8 ms·

Here is my view on inflation: 1: The root of inflation is the printing of money 2: No government will reduce the printing of money. It is just too convenient.

by TekMol 4y ago

Here is my view on inflation: 1: The root of inflation is the printing of money 2: No government will reduce the printing of money. It is just too convenient. It is like taxing more and more without getting much complaints. 3: Governments will rather use tricks to lower inflation. Change the definition. Make laws to restrict prices. Subsidize the production of goods to make them cheaper. Conclusion: The value of money will go down the drain faster and faster forever.

Sparkle-san 4y ago
Inflation can exist without the printing of money so I'm not sure it qualifies as the root. Supply and demand seems more likely to be the root, which can be affected by the printing of money and by other things such as supply chain constraints.
- JackFr 4y ago
  Too much money chasing too few goods. The Fed can only control the too much money side of the equation. In the case of inflation do to a supply side shock to an inelastic good, that is necessities with few or no substitutes, there is nothing the Fed can do.
epgui 4y ago
The way I understand it (and this is not my area of expertise), this view could have been cutting-edge 50-100 years ago, but now it’s not really sophisticated enough.
- everybodyknows 4y ago
  It's not a bad sketch of inflation in countries where central bankers follow orders from the head of state, and the head of state needs to win elections. Such as Argentina, or Turkey.
- TekMol 4y ago
  Prove me wrong. The numbers I see (asset prices and monetary base both going up and up and nothing but up) are in sync with my view.
  - temporalparts 4y ago
    Burden of proof should be on the person asserting the claim, not the other way around.
    - dymk 4y ago
      The claim being asserted is that the viewpoint is not sophisticated enough (despite it being the commonly held, intuitive belief about inflation). That's the claim that needs to be proven.
  - yibg 4y ago
    Why do people need to prove you wrong? Onus is on you to support your assertions.
    - notch656a 4y ago
      That's not how it works. If someone makes a claim, by default they are neither right nor wrong. But once you make the statement a claim is wrong (or "not sophisticated enough") then that person has made an additional assertion. Burden of proof doesn't mean it default to "you're wrong." It means it defaults to "your position is unfounded." To change it to "you're wrong" requires evidence of your own.
      - pessimizer 4y ago
        > your position is unfounded In the context of an argument, this is the same as wrong. You can't use evidence to refute an unfounded argument; there are no supports to attack.
        notch656a 4y ago
kibwen 4y ago
> The root of inflation is the printing of money This is only half the story. Inflation is measured based on the prices of goods in the wild. Yes, prices can increase when the value of a dollar falls based on the supply of dollars increasing. At the same time, the price of a good can increase when supply of the good decreases. We're in an era of unprecedented supply chain disruption due to covid, so it would be wrong to forget to account for this side of the story WRT inflation.
- savant_penguin 4y ago
  If the disruption of supply chains is the actual culprit for inflation, shouldn't we observe gradual deflation as they recover? If on the other hand it's printing money (as I'd expect from the trillions of free money in recent months) it should only get worse. What I observe is more consistent with money printing than disruption of supply chains
  - Sparkle-san 4y ago
    A lot of our supply chains rely heavily on China which hasn't pulled back on its use of lockdowns to fight covid.
  - hedora 4y ago
    It's not just covid. In the last few years, we've lost a lot of industrial and agricultural capacity to climate change and Putin.
  - nemothekid 4y ago
    >If the disruption of supply chains is the actual culprit for inflation, shouldn't we observe gradual deflation as they recover? Both China (most importantly) and Russia (to a lesser extent) have not recovered. China seems to be getting worse with a historic once-in-a-century heatwave and drought that is currently destroying productivity.
  - paulmd 4y ago
