gdp) as there's a chance it'd just be measured in another currency that's inflation based if a country's currency was deflationary.
hero member
Activity: 1736
Merit: 589
October 06, 2022, 11:30:26 AM
#1
Inflation is quite a convoluted concept that involves money and currency, both objects that contains and retains its value because we believe so. It doesn't help that most economists provide lackluster explanations that doesn't really strike any thought towards the masses, the ones that should know most about this concept.

So I took it upon myself to provide a bit of an explanation on what is inflation in economics, in hopes that this may one day help someone's economics homework (LOL) or at least shed light in this very confusing subject.

For starters, unlike most economics teachers, we wouldn't use analogies, as those prove to cause even more confusion than help. We'll get straight to the point.

Money has a value that we decided it should have, and that value always fluctuates depending on consensus when it is compared to different items or commodities, sometimes even different money. This isn't inflation.

Inflation happens when the demand/supply equilibrium of money is disrupted through numerous causes. In simplest of examples, during the height of the COVID-19 Pandemic, USA printed out more money than they normally do, to make up for the sending of stimulus checks that the Americans can then use for purchase of important goods. And since supply of money is higher and not in balance with the supply of goods, its inherent value fell down. This is but one of the few reasons money could lose value over time, but it is best seen in that particular scenario.

Feel free to chip in more information you are most willing to share within this thread, or better yet, tell me how you and your family is being affected by today's inflation rate!
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