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> Since inflation is just the price of stuff rising... Inflation literally is money printing. Price increases is not inflation. Price increases can be caused b

> Since inflation is just the price of stuff rising... Inflation literally is money printing. Price increases is not inflation. Price increases can be caused by inflation. Prices can remain nominally the same while money supply has increased. > So, do prices rise just because a certain amount of dollars were added to an economy ? No, certainly not. Which is why the money printing should only happen when the economy is dysfunctional. The prices while having not risen nominally are still artificially inflated. A dysfunctional economy is not a real thing. It is just the economy. If you are referring to a recession, printing money during a recession arguably may not cause prices to rise nominally, but it artificially inflates them. During a recession prices typically go down due to falling demand. This is a good thing. It allows people who are suffering to enjoy lower prices. Recessions are a healing process for a previous period of misallocation of resources. Money printing only serves to exacerbate and extend the misallocation. As the period of misallocation is extended and exacerbated, the recession necessary to balance that is larger and more frightening. We left the gold standard because we were afraid to deal with the recession from the spending of '60s and we've been afraid to deal with our issues ever since. One day we won't have a choice. Tough times are ahead.

jrs235 6y ago
This is the definition of inflation that I was taught too. However it seems that people now days mean for inflation to be about price increases rather than money supply inflation (increases). The money supply inflates and deflates. Prices increase and decrease. I think it would be best if we all start being more clear and specific when talking about "inflation". Printing money DOES automatically lead to inflation. It leads to inflating the money supply or MONEY SUPPLY inflation. However printing money and inflating the money supply does not necessarily lead to price increases or price inflation. Most of us care about price increases, which are a symptom, but not allows present, of money supply inflation/printing money.
- Anon1096 6y ago
  When talking about inflation, there's no such thing as "money supply inflation". The term inflation IS clear, you're just choosing to try and redefine it to match your purposes. Inflation is a rise in the price of goods, full stop.
  - ghastmaster 6y ago
    When using the word "inflation" without context is is referring to increased money supply. When using the word "inflation" with regard to prices it is in a different context. The assumed context is what has changed due to the fact that money supply no longer is directly correlated with price increases. When gold and silver were directly debased, prices of goods were directly inflated. If we still used gold/silver currency "inflation" by itself would be synonymous with price increases. We use fiat currencies and the money supply is increased in certain industries or assets and therefore "inflation" has to be defined more clearly. Debasing fiat is not as direct as debasing commodity backed dollars or gold/silver currency. The article author does a decent job of defining these, but fails to be clear as the writing progresses.
  - jrs235 6y ago
    Prices across the board could increase if say the cost to produce and deliver them went up across the board, perhaps because the cost of energy/oil goes up, perhaps due to constrained supply. This isn't inflation and the price increase isn't due to inflation. Prices across the board could also go up if war breaks out. That's not inflation. Those types of price increases are due to the supply side. Inflation is due to the demand side and the available dollars chasing the [same amount of] goods. Price increases and inflation are not the same thing. They are typically related though.
- deleted 6y ago
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deleted 6y ago
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OGWhales 6y ago
> Inflation literally is money printing. Price increases is not inflation. According to who exactly? I encourage you to research this and determine the validity of your assertion, as I can't even find a single person defining it the same way as you are here..
- ghastmaster 6y ago
  My explanation is in this thread to another comment(anon1096). To expand: > The era between the mid-1830s and the Civil War—a period economists refer to as the “free banking era”—saw a proliferation of banks. Along with these institutions came “bank notes,” a private paper currency redeemable for a specific amount of metal. That is, if the issuing bank had it. At times, banks did not have enough gold or silver to satisfy all of their claims. Bank notes, like the public notes that preceded them, also tended to depreciate. It is during this period that the word inflation begins to emerge in the literature, not in reference to something that happens to prices, but as something that happens to a paper currency. > The term inflation was initially used to describe a change in the proportion of currency in circulation relative to the amount of precious metal that constituted a nation’s money. By the late nineteenth century, however, the distinction between “currency” and “money” was becoming blurred. > In addition to separating the price level from the money stock, the Keynesian revolution in economics appears to have separated the word inflation from a condition of money and redefined it as a description of prices. > When Keynesian economic theory challenged the direct link between money and the price level, inflation lost its association with money and came to be chiefly understood as a condition of prices. https://www.clevelandfed.org/newsroom-and-events/publications/economic-commentary/economic-commentary-archives/1997-economic-commentaries/ec-19971015-on-the-origin-and-evolution-of-the-word-inflation.aspx https://www.clevelandfed.org/newsroom-and-events/publication... Keynesian economists changed the word to suite the needs of Keynesian theories. It is equivalent to "newspeak". It obfuscates and confuses. There is a large portion of the population that does not believe in the implementation of or understand Keynesian economics(and definitions). They may not be very good at explaining or understanding their discontent due to these semantics changes. Then again, maybe you are right. As Milton Friedman famously stated, "We are all Keynesians now."
  - 6y ago
synnejye 6y ago