    in some ways you already are - the price of gasoline and even diesel have eased significantly over the last few months, for example. Long term, that will pull prices of energy-intensive products (shipping, etc). However, "prices are sticky", they go up quickly and go down slowly. Companies aren't going to race to bring their margins back down, if people are paying X then they'll keep prices at X. Especially if they are worried that prices might continue increasing in the future - this is the "inertial" part of inertial inflation, it isn't just about inflation itself but about managing expectations in the economy around future inflation. So far there supposedly hasn't been a big inertial component but who knows. Really what we needed to discourage it was a massive windfall profits tax - the Fed is also basically saying that we need actual fiscal policy here and that they don't really have the tools to manage this like they want - but this gets back to "there are 48 definite no votes for any bill, and we're dependent on what we can get those last 2 senators to agree to". The fed is using the only levers it has, and that lever is "a gut-shot to aggregate demand for the next decade", that is not the right policy tool but it's the only one that congress can't block. This is why you don't throw gasoline on the fire during 2018-2019 when the economy is already going gangbusters, because when the economy inevitably dipped, suddenly those policy tools like government spending become much more "expensive" to implement when there's already tons of money sloshing around the economy.
TazeTSchnitzel 4y ago
> Conclusion: The value of money will go down the drain faster and faster forever. Most Western countries try to keep inflation low, and succeed. If what you were saying were true, wouldn't we have hyperinflation everywhere? Right now we're having a supply shock, but that's not normal.
axlee 4y ago
> The root of inflation is the printing of money Not exactly. It's the "printing of money" that increases faster than the economic output/demand curve that causes inflation. You can definitely be "printing money" in a deflationary environment as well. You can also see a general price level increase with the same money supply, if the velocity of money increases, or if the supply of goods goes down.
- paulmd 4y ago
  You're being downvoted but this is entirely correct. Inflation or deflation is a mismatch between the amount of money and the demand for money - if your economy increases at the same rate as the money supply, you won't have inflation even though you are "printing money". Similarly, you can have an absolutely fixed currency supply and still experience inflation (if your demand drops off a cliff). Money is just another good. It has its own demand and supply. Ideally, you want those to match - which is what central banks try to do. "Hard-currency advocated" (gold standard people) have been arguing against this concept since its inception, but, their system doesn't have a way to manage the money supply, which leads to frequent recessions. The gold period is marked by recessions that took place every couple years - and that was in a 19th century economy that moved far slower and was far less interconnected.
  - imtringued 4y ago
    The reason we have inflation and deflation is that people don't have to talk to each other to coordinate supply and demand on specific days. The gold standard doesn't solve the short term inflation deflation problem because to solve that you must ensure that for every buyer there is a seller that can handle the demand and the opposite, that for every seller there is also a buyer at any given point in time. The purpose of saving is to sell today and buy tomorrow and trade places with someone that wants to buy today and sell tomorrow. When you are saving for retirement you must sell to a future worker that will take care of you when you are old and that future worker must take on debt and buy from you. Then when you retire the positions reverse, you are buying and he is selling. Only if those positions are in balance do you actually get no inflation. But nobody even wants to think about coordinating production and consumption schedules because they fooled themselves into thinking liquid money does it automatically when the fact that we have inflation and deflation really just shows that it doesn't work. People save more than others want to be in debt leading to deflation. Or people take on more debt than others want to save and reduce consumption leading to competition over products and services and higher prices aka inflation.
aeternum 4y ago
> No government will reduce the printing of money. It is just too convenient. It is like taxing more and more without getting much complaints. Well the Fed just reduced the effective rate it was printing money quite substantially by switching to Quantitative Tightening and increasing rates. You could even argue that with QT, not only is the Fed no longer printing money, but they are taking money that was printed back out of circulation and effectively destroying it.
- notch656a 4y ago
  The only time I can think of that the fed continually contracted the money supply was during the great depression. Would be interesting to look at a monetary supply chart since the fed was founded (I think ~1913 or 1915?)
  - hedora 4y ago
    Powell claims the Fed did this in the 1980's under Volker, and says it plans to do it again right now. This matches up with the double digit mortgage rates that were common back then.
    - notch656a 4y ago
      M2 supply was practically monotonically increasing from 1970-1990.
      - JumpCrisscross 4y ago
