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> 1. a dilution of money. Let say a central bank injects a lot of new money, then all prices will be higher, but salary will be higher too, and the overall effe
by Sebb767 4y ago
> 1. a dilution of money. Let say a central bank injects a lot of new money, then all prices will be higher, but salary will be higher too, and the overall effect is neutral
More money does not necessarily mean decreased buying power. If you have more people or if the money isn't in circulation, the buying power will stay the same, therefore not causing inflation.
- itsoktocry 4y ago>If you have more people or if the money isn't in circulation, the buying power will stay the same, therefore not causing inflation. Exactly. Money is just another good in the economy (albeit a bit special). Its supply and demand ebbs and flows like any other. This is one of the things I find so funny about the known quantity trait of Bitcoin. Why would you want an underlying currency that can't increase its supply? It will inevitably increase in value and people will substitute for other methods of exchange.
- lupire 4y agoBecause if people use is less, it will decrease in value, making it attractive to spend, reaching equilibrium. It's not perfect, but either is "someone in charge prints a ton of money and gives it to their friends".
- zeroonetwothree 4y agoTypically when we say “more money” we mean more money in circulation. What’s the point of any other meaning?
- Sebb767 4y agoThese claims are usually supported by graphs about how much USD/EUR/... are provided by the respective central banks, which does not measure money in circulation, but total money existing. It's important to distinguish between the two since they are easily confused and a lot of existing money not in circulation can lead to rapid inflation if something mobilizes this money, which might be what we're seeing right now.