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> Besides, a general price increase doesn't occur without an increase in the supply of money relative to the value in the economy. Not quite true, they are cor

by neffo 4y ago

> Besides, a general price increase doesn't occur without an increase in the supply of money relative to the value in the economy. Not quite true, they are correlated but not linked 1:1 see 2020 and WW2. Think of economics a bit like the dual nature of light, not one theory can explain it. The 'Austrian'-school types believe this though, so maybe be where you have heard it? > Why is 9% inflation (what we have today) not destructive? It certainly is destructive to my finances. No, I didn't say 9% was good. It obviously reduces the value of savings materially, 2-3% y/y doesn't.

WalterBright 4y ago
> 2-3% y/y doesn't Yes, it does, just not as much as 9% does. Inflation is not hard to understand. It is always a monetary phenomenon. When the money supply increases faster than the value in the economy, you get inflation (because of Law of Supply & Demand, which no government has yet succeeded in repealing). The rising cost of gas does not cause inflation, because when gas prices go up, you have less money to spend, and hence other prices come down.
- andrepd 4y ago
  > Inflation is not hard to understand. It is always a monetary phenomenon. How do you reconcile that with the fact that there was uncontrolled inflation before fiat money?
- ethbr0 4y ago
  I'm guessing the underlying point both of you are making, re: 2-3% vs 9% you is that it's inflation... set against popular access to investments that meet or exceed that rate. I don't mind 3% inflation, when I have low-risk investments that earn >3%. I do mind 9% inflation, when my low-risk options earn <6%. (To pull some random demonstrative numbers out of a hat) And I think it's specifically the broadness of access to the sub- or supra- inflation investment opportunity that matters. If only some, limited-access opportunities exist, then it still hurts. Which I guess is another way of saying economic-growth-vs-inflation is the important metric, with a dash of central bank policy. In defense of fiat money... it is a powerful tool in the hands of a responsible macroeconomic manager. Emphasis on powerful & responsible.

by neffo 4y ago

WalterBright 4y ago

> 2-3% y/y doesn't Yes, it does, just not as much as 9% does. Inflation is not hard to understand. It is always a monetary phenomenon. When the money supply increases faster than the value in the economy, you get inflation (because of Law of Supply & Demand, which no government has yet succeeded in repealing). The rising cost of gas does not cause inflation, because when gas prices go up, you have less money to spend, and hence other prices come down.

andrepd 4y ago
> Inflation is not hard to understand. It is always a monetary phenomenon. How do you reconcile that with the fact that there was uncontrolled inflation before fiat money?
ethbr0 4y ago
I'm guessing the underlying point both of you are making, re: 2-3% vs 9% you is that it's inflation... set against popular access to investments that meet or exceed that rate. I don't mind 3% inflation, when I have low-risk investments that earn >3%. I do mind 9% inflation, when my low-risk options earn <6%. (To pull some random demonstrative numbers out of a hat) And I think it's specifically the broadness of access to the sub- or supra- inflation investment opportunity that matters. If only some, limited-access opportunities exist, then it still hurts. Which I guess is another way of saying economic-growth-vs-inflation is the important metric, with a dash of central bank policy. In defense of fiat money... it is a powerful tool in the hands of a responsible macroeconomic manager. Emphasis on powerful & responsible.