        > M2 supply was practically monotonically increasing from 1970-1990 This is correct [1]. The American economy has grown, decade to decade, every decade of its existence. If the economy grows and the money supply does not, bad things happen [1] https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL
        kshacker 4y ago
        1. A bad graph. I know it is an government website and not something you produced, I need to call it out. From 1970 to 1980, the metric jumped to 300% (an increase of 200%). From 1980 to 1990, the metric jumped to 210% (an increase of 110%). Whereas from 2010 to 2020 (just before covid), the metric jumped about to about 190% (an increase of 90%). But this is not obvious on the graph. They should use log scale. 2. The covid jump is something else. But I can understand why they spent money then. (Even from 1960s to 1970s they went up by 100% or to 200%, so I buy your point, just do not like the FRed's visualization) Edit: Just plotted these in Excel. Bush-1 and Clinton-1 were the only years with flat curve on logarithmic basis, every other era is a gradual increase.
ptero 4y ago
> The root of inflation is the printing of money This is mostly true most of the time, but this is not the only story. There is also a supply side to the equation: if supply can expand it can suck up a lot of money that is being printed without causing inflation. I highly recommend Lyn Alden's overviews and analysis. Here is her recent one on inflation (a subsection that points to broad money vs inflation -- the trend you indicate as well as some exceptions). https://www.lynalden.com/inflation/#supply https://www.lynalden.com/inflation/#supply Another one she wrote a couple of years ago on the global reserve currency situation is IMO relevant as well. https://www.lynalden.com/fraying-petrodollar-system/ https://www.lynalden.com/fraying-petrodollar-system/
- anonporridge 4y ago
  This is definitely a huge factor, especially when understanding short term inflationary trends, or inflation in a particular good or service. But very long term and holistic, systemic inflation, that 2-3% annual target, has very little to do with supply and is almost exclusively printing money. It's a slow drip, a covert tax on savers and gift to debtors, that the government can feed off indefinitely so long as they never get too overleveraged and forced to print money too fast to cover their obligations, shattering the trust that supports the system.
- throwoutway 4y ago
  Did you mean demand instead of supply? The supply of money is growing. So you mean the Demand needs to expand to consume it?
bryanlarsen 4y ago
#1 is incomplete. There's obviously a supply side component. You think the price of lumber quadrupled because of excess money? Some countries printed a lot more money than others during COVID, but the correlation between the money printing and inflation is very low. #2 is wrong. The fed can print money using QE and low interest rate loans. They can destroy money via reversing the easing and high interest rates. They've done this. Congress can destroy money through taxes. The Inflation Reduction Act does this.
- hedora 4y ago
  Lumber quadrupled in the US because of the Canadian tarrifs and a coordinated decision by the US lumber industry to cut production.
gwbas1c 4y ago
> The root of inflation is the printing of money It's always more complicated than that: Stop printing money? After a few years population will increase, the workforce will be larger, and there won't be enough money to go around. This will result in deflation. (And is supported by evidence of what happened when people used physical gold and silver as money. As population went up, and people stockpiled, deflation happened.) In this case, part of the cause (in the US) is a smaller work force. Not only did people retire early at the beginning of the pandemic, the baby boomers are retiring. This means there's less workers to go around. The remaining workers can demand more money.
- deleted 4y ago
  [deleted]
- senectus1 4y ago
  I suspect that the "printing of money" statement is about unhinged printing of money, not "expansion of population" printing of money.
  - imtringued 4y ago
    But calling it excessive fiscal deficits and public debts would be both more accurate and actually address a real problem. The next step would be to then ask ourselves why the government has to constantly micromanage the economy, the answer has very little to do with the fact that inflation is a tax but rather because of structural problems in the economy. Governments always run a deficit for a fear of a recession worse than 2008. Why is government debt the only way to prevent a financial crisis? Why does it never get better but exponentially worse? If you just say money printing people turn their brains off and think it is as simple as political overspending.
acuozzo 4y ago