> Inflation literally is money printing. Price increases is not inflation. Price increases can be caused by inflation. Prices can remain nominally the same while money supply has increased. Well, in today's world it is. Yes, not according to your 'old-school' definition of it. But if anyone says "inflation" today - it means price increases. Nothing more, nothing less. > The prices while having not risen nominally are still artificially inflated. Care to explain? > It is just the economy. If you are referring to a recession, printing money during a recession arguably may not cause prices to rise nominally, but it artificially inflates them. Yes, I meant a recession. Please, once again, elaborate what you mean by "artificially inflated prices"? > During a recession prices typically go down due to falling demand. This is a good thing. It allows people who are suffering to enjoy lower prices. Ehh, ok. So what happens to those people when companies start making less money? > Recessions are a healing process for a previous period of misallocation of resources. Care to explain how resources are "misallocated"? > Money printing only serves to exacerbate and extend the misallocation. Lol, no it doesn't. Sounds like a neoclassical fairytale. In a recession, you are arguing that one shouldn't print money, because it only "extends misallocation". Please explain me a proper allocation and a misallocation. Makes no sense. Newly printed money would add demand - as it should. It would create jobs and have nothing to do with "misallocation", That "misallocation" sounds like a conservative argument. No one can explain or prove it, or even make sense of it, but if you keep repeating it, then people will believe it. > We left the gold standard because we were afraid to deal with the recession from the spending of '60s No, America left it because it was a shit system. Capitalism is inherently monetary. Having a currency pegged hinders growth and only serves to avoid inflation for the rich. Rentier capitalism doesn't like inflation.
- ghastmaster 6y ago
  > Well, in today's world it is. Yes, not according to your 'old-school' definition of it. But if anyone says "inflation" today - it means price increases. Nothing more, nothing less. Apparently you are correct. The vast majority of people hear the term and think of price increases. As I noted earlier, the definition has changed. I gather most of my economic understanding from Austrian School economists which when referring to inflation usually mean increase in the money supply. > Care to explain? > Yes, I meant a recession. Please, once again, elaborate what you mean by "artificially inflated prices"? When a recession happens there is a decrease in demand for products and services. This drop in demand causes an increase in supply of those same products and services. The increase in supply causes prices to fall. When the government releases more cash into the market, the supply of cash is increased. When people have a larger supply of cash, they can pay more for goods and services. If the cash infusion is at a certain level, prices may not increase nominally(compared to before a recession) because the increased supply of money prevented their drop. The term artificial refers the fact that the money supply is increased or decreased by government fiat. Hence, the prices are increased or decreased by government fiat. Government involvement in the market is artificial. Markets exist without government and with governments. When a business or person is making decisions based on market dynamics and a government steps in to alter the dynamics, that is artificial, because it is produced by a political agency. It is not a natural quality of the market. > Ehh, ok. So what happens to those people when companies start making less money? When these people and companies make less money, that is offset by the decreased price of goods and services. Companies pay less for material because demand has gone down, this allows them to continue to employ people and be competitive and profitable. There will be temporary imbalances of course, which will result in job losses and business closures. > Care to explain how resources are "misallocated"? > Money printing only serves to exacerbate and extend the misallocation. Misallocation refers to capital that was directed to unprofitable sectors of industry at a macro and micro scale. Assume for a minute that government is not involved in the market at all. When businesses compete, they make different decisions on how many people to hire, equipment purchases, material acquisition, debt level, and many other things. They have decided where to "allocate" these resources(labor, capital). When one company makes a bad decision this can lead to less profit and eventually the failure of the business. If enough businesses make these bad decisions, a large portion of the resources have been "allocated" to sectors or markets that are unprofitable. They may survive for a time before one starts failing, then another, and another. This is what causes a recession in a market that is not influenced by government. As the recession progresses to the end, there are less businesses competing that have "misallocated" their resources. When governments print money and allow business unfettered access to this money via low interest rates, companies take advantage of it. Because they have more money than their competitor they can pay more money for materials, labor, equipment. They can lower prices of their goods or services to temporarily out compete their competitors. When other businesses see what is going on, they secure more of the cheap debt as well. For a time, the businesses that make poor decisions(paying too much for labor/materials/equipment) can still compete because they have not ran out of cash. When the loan balance becomes too high, we reach a scenario where businesses start cutting back to pay the interest and principle. They start increasing product prices, cut labor, sell equipment. Due to the fact that the government has increased the amount of money available to these companies beyond what they normally would have, the government increased the amount of "misalloctated" resources. Coupled with companies en masse gathering debt to stay competetive, this results in a larger recession, because a larger percent of the market is based on capital that was acquired through fiat rather than competition. Companies and individuals enter this new recession with larger balances and larger portions of their cash balance is subject to interest payments. This means the selloff of equipment must be larger, labor cuts must be larger, and material acquisition costs must be reduced to a greater extent. This results in a greater recession or depression. The money printing exacerbated and extended the misallocation. > No, America left it because it was a shit system. Capitalism is inherently monetary. Having a currency pegged hinders growth and only serves to avoid inflation for the rich. Please explain. How does pegged(commodity) dollar hinder growth, given the history of the US dollar peg and substantial economic growth? Avoids inflation for the rich?

