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What does inflation even mean these days? I thought it means when you increase the money supply the purchasing power of one dollar goes down. Then when you go t

What does inflation even mean these days? I thought it means when you increase the money supply the purchasing power of one dollar goes down. Then when you go to wikipedia it says inflation means "general price level of goods and services in an economy". I thought that's just a possible and likely outcome of inflation, not the definition. Then they talk about stuff like "food inflation" and at first you think well that's good the price of food is going down as the amount of food in the markets increases, but then they say it actually means that the price of food is going up. What? In "money inflation" the value of money goes down but in "food inflation" the value of food goes up. This doesn't make any sense. Why can't we just use the old definition for inflation? These days it seems like inflation simply means price increase and has nothing to do with monetary policy. So what is the "old inflation" called these days? Like when you increase the money supply the value of one dollar goes down. What's that called these days now that "new inflation" simply means general price increase and even supply chain disruptions can cause "inflation" somehow.

zer0tonin 3y ago
Have you considered that it was not "the old definition", but just that you were wrong about it?
- tmn 3y ago
  It was the old definition. It made more sense when the money supply was defined as a the pool of circulating money. Now that the supply is debt based and abstract, it became non pragmatic to keep referencing it.
  - throw0101a 3y ago
    > Now that the supply is debt based and abstract, it became non pragmatic to keep referencing it. Supply has been debt-based (or rather, credit-based) for decades, if not at least a century. It was wrong for decades, and yet folks like Milton Friedman insisted on using this definition: * https://en.wikipedia.org/wiki/Monetarism https://en.wikipedia.org/wiki/Monetarism
    - tmn 3y ago
      Agree. I’m looking back much farther.
- janmarsal 3y ago
  Well that's how it was taught to me. This new thing just confuses me and I wonder what the old inflation should be called now. https://www.etymonline.com/word/inflation#etymonline_v_6450 https://www.etymonline.com/word/inflation#etymonline_v_6450 >Monetary sense of "enlargement of prices" (originally by an increase in the amount of money in circulation) first recorded 1838 in American English. Even the oldest wikipedia entry has this: https://en.wikipedia.org/w/index.php?title=Inflation&oldid=28116307 https://en.wikipedia.org/w/index.php?title=Inflation&oldid=2... >In some contexts the word "inflation" is used to mean an increase in the money supply, which is sometimes seen as the cause of price increases. Some economists (of the Austrian school) still prefer this meaning of the term, rather than to mean the price increases themselves. Thus, for example, some observers of the 1920s in the United States refer to "inflation" even though prices of goods were not increasing at the time. Below, the word "inflation" will be used to refer to a general increase in prices unless otherwise specified. To me inflation means this. What should I call it because nowadays inflation simply means prince increase. What's the term for the "old inflation"? I want a word for it and apparently I can't use inflation anymore because its meaning has changed. Debasement? Can you use that when the central bank expands the money supply and causes the value of currency to decline? Because you can't call that inflation anymore as language has apparently evolved.
  - zhte415 3y ago
    The 'oldest' Wikipedia article you linked isn't the 'oldest'. Should you want to go by Wikipedia for a 'truthyness' https://en.wikipedia.org/w/index.php?title=Inflation&oldid=258488 https://en.wikipedia.org/w/index.php?title=Inflation&oldid=2... But.. we could reference "a rise in the general price level caused by an imbalance between the quantity of money and trade needs" [1] (Cleveland Fed; On the Origin and Evolution of the Word Inflation). [1] https://www.clevelandfed.org/publications/economic-commentary/1997/ec-19971015-on-the-origin-and-evolution-of-the-word-inflation https://www.clevelandfed.org/publications/economic-commentar... On reverting to to 'old' meanings, Adam Smith's The real price of everything...is the toil and trouble of acquiring it isn't inconsistent with Marx as long as toil and trouble is, in the end, people. Or perhaps myths of old beliefs that there was no sectoral, geographical nor temporal stickyness to anything. It's as if there were no sudden and unexpected changes in prices during times of a roughly constant amount of specie backing 'prices' that make 10% look like a storm in a teacup, though was it ever 1:1 or was hope to have the means to provide backing more accurate; specie based currency has a long history of volatility over the world, from West African empires to Asia. We could even go farther... to say that inflation, a change in prices, is caused by expectations of inflation; that the supply of money is driven by the demand for money... and that gets us to whether demand is liability or asset driven which may be full circle.