> 1: The root of inflation is the printing of money The root of inflation is an increase in the cost of goods & services. If the money supply increased, but the head of every company willfully elected to ignore this (due to patriotic duty, for instance) and continue charging the same for their goods & services, then inflation would not occur.
- notch656a 4y ago
  Instead you would have shortages.
  - hedora 4y ago
    Those lead to profitable gray/black markets, and then inflation.
  - anonporridge 4y ago
    And a black market would rapidly develop to subvert the government's artificial constraint on the free market, and inflation would happen there to counter the shortages by creating real price signals to allow people to allocate resources as efficiently as possible to get to where they're most needed and earned. This is exactly what's happening in countries like Venezuela and Argentina with high inflation right now. The government has set an official forex exchange rate to try to make believe their currency is more valuable than it actually is, while the black market currency exchange gives you the true exchange rate that is reflected by real world markets. In some cases, this situation is fine, because the government just needs the fake numbers to push a political narrative. More commonly, I feel like this action starts a downward spiral of trust in a society's political class or the political system itself. This is probably a big thing that led to the collapse of communism.
    - acuozzo 4y ago
      > to subvert the government's artificial constraint on the free market No government constraint/restriction was mentioned in the hypothetical scenario I constructed.
  - 4y ago
ParksNet 4y ago
American Federal Spending is driven by social security recipients - the elderly and disabled (60% of Federal Spending and rising) https://www.nationalpriorities.org/analysis/2015/presidents-2016-budget-in-pictures/ https://www.nationalpriorities.org/analysis/2015/presidents-... We can no longer afford that. Government pensions should be abolished and the retirement age raised.
- hedora 4y ago
  Why not just jump to turning them into Soylent Green?
- paulmd 4y ago
  Just to be clear, you're suggesting we cut the program but retain the payroll taxes that fund it, right? that's the problem with mixing social security and medicare in with the rest of the "general budget items"... it's specifically built to be a self-funding program and people have been paying taxes for decades (regardless of whether you think the government has mismanaged it) with the expectation of receiving the benefit. (note that nowhere here have I said "lockbox", I am firmly aware that it's a "pay as you go" concern at the end of the day, and it's irrelevant to this point, which regards the human factor.) In contrast, let's say the military is not specifically funded with any specific tax that was intended to go towards that program. It's just something we spend money on. That's what a general budget item is, and that's where the general budget largely gets spent. Medicare/social security are handled differently.
throw0101a 4y ago
> 1: The root of inflation is the printing of money Japan enters the chat * https://fred.stlouisfed.org/graph/?g=PA7P https://fred.stlouisfed.org/graph/?g=PA7P > 2: No government will reduce the printing of money. It is just too convenient. It is like taxing more and more without getting much complaints. It's not the government that creates money, but rather private banks: * https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m... * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625
credit_guy 4y ago
> Governments will rather use tricks to lower inflation. Change the definition. I may agree with the rest, but not with this one. The definition of inflation (or CPI) is owned by the Bureau of Labor Statistics, which is obviously part of the Government. Still, nobody in this bureau will get a bonus or a salary increase, or anything really, if they tweak the definition. Moreover, how many times can the Government change the definition?
imtringued 4y ago
" The root of inflation is the printing of money" Completely wrong, the gold standard had a mostly fixed supply that was growing over time but the price went up over the long term but there was inflation over the short term anyway. Deflation happens when people save more than others have a desire to spend and invest. Inflation happens when people spend and invest more than other people want to save. The other problem is that no printing is happening, that operation simply doesn't exist beyond the creation of physical dollar bills. >No government will reduce the printing of money Do you live under a rock? Germany was running a hard debt brake before the pandemic and right now the debt isn't excessive either. How about you actually look what is happening around the world before making universal claims? >The value of money will go down the drain faster and faster forever. What did you expect, did you really think the opposite is going to happen? That you are going to enslave the future faster and faster forever?

