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> If the only factory producing widgets blows up and the price goes up (and the price of everything else dependent on it) the value of the currency isn't eroded

by Nursie 4y ago

> If the only factory producing widgets blows up and the price goes up (and the price of everything else dependent on it) the value of the currency isn't eroded at all. As proven by the fact that the cost of goods unrelated to widgets is unchanged. But if it happens across an economy due to, for instance, a rise in the input costs of fossil fuel which plays out across multiple sectors, this can push prices up across the board without needing the money supply to change at all. > Its funny you call monetary theory “pseudo-economics” I did nothing of the sort, monetary theory and Austrian economics are not synonymous. Once again, money supply is not the only factor in inflation, this is a very mainstream economic view.

refurb 4y ago
Yes, prices can rise broadly due to oil prices rising, but they come back down when oil prices drop. And the price rise isn't because the currency is less valuable, so its not the type of inflation that concerns economists - the kind that drives consumers to spend rather than save or invest. Just like the converse - if energy costs dropped due some new technology, it’s not deflationary (each dollar is worth more than before).
- Nursie 4y ago
  > And the price rise isn't because the currency is less valuable > Just like the converse - if energy costs dropped due some new technology, it’s not deflationary (each dollar is worth more than before). If the price of everything rises or falls, the currency is more or less valuable when compared to goods, and this is a type of inflation which affects consumer behaviour, particularly if that rise is sustained. Inflation in many countries is measured against some sort of 'basket of goods' that are (in theory) chosen to reflect costs that affect everyday life. I'm not trying to dismiss money supply as a factor, clearly it's a huge factor, particularly over the longer term.

by Nursie 4y ago

refurb 4y ago

Yes, prices can rise broadly due to oil prices rising, but they come back down when oil prices drop. And the price rise isn't because the currency is less valuable, so its not the type of inflation that concerns economists - the kind that drives consumers to spend rather than save or invest. Just like the converse - if energy costs dropped due some new technology, it’s not deflationary (each dollar is worth more than before).

Nursie 4y ago
> And the price rise isn't because the currency is less valuable > Just like the converse - if energy costs dropped due some new technology, it’s not deflationary (each dollar is worth more than before). If the price of everything rises or falls, the currency is more or less valuable when compared to goods, and this is a type of inflation which affects consumer behaviour, particularly if that rise is sustained. Inflation in many countries is measured against some sort of 'basket of goods' that are (in theory) chosen to reflect costs that affect everyday life. I'm not trying to dismiss money supply as a factor, clearly it's a huge factor, particularly over the longer term.