rascul 3y ago
I think "monetary inflation" is the term you're looking for. https://en.wikipedia.org/wiki/Monetary_inflation https://en.wikipedia.org/wiki/Monetary_inflation
tmn 3y ago
So I generally held the same questions as you. I think part of the answer is in our modern debt based monetary system, there isn’t one clear notion of money supply (M1, m2, m3,..). Also, these supplies of money can be only esoterically linked to price of goods (look at japan). As such talking about price of goods is more applicable to the general population. Debasement has become the unambiguous term for inflation of the money supply.
jpcfl 3y ago
Inflation is just the increase in cost of goods. QE can cause inflation, but QE != inflation. It’s called food inflation because people know inflation is about cost, so you don’t need to specify inflation of food costs. You can just say food inflation.
- throw0101a 3y ago
  > QE can cause inflation, but QE != inflation. A reasonable case can be made that QE may actually be deflationary to a certain extent. See Cullen Roche in 2010: * https://www.pragcap.com/quantitative-easing-the-greatest-monetary-non-event/ https://www.pragcap.com/quantitative-easing-the-greatest-mon... * https://www.pragcap.com/wait-qe-might-be-deflationary/ https://www.pragcap.com/wait-qe-might-be-deflationary/
  - phpisthebest 3y ago
    Depends on where you are looking for inflation, if you look at say S&P 500 performance during QE you will see most of the money supply creation directly lead to stock price inflation and largely lead to a huge bubble in the stock market (that is largely still there) where basic fundamentals of a company did not matter to the stock prices. You see the rise of alot of highly unprofitable companies which under normal conditions would mean lowering of their stock value but instead their stocks were still going up. QE and other fed programs of the time where designed to ensure stock market inflation, and to prevent the collapse of Big Finance. That is where most of that money supply went, not to mainstreet which is where you would see CPI increases Come to COVID and the money supply creation was done in direct transfers to Mainstreet, and almost immediately we see CPI go nuts...
    - throw0101a 3y ago
      Pre-1932 US had a fixed money supply under the gold standard, and there still existed stock market bubbles: * https://en.wikipedia.org/wiki/Panic_of_1873 https://en.wikipedia.org/wiki/Panic_of_1873 * https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929 https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929 Japan has had a constantly growing money supply for decades and its stock market has gone up, down, and sideways in the same time period: * https://fred.stlouisfed.org/graph/?g=17sx4 https://fred.stlouisfed.org/graph/?g=17sx4
aCoreyJ 3y ago
Inflation is a rise in the general level of prices, more money in the economy causing the value of the dollar to reduce in value can be one cause of inflation. There are various ways to measure this like the consumer price index Things like printing money are often said to cause inflationary pressure. Inflationary pressure can be caused by several factors such as fiscal policies, demand-pull inflation, cost-push inflation, disproportionate minting of money compared to the industrial output and demand for goods and services, increases in production costs such as raw materials and wages, a surge in demand for products and services, different variables or disruptions that push manufacturers to adjust and respond to ever-changing supply-demand economic conditions https://www.wallstreetmojo.com/inflationary-pressure/ https://www.wallstreetmojo.com/inflationary-pressure/ https://www.investopedia.com/ask/answers/012115/consumer-price-index-cpi-best-measure-inflation.asp https://www.investopedia.com/ask/answers/012115/consumer-pri...
throw0101a 3y ago
> I thought it means when you increase the money supply the purchasing power of one dollar goes down. This is the view of right-leaning folks, most famously by Milton Friedman. It turns out to not be accurate as even Friedman realized (Financial Times (UK), June 7, 2003): > The use of quantity of money as a target has not been a success. I'm not sure that I would as of today push it as hard as I once did. * https://en.wikipedia.org/wiki/Monetarism https://en.wikipedia.org/wiki/Monetarism
- janmarsal 3y ago
  I wonder what hyperinflation means these days. Is hyper food inflation a thing?
pandaman 3y ago
You likely thought so because it's the position UBI proponents on HN (and elsewhere) take. They claim that inflation is caused by the increased money supply only and UBI cannot possibly cause inflation, and repeat this in every UBI thread, so somebody who is not familiar with the topic might conclude that inflation is the increase of the money supply.
bigfryo 3y ago
The old definition, the money supply expansion definition of inflation, has been memory holed.. anyone who fails to use the new definition of inflation is a thought crimer.. please correct your ways

zer0tonin 3y ago

Have you considered that it was not "the old definition", but just that you were wrong about it?