by TekMol 4y ago

Sparkle-san 4y ago

Inflation can exist without the printing of money so I'm not sure it qualifies as the root. Supply and demand seems more likely to be the root, which can be affected by the printing of money and by other things such as supply chain constraints.

JackFr 4y ago
Too much money chasing too few goods. The Fed can only control the too much money side of the equation. In the case of inflation do to a supply side shock to an inelastic good, that is necessities with few or no substitutes, there is nothing the Fed can do.

epgui 4y ago

The way I understand it (and this is not my area of expertise), this view could have been cutting-edge 50-100 years ago, but now it’s not really sophisticated enough.

everybodyknows 4y ago
It's not a bad sketch of inflation in countries where central bankers follow orders from the head of state, and the head of state needs to win elections. Such as Argentina, or Turkey.
TekMol 4y ago
Prove me wrong. The numbers I see (asset prices and monetary base both going up and up and nothing but up) are in sync with my view.
- temporalparts 4y ago
  Burden of proof should be on the person asserting the claim, not the other way around.
  - dymk 4y ago
    The claim being asserted is that the viewpoint is not sophisticated enough (despite it being the commonly held, intuitive belief about inflation). That's the claim that needs to be proven.
- yibg 4y ago
  Why do people need to prove you wrong? Onus is on you to support your assertions.
  - notch656a 4y ago
    That's not how it works. If someone makes a claim, by default they are neither right nor wrong. But once you make the statement a claim is wrong (or "not sophisticated enough") then that person has made an additional assertion. Burden of proof doesn't mean it default to "you're wrong." It means it defaults to "your position is unfounded." To change it to "you're wrong" requires evidence of your own.
    - pessimizer 4y ago
      > your position is unfounded In the context of an argument, this is the same as wrong. You can't use evidence to refute an unfounded argument; there are no supports to attack.
      - notch656a 4y ago

kibwen 4y ago

> The root of inflation is the printing of money This is only half the story. Inflation is measured based on the prices of goods in the wild. Yes, prices can increase when the value of a dollar falls based on the supply of dollars increasing. At the same time, the price of a good can increase when supply of the good decreases. We're in an era of unprecedented supply chain disruption due to covid, so it would be wrong to forget to account for this side of the story WRT inflation.

savant_penguin 4y ago
If the disruption of supply chains is the actual culprit for inflation, shouldn't we observe gradual deflation as they recover? If on the other hand it's printing money (as I'd expect from the trillions of free money in recent months) it should only get worse. What I observe is more consistent with money printing than disruption of supply chains
- Sparkle-san 4y ago
  A lot of our supply chains rely heavily on China which hasn't pulled back on its use of lockdowns to fight covid.
- hedora 4y ago
  It's not just covid. In the last few years, we've lost a lot of industrial and agricultural capacity to climate change and Putin.
- nemothekid 4y ago
  >If the disruption of supply chains is the actual culprit for inflation, shouldn't we observe gradual deflation as they recover? Both China (most importantly) and Russia (to a lesser extent) have not recovered. China seems to be getting worse with a historic once-in-a-century heatwave and drought that is currently destroying productivity.
- paulmd 4y ago
  in some ways you already are - the price of gasoline and even diesel have eased significantly over the last few months, for example. Long term, that will pull prices of energy-intensive products (shipping, etc). However, "prices are sticky", they go up quickly and go down slowly. Companies aren't going to race to bring their margins back down, if people are paying X then they'll keep prices at X. Especially if they are worried that prices might continue increasing in the future - this is the "inertial" part of inertial inflation, it isn't just about inflation itself but about managing expectations in the economy around future inflation. So far there supposedly hasn't been a big inertial component but who knows. Really what we needed to discourage it was a massive windfall profits tax - the Fed is also basically saying that we need actual fiscal policy here and that they don't really have the tools to manage this like they want - but this gets back to "there are 48 definite no votes for any bill, and we're dependent on what we can get those last 2 senators to agree to". The fed is using the only levers it has, and that lever is "a gut-shot to aggregate demand for the next decade", that is not the right policy tool but it's the only one that congress can't block. This is why you don't throw gasoline on the fire during 2018-2019 when the economy is already going gangbusters, because when the economy inevitably dipped, suddenly those policy tools like government spending become much more "expensive" to implement when there's already tons of money sloshing around the economy.