jrs235 6y ago

This is the definition of inflation that I was taught too. However it seems that people now days mean for inflation to be about price increases rather than money supply inflation (increases). The money supply inflates and deflates. Prices increase and decrease. I think it would be best if we all start being more clear and specific when talking about "inflation". Printing money DOES automatically lead to inflation. It leads to inflating the money supply or MONEY SUPPLY inflation. However printing money and inflating the money supply does not necessarily lead to price increases or price inflation. Most of us care about price increases, which are a symptom, but not allows present, of money supply inflation/printing money.

Anon1096 6y ago
When talking about inflation, there's no such thing as "money supply inflation". The term inflation IS clear, you're just choosing to try and redefine it to match your purposes. Inflation is a rise in the price of goods, full stop.
- ghastmaster 6y ago
  When using the word "inflation" without context is is referring to increased money supply. When using the word "inflation" with regard to prices it is in a different context. The assumed context is what has changed due to the fact that money supply no longer is directly correlated with price increases. When gold and silver were directly debased, prices of goods were directly inflated. If we still used gold/silver currency "inflation" by itself would be synonymous with price increases. We use fiat currencies and the money supply is increased in certain industries or assets and therefore "inflation" has to be defined more clearly. Debasing fiat is not as direct as debasing commodity backed dollars or gold/silver currency. The article author does a decent job of defining these, but fails to be clear as the writing progresses.
- jrs235 6y ago
  Prices across the board could increase if say the cost to produce and deliver them went up across the board, perhaps because the cost of energy/oil goes up, perhaps due to constrained supply. This isn't inflation and the price increase isn't due to inflation. Prices across the board could also go up if war breaks out. That's not inflation. Those types of price increases are due to the supply side. Inflation is due to the demand side and the available dollars chasing the [same amount of] goods. Price increases and inflation are not the same thing. They are typically related though.
deleted 6y ago
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deleted 6y ago

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OGWhales 6y ago

> Inflation literally is money printing. Price increases is not inflation. According to who exactly? I encourage you to research this and determine the validity of your assertion, as I can't even find a single person defining it the same way as you are here..

ghastmaster 6y ago
My explanation is in this thread to another comment(anon1096). To expand: > The era between the mid-1830s and the Civil War—a period economists refer to as the “free banking era”—saw a proliferation of banks. Along with these institutions came “bank notes,” a private paper currency redeemable for a specific amount of metal. That is, if the issuing bank had it. At times, banks did not have enough gold or silver to satisfy all of their claims. Bank notes, like the public notes that preceded them, also tended to depreciate. It is during this period that the word inflation begins to emerge in the literature, not in reference to something that happens to prices, but as something that happens to a paper currency. > The term inflation was initially used to describe a change in the proportion of currency in circulation relative to the amount of precious metal that constituted a nation’s money. By the late nineteenth century, however, the distinction between “currency” and “money” was becoming blurred. > In addition to separating the price level from the money stock, the Keynesian revolution in economics appears to have separated the word inflation from a condition of money and redefined it as a description of prices. > When Keynesian economic theory challenged the direct link between money and the price level, inflation lost its association with money and came to be chiefly understood as a condition of prices. https://www.clevelandfed.org/newsroom-and-events/publications/economic-commentary/economic-commentary-archives/1997-economic-commentaries/ec-19971015-on-the-origin-and-evolution-of-the-word-inflation.aspx https://www.clevelandfed.org/newsroom-and-events/publication... Keynesian economists changed the word to suite the needs of Keynesian theories. It is equivalent to "newspeak". It obfuscates and confuses. There is a large portion of the population that does not believe in the implementation of or understand Keynesian economics(and definitions). They may not be very good at explaining or understanding their discontent due to these semantics changes. Then again, maybe you are right. As Milton Friedman famously stated, "We are all Keynesians now."
- 6y ago