tmn 3y ago
It was the old definition. It made more sense when the money supply was defined as a the pool of circulating money. Now that the supply is debt based and abstract, it became non pragmatic to keep referencing it.
- throw0101a 3y ago
  > Now that the supply is debt based and abstract, it became non pragmatic to keep referencing it. Supply has been debt-based (or rather, credit-based) for decades, if not at least a century. It was wrong for decades, and yet folks like Milton Friedman insisted on using this definition: * https://en.wikipedia.org/wiki/Monetarism https://en.wikipedia.org/wiki/Monetarism
  - tmn 3y ago
    Agree. I’m looking back much farther.
janmarsal 3y ago
Well that's how it was taught to me. This new thing just confuses me and I wonder what the old inflation should be called now. https://www.etymonline.com/word/inflation#etymonline_v_6450 https://www.etymonline.com/word/inflation#etymonline_v_6450 >Monetary sense of "enlargement of prices" (originally by an increase in the amount of money in circulation) first recorded 1838 in American English. Even the oldest wikipedia entry has this: https://en.wikipedia.org/w/index.php?title=Inflation&oldid=28116307 https://en.wikipedia.org/w/index.php?title=Inflation&oldid=2... >In some contexts the word "inflation" is used to mean an increase in the money supply, which is sometimes seen as the cause of price increases. Some economists (of the Austrian school) still prefer this meaning of the term, rather than to mean the price increases themselves. Thus, for example, some observers of the 1920s in the United States refer to "inflation" even though prices of goods were not increasing at the time. Below, the word "inflation" will be used to refer to a general increase in prices unless otherwise specified. To me inflation means this. What should I call it because nowadays inflation simply means prince increase. What's the term for the "old inflation"? I want a word for it and apparently I can't use inflation anymore because its meaning has changed. Debasement? Can you use that when the central bank expands the money supply and causes the value of currency to decline? Because you can't call that inflation anymore as language has apparently evolved.
- zhte415 3y ago
  The 'oldest' Wikipedia article you linked isn't the 'oldest'. Should you want to go by Wikipedia for a 'truthyness' https://en.wikipedia.org/w/index.php?title=Inflation&oldid=258488 https://en.wikipedia.org/w/index.php?title=Inflation&oldid=2... But.. we could reference "a rise in the general price level caused by an imbalance between the quantity of money and trade needs" [1] (Cleveland Fed; On the Origin and Evolution of the Word Inflation). [1] https://www.clevelandfed.org/publications/economic-commentary/1997/ec-19971015-on-the-origin-and-evolution-of-the-word-inflation https://www.clevelandfed.org/publications/economic-commentar... On reverting to to 'old' meanings, Adam Smith's The real price of everything...is the toil and trouble of acquiring it isn't inconsistent with Marx as long as toil and trouble is, in the end, people. Or perhaps myths of old beliefs that there was no sectoral, geographical nor temporal stickyness to anything. It's as if there were no sudden and unexpected changes in prices during times of a roughly constant amount of specie backing 'prices' that make 10% look like a storm in a teacup, though was it ever 1:1 or was hope to have the means to provide backing more accurate; specie based currency has a long history of volatility over the world, from West African empires to Asia. We could even go farther... to say that inflation, a change in prices, is caused by expectations of inflation; that the supply of money is driven by the demand for money... and that gets us to whether demand is liability or asset driven which may be full circle.