TazeTSchnitzel 4y ago

> Conclusion: The value of money will go down the drain faster and faster forever. Most Western countries try to keep inflation low, and succeed. If what you were saying were true, wouldn't we have hyperinflation everywhere? Right now we're having a supply shock, but that's not normal.

axlee 4y ago

> The root of inflation is the printing of money Not exactly. It's the "printing of money" that increases faster than the economic output/demand curve that causes inflation. You can definitely be "printing money" in a deflationary environment as well. You can also see a general price level increase with the same money supply, if the velocity of money increases, or if the supply of goods goes down.

paulmd 4y ago
You're being downvoted but this is entirely correct. Inflation or deflation is a mismatch between the amount of money and the demand for money - if your economy increases at the same rate as the money supply, you won't have inflation even though you are "printing money". Similarly, you can have an absolutely fixed currency supply and still experience inflation (if your demand drops off a cliff). Money is just another good. It has its own demand and supply. Ideally, you want those to match - which is what central banks try to do. "Hard-currency advocated" (gold standard people) have been arguing against this concept since its inception, but, their system doesn't have a way to manage the money supply, which leads to frequent recessions. The gold period is marked by recessions that took place every couple years - and that was in a 19th century economy that moved far slower and was far less interconnected.
- imtringued 4y ago
  The reason we have inflation and deflation is that people don't have to talk to each other to coordinate supply and demand on specific days. The gold standard doesn't solve the short term inflation deflation problem because to solve that you must ensure that for every buyer there is a seller that can handle the demand and the opposite, that for every seller there is also a buyer at any given point in time. The purpose of saving is to sell today and buy tomorrow and trade places with someone that wants to buy today and sell tomorrow. When you are saving for retirement you must sell to a future worker that will take care of you when you are old and that future worker must take on debt and buy from you. Then when you retire the positions reverse, you are buying and he is selling. Only if those positions are in balance do you actually get no inflation. But nobody even wants to think about coordinating production and consumption schedules because they fooled themselves into thinking liquid money does it automatically when the fact that we have inflation and deflation really just shows that it doesn't work. People save more than others want to be in debt leading to deflation. Or people take on more debt than others want to save and reduce consumption leading to competition over products and services and higher prices aka inflation.

aeternum 4y ago

> No government will reduce the printing of money. It is just too convenient. It is like taxing more and more without getting much complaints. Well the Fed just reduced the effective rate it was printing money quite substantially by switching to Quantitative Tightening and increasing rates. You could even argue that with QT, not only is the Fed no longer printing money, but they are taking money that was printed back out of circulation and effectively destroying it.

