4 ms·

That is not how inflation works...

elmar 9y ago
"Throughout history, governments have tried to solve financial problems by simply printing more money. This can drive the value of money drastically downward, especially in modern markets where money is not backed by gold." http://money.howstuffworks.com/question737.htm http://money.howstuffworks.com/question737.htm
- ivanbakel 9y ago
  That has nothing to do with gains in productivity. If you produce ten times the value you did ten years ago, that fact is unaffected by the nominal dollar equivalent you make. Inflation - in your quote, of fiat currency - devalues stores of money, not stores of value, because it's a change in the relation of money to value that is strictly controlled on the money end.
  - elmar 9y ago
    " The Hidden Tax Although inflation causes generally rising prices, it should not be understood as detrimental to all parties involved. It is highly lucrative for the government and the banking industry. When new money is printed (today, created electronically), it greatly benefits the first recipient because assimilating the new money into the economic organism takes time. Those first recipients (government and banks) can purchase goods and services at the old prices. As the money slowly works its way through the economy prices are bid up. Eventually when it reaches the salaried workers, prices have mostly adjusted. This process is a hidden tax on salaried workers, or anyone who receives the money late in the cycle. It is especially detrimental to those on fixed incomes, such as pensioners. Not only does the government understate the effects of inflation in its official numbers, any price decrease that would have occurred as a result of productivity gains are denied to the consumer as well. Inflation is nothing but wealth transfer. The government prints money and buys stuff with it. Prices rise and the salaried worker can buy less stuff. All the stuff the salaried worker could have otherwise bought has accrued to the government. Simple. Politically, it is far more palatable than raising taxes because the process is badly understood and well obfuscated. " http://austrianeco.blogspot.pt/2008/02/inflation-part-22.html http://austrianeco.blogspot.pt/2008/02/inflation-part-22.htm...
    - ivanbakel 9y ago
      Quoting sources is very impressive, but you're not making a real point. People are aware of how inflation works - unless you can explain how inflation would counter productivity increases in the general shape of the economy, you're not adding anything to the conversation.
      - elmar 9y ago
        no most people don't know on inflation really works I expeculate 99% of the people don't really know or have big misconceptions on how inflation works. "Politically, it is far more palatable than raising taxes because the process is badly understood and well obfuscated." It is really self-explanatory "any price decrease that would have occurred as a result of productivity gains are denied to the consumer" trough inflation.
        ivanbakel 9y ago
        But we're not talking about a nominal dollar change in prices. The point was that the real wages have gone down, and that's not a direct result of inflation because you would expect workers to demand raises in line with inflation if they had the power to. Instead, manufacturing workers don't have that power.
elmar 9y ago
A more detailed and technical view on inflation. What You Should Know About Inflation. https://mises.org/library/what-you-should-know-about-inflation https://mises.org/library/what-you-should-know-about-inflati...

"Throughout history, governments have tried to solve financial problems by simply printing more money. This can drive the value of money drastically downward, especially in modern markets where money is not backed by gold." http://money.howstuffworks.com/question737.htm http://money.howstuffworks.com/question737.htm

ivanbakel 9y ago
That has nothing to do with gains in productivity. If you produce ten times the value you did ten years ago, that fact is unaffected by the nominal dollar equivalent you make. Inflation - in your quote, of fiat currency - devalues stores of money, not stores of value, because it's a change in the relation of money to value that is strictly controlled on the money end.
- elmar 9y ago
  " The Hidden Tax Although inflation causes generally rising prices, it should not be understood as detrimental to all parties involved. It is highly lucrative for the government and the banking industry. When new money is printed (today, created electronically), it greatly benefits the first recipient because assimilating the new money into the economic organism takes time. Those first recipients (government and banks) can purchase goods and services at the old prices. As the money slowly works its way through the economy prices are bid up. Eventually when it reaches the salaried workers, prices have mostly adjusted. This process is a hidden tax on salaried workers, or anyone who receives the money late in the cycle. It is especially detrimental to those on fixed incomes, such as pensioners. Not only does the government understate the effects of inflation in its official numbers, any price decrease that would have occurred as a result of productivity gains are denied to the consumer as well. Inflation is nothing but wealth transfer. The government prints money and buys stuff with it. Prices rise and the salaried worker can buy less stuff. All the stuff the salaried worker could have otherwise bought has accrued to the government. Simple. Politically, it is far more palatable than raising taxes because the process is badly understood and well obfuscated. " http://austrianeco.blogspot.pt/2008/02/inflation-part-22.html http://austrianeco.blogspot.pt/2008/02/inflation-part-22.htm...
  - ivanbakel 9y ago
    Quoting sources is very impressive, but you're not making a real point. People are aware of how inflation works - unless you can explain how inflation would counter productivity increases in the general shape of the economy, you're not adding anything to the conversation.
    - elmar 9y ago
      no most people don't know on inflation really works I expeculate 99% of the people don't really know or have big misconceptions on how inflation works. "Politically, it is far more palatable than raising taxes because the process is badly understood and well obfuscated." It is really self-explanatory "any price decrease that would have occurred as a result of productivity gains are denied to the consumer" trough inflation.
      - ivanbakel 9y ago
        But we're not talking about a nominal dollar change in prices. The point was that the real wages have gone down, and that's not a direct result of inflation because you would expect workers to demand raises in line with inflation if they had the power to. Instead, manufacturing workers don't have that power.

elmar 9y ago

A more detailed and technical view on inflation. What You Should Know About Inflation. https://mises.org/library/what-you-should-know-about-inflation https://mises.org/library/what-you-should-know-about-inflati...