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> Inflation is not prices; it is the rate of change in prices. Inflation is actually the increase in the money supply. The term is used wrong almost everywhere

> Inflation is not prices; it is the rate of change in prices. Inflation is actually the increase in the money supply. The term is used wrong almost everywhere today. Price indexes like the CPI are what measure the change in prices of a set of goods. Inflation can influence prices since the supply of money changed, but they aren't directly linked. Edit: getting plenty of requests for a source here, especially because you will find countless sources online using the price increase definition. 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...

adastra22 2y ago
> Inflation is actually the increase in the money supply. The term is used wrong almost everywhere today. The word has multiple meanings. That’s monetary inflation. The primary meaning in use today is price inflation.
- _heimdall 2y ago
  Its used in many ways, that doesn't redefine the word though. Inflation is a policy of increasing the money supply, nothing more and nothing less. Inflation is not price increases. If that is the definition then the metric is effectively useless. Prices can increase for any number of reasons, looking only at price changes doesn't tell us anything meaningful or actionable.
  - adastra22 2y ago
    “Inflation” doesn’t mean anything by itself. It is a shorthand for either price inflation or monetary inflation. Or inflating a balloon. Context is needed.
    - _heimdall 2y ago
      > “Inflation” doesn’t mean anything by itself. It absolutely does when the correct definition is still used. Inflation is an increase in money supply, that's really all there is to it. Your point is why the use of "inflation" to mean price increases is so meaningless. Prices change for any number of reasons and you need context. When "inflation" still means in increase in the money supply there is no context required to know what it means, though obviously that's not all the information you need to understand the economy.
      - interestica 2y ago
        What's "shrinkflation"?
      - bluecalm 2y ago
        https://www.merriam-webster.com/dictionary/inflation https://www.merriam-webster.com/dictionary/inflation You are wrong and that's why you are misunderstood. I would suggest just saying "increase in money supply" if you mean increase of money supply instead of using a term that means "a continuing rise in the general price level". That will make people understand what you mean.
  - monktastic1 2y ago
    It's not just "used in many ways," it has several definitions. The one that almost everybody uses -- including the Fed[0], US Dept of Labor[1], and the ECB[2] -- is about rise in prices. Nobody is saying that your definition is bad or wrong, but to claim that it's the only (or even primary) one is disingenuous. [0] https://www.clevelandfed.org/center-for-inflation-research/inflation-101 https://www.clevelandfed.org/center-for-inflation-research/i... [1] https://www.dol.gov/general/topic/statistics/inflation https://www.dol.gov/general/topic/statistics/inflation [2] https://www.ecb.europa.eu/ecb-and-you/explainers/tell-me-more/html/what_is_inflation.en.html https://www.ecb.europa.eu/ecb-and-you/explainers/tell-me-mor...
    - _heimdall 2y ago
      Sure, though it makes sense that most economists use the price inflation term. The change in how "inflation" was being used largely goes back to Keynes and Modern Monetary Theory. Most economists today fall into that bucket, of course they use the term in the same way. That doesn't change the fact that the attempt to redefine it both co-opted the word and made it functionally useless. Prices change for all kinds of reasons. The amount of change alone is meaningless and using that meaning of the word allows economists today to play a lot of shell games with the numbers.
      - JumpCrisscross 2y ago
        > change in how "inflation" was being used largely goes back to Keynes and Modern Monetary Theory This is totally false. It dates to the inter-War period, specifically, to describe Weimar hyperinflation. (If you just look at money supply, it was bad. If you look at prices it was the disaster that it was.)
  - jjk166 2y ago
    > Its used in many ways, that doesn't redefine the word though. That's exactly how words get redefined.
- erulabs 2y ago
  > Word X means Y, NOT Z Wittgenstien would like a word. Words always mean whatever the hell the speaker thinks they mean, which is always unverifiable. We should always endeavor to understand what people _think they mean_ instead of insisting on some (faulty) denotation. The inflation argument is always frustrating. In a vacuum, inflating the _supply of money_ would delate the _price of money_ which inflates the _prices of goods_. Most people say "inflation" to mean the price of goods, but it does no good to insist that one definition means you can't use the word in other ways!