synnejye 6y ago

> Inflation literally is money printing. Price increases is not inflation. Price increases can be caused by inflation. Prices can remain nominally the same while money supply has increased. Well, in today's world it is. Yes, not according to your 'old-school' definition of it. But if anyone says "inflation" today - it means price increases. Nothing more, nothing less. > The prices while having not risen nominally are still artificially inflated. Care to explain? > It is just the economy. If you are referring to a recession, printing money during a recession arguably may not cause prices to rise nominally, but it artificially inflates them. Yes, I meant a recession. Please, once again, elaborate what you mean by "artificially inflated prices"? > During a recession prices typically go down due to falling demand. This is a good thing. It allows people who are suffering to enjoy lower prices. Ehh, ok. So what happens to those people when companies start making less money? > Recessions are a healing process for a previous period of misallocation of resources. Care to explain how resources are "misallocated"? > Money printing only serves to exacerbate and extend the misallocation. Lol, no it doesn't. Sounds like a neoclassical fairytale. In a recession, you are arguing that one shouldn't print money, because it only "extends misallocation". Please explain me a proper allocation and a misallocation. Makes no sense. Newly printed money would add demand - as it should. It would create jobs and have nothing to do with "misallocation", That "misallocation" sounds like a conservative argument. No one can explain or prove it, or even make sense of it, but if you keep repeating it, then people will believe it. > We left the gold standard because we were afraid to deal with the recession from the spending of '60s No, America left it because it was a shit system. Capitalism is inherently monetary. Having a currency pegged hinders growth and only serves to avoid inflation for the rich. Rentier capitalism doesn't like inflation.

ghastmaster 6y ago
> Well, in today's world it is. Yes, not according to your 'old-school' definition of it. But if anyone says "inflation" today - it means price increases. Nothing more, nothing less. Apparently you are correct. The vast majority of people hear the term and think of price increases. As I noted earlier, the definition has changed. I gather most of my economic understanding from Austrian School economists which when referring to inflation usually mean increase in the money supply. > Care to explain? > Yes, I meant a recession. Please, once again, elaborate what you mean by "artificially inflated prices"? When a recession happens there is a decrease in demand for products and services. This drop in demand causes an increase in supply of those same products and services. The increase in supply causes prices to fall. When the government releases more cash into the market, the supply of cash is increased. When people have a larger supply of cash, they can pay more for goods and services. If the cash infusion is at a certain level, prices may not increase nominally(compared to before a recession) because the increased supply of money prevented their drop. The term artificial refers the fact that the money supply is increased or decreased by government fiat. Hence, the prices are increased or decreased by government fiat. Government involvement in the market is artificial. Markets exist without government and with governments. When a business or person is making decisions based on market dynamics and a government steps in to alter the dynamics, that is artificial, because it is produced by a political agency. It is not a natural quality of the market. > Ehh, ok. So what happens to those people when companies start making less money? When these people and companies make less money, that is offset by the decreased price of goods and services. Companies pay less for material because demand has gone down, this allows them to continue to employ people and be competitive and profitable. There will be temporary imbalances of course, which will result in job losses and business closures. > Care to explain how resources are "misallocated"? > Money printing only serves to exacerbate and extend the misallocation. Misallocation refers to capital that was directed to unprofitable sectors of industry at a macro and micro scale. Assume for a minute that government is not involved in the market at all. When businesses compete, they make different decisions on how many people to hire, equipment purchases, material acquisition, debt level, and many other things. They have decided where to "allocate" these resources(labor, capital). When one company makes a bad decision this can lead to less profit and eventually the failure of the business. If enough businesses make these bad decisions, a large portion of the resources have been "allocated" to sectors or markets that are unprofitable. They may survive for a time before one starts failing, then another, and another. This is what causes a recession in a market that is not influenced by government. As the recession progresses to the end, there are less businesses competing that have "misallocated" their resources. When governments print money and allow business unfettered access to this money via low interest rates, companies take advantage of it. Because they have more money than their competitor they can pay more money for materials, labor, equipment. They can lower prices of their goods or services to temporarily out compete their competitors. When other businesses see what is going on, they secure more of the cheap debt as well. For a time, the businesses that make poor decisions(paying too much for labor/materials/equipment) can still compete because they have not ran out of cash. When the loan balance becomes too high, we reach a scenario where businesses start cutting back to pay the interest and principle. They start increasing product prices, cut labor, sell equipment. Due to the fact that the government has increased the amount of money available to these companies beyond what they normally would have, the government increased the amount of "misalloctated" resources. Coupled with companies en masse gathering debt to stay competetive, this results in a larger recession, because a larger percent of the market is based on capital that was acquired through fiat rather than competition. Companies and individuals enter this new recession with larger balances and larger portions of their cash balance is subject to interest payments. This means the selloff of equipment must be larger, labor cuts must be larger, and material acquisition costs must be reduced to a greater extent. This results in a greater recession or depression. The money printing exacerbated and extended the misallocation. > No, America left it because it was a shit system. Capitalism is inherently monetary. Having a currency pegged hinders growth and only serves to avoid inflation for the rich. Please explain. How does pegged(commodity) dollar hinder growth, given the history of the US dollar peg and substantial economic growth? Avoids inflation for the rich?