rascul 3y ago

I think "monetary inflation" is the term you're looking for. https://en.wikipedia.org/wiki/Monetary_inflation https://en.wikipedia.org/wiki/Monetary_inflation

tmn 3y ago

So I generally held the same questions as you. I think part of the answer is in our modern debt based monetary system, there isn’t one clear notion of money supply (M1, m2, m3,..). Also, these supplies of money can be only esoterically linked to price of goods (look at japan). As such talking about price of goods is more applicable to the general population. Debasement has become the unambiguous term for inflation of the money supply.

jpcfl 3y ago

Inflation is just the increase in cost of goods. QE can cause inflation, but QE != inflation. It’s called food inflation because people know inflation is about cost, so you don’t need to specify inflation of food costs. You can just say food inflation.

throw0101a 3y ago
> QE can cause inflation, but QE != inflation. A reasonable case can be made that QE may actually be deflationary to a certain extent. See Cullen Roche in 2010: * https://www.pragcap.com/quantitative-easing-the-greatest-monetary-non-event/ https://www.pragcap.com/quantitative-easing-the-greatest-mon... * https://www.pragcap.com/wait-qe-might-be-deflationary/ https://www.pragcap.com/wait-qe-might-be-deflationary/
- phpisthebest 3y ago
  Depends on where you are looking for inflation, if you look at say S&P 500 performance during QE you will see most of the money supply creation directly lead to stock price inflation and largely lead to a huge bubble in the stock market (that is largely still there) where basic fundamentals of a company did not matter to the stock prices. You see the rise of alot of highly unprofitable companies which under normal conditions would mean lowering of their stock value but instead their stocks were still going up. QE and other fed programs of the time where designed to ensure stock market inflation, and to prevent the collapse of Big Finance. That is where most of that money supply went, not to mainstreet which is where you would see CPI increases Come to COVID and the money supply creation was done in direct transfers to Mainstreet, and almost immediately we see CPI go nuts...
  - throw0101a 3y ago
    Pre-1932 US had a fixed money supply under the gold standard, and there still existed stock market bubbles: * https://en.wikipedia.org/wiki/Panic_of_1873 https://en.wikipedia.org/wiki/Panic_of_1873 * https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929 https://en.wikipedia.org/wiki/Wall_Street_Crash_of_1929 Japan has had a constantly growing money supply for decades and its stock market has gone up, down, and sideways in the same time period: * https://fred.stlouisfed.org/graph/?g=17sx4 https://fred.stlouisfed.org/graph/?g=17sx4

aCoreyJ 3y ago

Inflation is a rise in the general level of prices, more money in the economy causing the value of the dollar to reduce in value can be one cause of inflation. There are various ways to measure this like the consumer price index Things like printing money are often said to cause inflationary pressure. Inflationary pressure can be caused by several factors such as fiscal policies, demand-pull inflation, cost-push inflation, disproportionate minting of money compared to the industrial output and demand for goods and services, increases in production costs such as raw materials and wages, a surge in demand for products and services, different variables or disruptions that push manufacturers to adjust and respond to ever-changing supply-demand economic conditions https://www.wallstreetmojo.com/inflationary-pressure/ https://www.wallstreetmojo.com/inflationary-pressure/ https://www.investopedia.com/ask/answers/012115/consumer-price-index-cpi-best-measure-inflation.asp https://www.investopedia.com/ask/answers/012115/consumer-pri...

throw0101a 3y ago

> I thought it means when you increase the money supply the purchasing power of one dollar goes down. This is the view of right-leaning folks, most famously by Milton Friedman. It turns out to not be accurate as even Friedman realized (Financial Times (UK), June 7, 2003): > The use of quantity of money as a target has not been a success. I'm not sure that I would as of today push it as hard as I once did. * https://en.wikipedia.org/wiki/Monetarism https://en.wikipedia.org/wiki/Monetarism

janmarsal 3y ago
I wonder what hyperinflation means these days. Is hyper food inflation a thing?

pandaman 3y ago

You likely thought so because it's the position UBI proponents on HN (and elsewhere) take. They claim that inflation is caused by the increased money supply only and UBI cannot possibly cause inflation, and repeat this in every UBI thread, so somebody who is not familiar with the topic might conclude that inflation is the increase of the money supply.

bigfryo 3y ago

The old definition, the money supply expansion definition of inflation, has been memory holed.. anyone who fails to use the new definition of inflation is a thought crimer.. please correct your ways