notch656a 4y ago
The only time I can think of that the fed continually contracted the money supply was during the great depression. Would be interesting to look at a monetary supply chart since the fed was founded (I think ~1913 or 1915?)
- hedora 4y ago
  Powell claims the Fed did this in the 1980's under Volker, and says it plans to do it again right now. This matches up with the double digit mortgage rates that were common back then.
  - notch656a 4y ago
    M2 supply was practically monotonically increasing from 1970-1990.
    - JumpCrisscross 4y ago
      > M2 supply was practically monotonically increasing from 1970-1990 This is correct [1]. The American economy has grown, decade to decade, every decade of its existence. If the economy grows and the money supply does not, bad things happen [1] https://fred.stlouisfed.org/series/M2SL https://fred.stlouisfed.org/series/M2SL
      - kshacker 4y ago
        1. A bad graph. I know it is an government website and not something you produced, I need to call it out. From 1970 to 1980, the metric jumped to 300% (an increase of 200%). From 1980 to 1990, the metric jumped to 210% (an increase of 110%). Whereas from 2010 to 2020 (just before covid), the metric jumped about to about 190% (an increase of 90%). But this is not obvious on the graph. They should use log scale. 2. The covid jump is something else. But I can understand why they spent money then. (Even from 1960s to 1970s they went up by 100% or to 200%, so I buy your point, just do not like the FRed's visualization) Edit: Just plotted these in Excel. Bush-1 and Clinton-1 were the only years with flat curve on logarithmic basis, every other era is a gradual increase.

ptero 4y ago

> The root of inflation is the printing of money This is mostly true most of the time, but this is not the only story. There is also a supply side to the equation: if supply can expand it can suck up a lot of money that is being printed without causing inflation. I highly recommend Lyn Alden's overviews and analysis. Here is her recent one on inflation (a subsection that points to broad money vs inflation -- the trend you indicate as well as some exceptions). https://www.lynalden.com/inflation/#supply https://www.lynalden.com/inflation/#supply Another one she wrote a couple of years ago on the global reserve currency situation is IMO relevant as well. https://www.lynalden.com/fraying-petrodollar-system/ https://www.lynalden.com/fraying-petrodollar-system/

anonporridge 4y ago
This is definitely a huge factor, especially when understanding short term inflationary trends, or inflation in a particular good or service. But very long term and holistic, systemic inflation, that 2-3% annual target, has very little to do with supply and is almost exclusively printing money. It's a slow drip, a covert tax on savers and gift to debtors, that the government can feed off indefinitely so long as they never get too overleveraged and forced to print money too fast to cover their obligations, shattering the trust that supports the system.
throwoutway 4y ago
Did you mean demand instead of supply? The supply of money is growing. So you mean the Demand needs to expand to consume it?

bryanlarsen 4y ago

#1 is incomplete. There's obviously a supply side component. You think the price of lumber quadrupled because of excess money? Some countries printed a lot more money than others during COVID, but the correlation between the money printing and inflation is very low. #2 is wrong. The fed can print money using QE and low interest rate loans. They can destroy money via reversing the easing and high interest rates. They've done this. Congress can destroy money through taxes. The Inflation Reduction Act does this.

hedora 4y ago
Lumber quadrupled in the US because of the Canadian tarrifs and a coordinated decision by the US lumber industry to cut production.

gwbas1c 4y ago

> The root of inflation is the printing of money It's always more complicated than that: Stop printing money? After a few years population will increase, the workforce will be larger, and there won't be enough money to go around. This will result in deflation. (And is supported by evidence of what happened when people used physical gold and silver as money. As population went up, and people stockpiled, deflation happened.) In this case, part of the cause (in the US) is a smaller work force. Not only did people retire early at the beginning of the pandemic, the baby boomers are retiring. This means there's less workers to go around. The remaining workers can demand more money.

deleted 4y ago
[deleted]
senectus1 4y ago
I suspect that the "printing of money" statement is about unhinged printing of money, not "expansion of population" printing of money.
- imtringued 4y ago
  But calling it excessive fiscal deficits and public debts would be both more accurate and actually address a real problem. The next step would be to then ask ourselves why the government has to constantly micromanage the economy, the answer has very little to do with the fact that inflation is a tax but rather because of structural problems in the economy. Governments always run a deficit for a fear of a recession worse than 2008. Why is government debt the only way to prevent a financial crisis? Why does it never get better but exponentially worse? If you just say money printing people turn their brains off and think it is as simple as political overspending.