  - lottin 2y ago
    So I can use the word 'dog' to mean a cat? Nonsense. The purpose of words is to communicate meaning. Therefore we must agree on what that meaning is beforehand in order to communicate effectively.
    - singlow 2y ago
      Don't for heaven's sake, be afraid of talking nonsense! But you must pay attention to your nonsense.
    - erulabs 2y ago
      What's a dog? Is a child's plastic toy in the shape of a dog a dog? Maybe. Is a cross-bread wolfhound a dog? Maybe. Language games! Meaning is "fuzzy around the edges". If you insist a cat is a dog, we're not playing a fun game - but that's up to me and up to you - Maybe someone in an undiscovered tribe doesn't know these words and wouldn't balk. If you say "dog" when you mean to insult someone, I might know what you're saying. But there is no mechanism to verify internal meaning. I _strongly_ suggest reading some Wittgenstien if you're interested in this topic! If I say I speak Swedish fluently but refuse to ever utter a word, do I speak Swedish? Only our actions can vaguely point at our meaning. Language is a game we play with each other which does not and cannot communicate ultimate meaning. All we can do is agree or disagree to play games - animals dancing around a fire.
    - _heimdall 2y ago
      This is my main beef with "inflation" being used differently now from what it had been historically. Going back to the roman empire it was always about money supply increase, Keynes and crew decided that didn't sit well with them since money supply manipulation was their whole game.
echoangle 2y ago
> Inflation is actually the increase in the money supply. The term is used wrong almost everywhere today. Do you have a source that this is the „correct“ definition? Wikipedia for example uses the definition you think is wrong, and specifically says that CPI measures inflation.
- _heimdall 2y ago
  You can see glimmers of the original definition on the wikipedia page, but the term has been misused for decades noe and basically anything you try to find for a definition of inflation will talk only about prices. https://en.m.wikipedia.org/wiki/Inflation https://en.m.wikipedia.org/wiki/Inflation I can't get deep links in wikipedia on my mobile browser for some reason, but here's the full page. The "Terminology" section vaguely references the original Latin word and gives a few nods to when currency was tied to gold. It is a bit hand wavy, though when it talks about new gold supplies being found or later mentions when the cost of money changes, those are both related to the original (correct) definition. Finding more gold increased the money supply, which may change prices though it doesn't have to. Toman history sometimes covers the idea well as they inflated the currency by minting more coins to increase supply. I can't find a great link at the moment that covers it well from that angle though, I'll try to come back here when I'm at my desk if I find a good link down that rabbit hole.
  - drawkward 2y ago
    >the term has been misused for decades now Am I out of touch? No it is all of modern economists who are wrong.jpg
    - _heimdall 2y ago
      Wait, is your argument that modern economists couldn't possible be wrong? Or in this case, that modern economists couldn't possibly have co-opted the term to better work with Keynesian economics and MMT? If physicists decide to reuse the word "meter" for a unit of measuring volume does that mean anyone that uses it as a measure of distance is wrong? Wouldn't it make more sense to create a new term for the new need, a term that doesn't collide with centuries of use?
asdasdsddd 2y ago
The increase in money supply means nothing if goods and services are produced in larger quantities.
- RpmReviver 2y ago
  I'm not sure I understand this thought, it's possible producing larger quantities would actually increase the velocity of money which would increase money supply
  - _heimdall 2y ago
    Velocity of money itself is a funny term in modern economics. Modern monetary theory, or at least the economists that follow it, argue that the velocity of money doesn't mean anything and they basically ignore it. Arguably, with a fiat currency where they can freely manipulate the money supply, they aren't wrong. That's a problem of fist in my opinion though, there are too many moving pieces and the data can be too easily manipulated to say whatever you want it to say.
