3 ms·
> If the currency was debased, inflation would have occurred fairly evenly across the economy Nothing makes this necessarily true. As an example, if the govern
by Rury 4y ago
> If the currency was debased, inflation would have occurred fairly evenly across the economy
Nothing makes this necessarily true. As an example, if the government printed everyone in the world 100 trillion dollars, and everyone used it to buy as much house they could, and nothing else, then houses would skyrocket in price as this money spurred demand for houses causing a shortage of housing stock (as prices are a matter of supply vs demand). Bread wouldn't change a dime in this scenario, because no one used the new money to buy more bread than normal, causing a supply shortage of bread. Ergo, nothing necessitates that inflation occurs evenly across the economy. Not even in Roman times. Inflation only occurs where demand happens. If demand, demands it be stored in bank accounts, then bank accounts inflate.
- arrosenberg 4y agoWrong. If you debase your currency, by definition the cost goes up on goods even where demand is static. That's what it literally means - coins are now worth half because they have half the silver they used to. We saw some inflation on food and gas prices in 2022 (for reason not directly related to monetary policy), but not in 2020 or 2021 when the cash was added to the economy - we saw inflation in assets because the Fed handed out cash to investors who deployed it on a limited pool of assets.
- Rury 4y agoI'm not wrong at all. You can make coins with 1/4 the silver they use to, but if people don't demand more coins to make up for the debasement, there is no inflation seen in traded goods. There's nothing necessarily stopping anyone from accepting the 1/4 silver coin as equivalent as the 100% silver coin for the same good. However if someone is wiser about the debasement, and now demands 4 coins instead of 1 to make up for it = there's your inflation. Like I said, inflation only happens where demand happens. Demand can be broad based, but nothing necessitates it being evenly distributed.
- arrosenberg 4y agoThat assumes people are unaware suckers and would still only be true for a short time under metallist economies (until word gets out). My entire point was that it doesn’t work that way with fiat currency. Demand is driving inflated prices, but the money isn't being debased, the supply is increasing. Congress could remove the extra cash with taxes, which you cant do with debased coins, they have to be reminted entirely.