acuozzo 4y ago

> 1: The root of inflation is the printing of money The root of inflation is an increase in the cost of goods & services. If the money supply increased, but the head of every company willfully elected to ignore this (due to patriotic duty, for instance) and continue charging the same for their goods & services, then inflation would not occur.

notch656a 4y ago
Instead you would have shortages.
- hedora 4y ago
  Those lead to profitable gray/black markets, and then inflation.
- anonporridge 4y ago
  And a black market would rapidly develop to subvert the government's artificial constraint on the free market, and inflation would happen there to counter the shortages by creating real price signals to allow people to allocate resources as efficiently as possible to get to where they're most needed and earned. This is exactly what's happening in countries like Venezuela and Argentina with high inflation right now. The government has set an official forex exchange rate to try to make believe their currency is more valuable than it actually is, while the black market currency exchange gives you the true exchange rate that is reflected by real world markets. In some cases, this situation is fine, because the government just needs the fake numbers to push a political narrative. More commonly, I feel like this action starts a downward spiral of trust in a society's political class or the political system itself. This is probably a big thing that led to the collapse of communism.
  - acuozzo 4y ago
    > to subvert the government's artificial constraint on the free market No government constraint/restriction was mentioned in the hypothetical scenario I constructed.
- 4y ago

ParksNet 4y ago

American Federal Spending is driven by social security recipients - the elderly and disabled (60% of Federal Spending and rising) https://www.nationalpriorities.org/analysis/2015/presidents-2016-budget-in-pictures/ https://www.nationalpriorities.org/analysis/2015/presidents-... We can no longer afford that. Government pensions should be abolished and the retirement age raised.

hedora 4y ago
Why not just jump to turning them into Soylent Green?
paulmd 4y ago
Just to be clear, you're suggesting we cut the program but retain the payroll taxes that fund it, right? that's the problem with mixing social security and medicare in with the rest of the "general budget items"... it's specifically built to be a self-funding program and people have been paying taxes for decades (regardless of whether you think the government has mismanaged it) with the expectation of receiving the benefit. (note that nowhere here have I said "lockbox", I am firmly aware that it's a "pay as you go" concern at the end of the day, and it's irrelevant to this point, which regards the human factor.) In contrast, let's say the military is not specifically funded with any specific tax that was intended to go towards that program. It's just something we spend money on. That's what a general budget item is, and that's where the general budget largely gets spent. Medicare/social security are handled differently.

throw0101a 4y ago

> 1: The root of inflation is the printing of money Japan enters the chat * https://fred.stlouisfed.org/graph/?g=PA7P https://fred.stlouisfed.org/graph/?g=PA7P > 2: No government will reduce the printing of money. It is just too convenient. It is like taxing more and more without getting much complaints. It's not the government that creates money, but rather private banks: * https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/m... * https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625 https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625

credit_guy 4y ago

> Governments will rather use tricks to lower inflation. Change the definition. I may agree with the rest, but not with this one. The definition of inflation (or CPI) is owned by the Bureau of Labor Statistics, which is obviously part of the Government. Still, nobody in this bureau will get a bonus or a salary increase, or anything really, if they tweak the definition. Moreover, how many times can the Government change the definition?

imtringued 4y ago

" The root of inflation is the printing of money" Completely wrong, the gold standard had a mostly fixed supply that was growing over time but the price went up over the long term but there was inflation over the short term anyway. Deflation happens when people save more than others have a desire to spend and invest. Inflation happens when people spend and invest more than other people want to save. The other problem is that no printing is happening, that operation simply doesn't exist beyond the creation of physical dollar bills. >No government will reduce the printing of money Do you live under a rock? Germany was running a hard debt brake before the pandemic and right now the debt isn't excessive either. How about you actually look what is happening around the world before making universal claims? >The value of money will go down the drain faster and faster forever. What did you expect, did you really think the opposite is going to happen? That you are going to enslave the future faster and faster forever?