    - RpmReviver 2y ago
      In my mind part of the calculus in a high interest rate environments has to include the reduced movement in investments and into more stationary savings, maybe it's accounted for indirectly?
drawkward 2y ago
I am sorry, but you are wrong, since about the 1960s. Inflation could be caused by money supply, sure. But don't take it from me: https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Inflation https://www.imf.org/en/Publications/fandd/issues/Series/Back... https://www.investopedia.com/terms/i/inflation.asp https://www.investopedia.com/terms/i/inflation.asp https://en.wikipedia.org/wiki/Inflation https://en.wikipedia.org/wiki/Inflation https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-inflation https://www.mckinsey.com/featured-insights/mckinsey-explaine... https://www.dol.gov/general/topic/statistics/inflation https://www.dol.gov/general/topic/statistics/inflation https://gisme.georgetown.edu/news/what-the-hell-is-inflation-anyway/ https://gisme.georgetown.edu/news/what-the-hell-is-inflation... (Inflation used to mean what you claim it means...but doesn't anymore) https://www.econlib.org/library/Topics/HighSchool/Inflation.html https://www.econlib.org/library/Topics/HighSchool/Inflation.... https://www.bankofengland.co.uk/explainers/what-is-inflation https://www.bankofengland.co.uk/explainers/what-is-inflation https://www.rba.gov.au/education/resources/explainers/inflation-and-its-measurement.html https://www.rba.gov.au/education/resources/explainers/inflat... https://www.axios.com/2024/05/26/inflation-definition-evolution-high-prices https://www.axios.com/2024/05/26/inflation-definition-evolut... (There is some argument that I may too be wrong, and inflation is coming to mean high prices, but when the DNC campaign was talking about low inflation, it was not referring to prices, but change in prices.)
- _heimdall 2y ago
  My point wasn't that the term is used this way, its that the definition of inflation has always been an increase in money supply. The common use of the term to mean a change in prices is a useless definition. Its extremely common to hear "inflation" used to describe price changes, but the number is then used in isolation. Prices change for countless reasons and without detailed context related to supply/demand, strength of the dollar, etc you have NP idea why prices changed. Maybe we printed trillions and prices went up because the supply of money went up Maybe prices increased because demand is outpacing supply. The response to those situations and economic sentiment should be wildly different, but the inflation number may be exactly the same.
  - 2y ago
wasabi991011 2y ago
> Inflation is actually the increase in the money supply. The term is used wrong almost everywhere today. I'm sorry I just can't find a single source backing you up. All sources I find define inflation as increase in prices.
- _heimdall 2y ago
  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... Here's a good one I just found as so many here were asking for sources.
  - rodiger 2y ago
    This doesn't support your assertion- in fact it does the opposite. The definition(s) of inflation has changed over time. That does not make the current definition(s) less correct
    - _heimdall 2y ago
      Well I did try to caveat it that its one of the few sources I could even find that reference the fact that the definition was changed. My argument isn't with the fact that "inflation" is in fact being used to mean "price increase of goods." My issue is that economists co-opted the word at all and made it functionally useless, especially in isolation as it is often mentioned with no other context of why prices changed. The use of "inflation" to mean money supply increase goes all the way back to the roman empire.
  - idunnoman1222 2y ago
    “Inflation” is measured based on the prices of a predefined list of goods.
    - _heimdall 2y ago
      Have you ever read up on that list of predefined goods? It is pretty interesting to see how regularly the list is changed and how many different factors they add in to adjust prices. Someone did a study looking at magazine prices for example. They picked magazines because they almost always had prices printed on the cover and cover images are cataloged. I don't remember the exact numbers, but they found that the actual prices went up by a much higher rate than how the CPI calculated it because they were discounting price increase with a claim that quality got better. Meaning you may have seen the price double over time but the CPI only said it went up by 30% because you got more value from the newer issues.
braincat31415 2y ago
There are many faces of inflation. The "money supply" you are talking about was not the primary driver in the last few years and there was robust demand for the treasury issuance. You will see the money supply inflation pick up when treasury auctions start to fail. I believe this will happen down the road but not soon. Most of the inflation was driven by other factors: low-income labor shortage, and a supply side shortage that fueled an increase of prices for commodities and anything else up the chain.
- _heimdall 2y ago
  > The "money supply" you are talking about was not the primary driver in the last few years and there was robust demand for the treasury issuance. Unless I'm mistaken, I don't believe we can be sure of that. The economy is extremely complex, ferreting out the impact of any one intervention is nearly impossible. On the surface it seems very unlikely to me that printing trillions in new money and giving it to banks, businesses, and directly to every citizen had no impact on prices. The supply of money increased dramatically and the cost of money (interest rates) was also extremely low. Beyond my hunch though, I haven't found any data that has clearly isolated the inflation out of the equation to be able to show that the price increases weren't driven by the new money at all.
  - braincat31415 2y ago
    The Fed is really not printing anything, and they have a lot of power to control money supply through open market operations. It is incredibly efficient when doing this, and can increase the cost of capital very quickly. But like you said, it is hard to come to a definite conclusion or come up with a proof. The other parts of the equation that I mentioned are very hard for anyone to control.
coryfklein 2y ago
This is oddly reflective of the elitism that cost the DNC it's victory. "Well actually, my poor man, a tomato is a fruit and every PhD economist knows that inflation is connected to fiscal policy's influence on the monetary supply" The every day person uses the culinary definition of tomato, and inflation means that those tomatoes cost more at Walmart.
- _heimdall 2y ago
  I would expect a botanist to know that a tomato is technically a berry, just like I would expect an economist to know that inflation is technically defined as an increase in the money supply. Everyday people can use whatever definition they want. That doesn't mean economists, the Fed, etc should say "inflation" when they mean "price of goods".
  - FollowingTheDao 2y ago
    The tomato price is too damn high! Get it yet?
    - aydyn 2y ago
      This exchange is like a microcosm of the educated elite trying to talk to ordinary people.
      - drawkward 2y ago
        This comment made my day.
  - khana 2y ago
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  - lottin 2y ago
    Inflation is technically defined as an increase in the price level. You'll find the term defined in this way in every single economics textbook.
JumpCrisscross 2y ago
> Inflation is actually the in the money supply No, that is expansion of the monetary base. Inflation is an increase in price levels. If a country’s money supply contracts while prices rise that’s inflation. The problem with the metallic definition is a country that loses half its territory and most of its reserves after losing a 19th-century war, thereby setting off double-digit price increases across its economy, doesn’t “inflate” from a monetary base perspective. Once we understood these concepts were separate, we segregated the terms. Insisting inflation refers exclusively to monetary-base expansion is phlogiston-theory stuff.
- _heimdall 2y ago
  The problem with the metallic definition, meaning the definition of "inflation" from the roman empire until the mid 1900s, is that it didn't really work well with Keynesian economics or modern monetary theory. Inflation has a bad connotation historically due to the number of examples where increasing the money supply too quickly ruined economies and destroyed empires. MMT and Keynesian economics use the money supply as the primary tool for controlling the economy. They may not like that "inflation" described the exact mechanism for the main tool of modern economics, but that doesn't make it wrong. The easily could have come up with a new term for an increase in the price of goods rather than co-opting an existing term. That strategy seems very much like a play driven by ulterior motives. It isn't so much that we had to understand new concepts as it was they had to redefine terms to put their new game in a better light. That's also why they talk about price increases rather than currency devaluation or theft. Both would be accurate, but price changes sound more benign.
kjrfghslkdjfl 2y ago
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FrustratedMonky 2y ago
"Inflation is actually the increase in the money supply." NO. It is the cost of the goods. What people will pay. Inflation Contributors: 30% money supply 30% was corporations raised prices specifically under cover of people blaming the government. This was actually listed on earnings calls, for profit. 30% supply chain shortages.
- _heimdall 2y ago
  > It is the cost of the goods. What people will pay. No. Even in the modern definition I'm arguing against here, this isn't right. The cost of goods is just a number, inflation in the CPI sense would be the rate of change of prices. > Inflation Contributors: 30% money supply 30% was corporations raised prices specifically under cover of people blaming the government. This was actually listed on earnings calls, for profit. 30% supply chain shortages. Where's the last 10%? And how do you come up with such specific numbers? Economies are extremely complex, I don't believe you could have untangled them so precisely or that the numbers behind it would be so evenly distributed.
  - FrustratedMonky 2y ago
    That is needlessly pedantic. You said Inflation was Money Supply, I said it was the cost of what you are buying. YES, technically it is the "change" in the cost of what you are buying. Congratulations. I assumed that was understood. Percentages. Nothing is exact. There are ranges, and really more than 3 factors. I was going off memory. Congratulations again on your discernment. More ball park: "" While pinpointing exact percentages for each contributing factor to inflation is complex and can vary significantly depending on the economic context, a breakdown of major contributors could include: high demand for goods and services (30-40%), supply chain disruptions (20-30%), labor cost increases (15-25%), rising energy prices (10-15%), government spending (5-10%), and currency devaluation (5-10%); however, these percentages should be interpreted as a general guide and not a definitive breakdown" The point is, it is not Biden's spending, that is just another misleading right wing talking point. (lie)
barrkel 2y ago
Inflation is increase in the cost of living. You've linked to a privately written article ("The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland ") by someone who worked for the Cleveland Fed, who blames printing currency for inflation. No doubt that debasement of the currency increases the nominal prices of things. But it's hard to square the idea that that's all there is to inflation when you consider that lots of countries had inflation after COVID. They didn't all coordinate on printing currency.
- lottin 2y ago
  > Inflation is increase in the cost of living. This isn't entirely accurate, either. An increase in the cost of living occurs when real wages fall (in other words, when workers paid less, in real terms (adjusted for inflation), for the same amount of work). In principle, inflation doesn't necessarily lead to an increase in the cost of living, although in practice usually it does.
- _heimdall 2y ago
  I've never actually seen anyone use "inflation" to refer to cost of living. Most economists use the term to talk about price increases of a subset of goods, but that isn't directly measuring cost of living.
  - TheOtherHobbes 2y ago
    It's literally how most people use the word. Most people are not economists. All they know is they're spending more for less every month, and they don't like it. The money supply idea has always been Austerian crackpot nonsense, intended to dissuade governments from investing in public services of all kinds because that's socialism, and we certainly don't want any of that. In reality price rises are mostly driven by corporate profiteering, and sometimes - as in the oil crises of the 70s - by supply shocks.
Detrytus 2y ago
> Inflation is actually the increase in the money supply It's not that simple. That might be how it is defined in economy textbook, but in practice, how do government agencies measure inflation? You have predefined basket of consumer goods and record their prices over time, and that price increase is reported as "inflation rate", and that's what gets reported in TV news. And yet you somehow blame people for misunderstanding the term when the wrong definition is hammered into their brains all the time by all the mainstream media.
- Supermancho 2y ago
  > and that's what gets reported in TV news. That's the clue that it's a signal. If every merchant is mandated to drop the cost of goods to 1$, the measure becomes meaningless for this purpose, while people continue to trade more and more for the same amount of goods. The published values themselves are incidental and barter normalizes, detached from the edge effects, as the underlying cause remains. https://search.brave.com/search?q=inflation+origin&source=desktop&summary=1&conversation=f13da35bb4744733b372d9&summary_og=2cd4624c5ead7a501ec29d https://search.brave.com/search?q=inflation+origin&source=de...

adastra22 2y ago

> Inflation is actually the increase in the money supply. The term is used wrong almost everywhere today. The word has multiple meanings. That’s monetary inflation. The primary meaning in use today is price inflation.

_heimdall 2y ago
Its used in many ways, that doesn't redefine the word though. Inflation is a policy of increasing the money supply, nothing more and nothing less. Inflation is not price increases. If that is the definition then the metric is effectively useless. Prices can increase for any number of reasons, looking only at price changes doesn't tell us anything meaningful or actionable.
- adastra22 2y ago
  “Inflation” doesn’t mean anything by itself. It is a shorthand for either price inflation or monetary inflation. Or inflating a balloon. Context is needed.
  - _heimdall 2y ago
    > “Inflation” doesn’t mean anything by itself. It absolutely does when the correct definition is still used. Inflation is an increase in money supply, that's really all there is to it. Your point is why the use of "inflation" to mean price increases is so meaningless. Prices change for any number of reasons and you need context. When "inflation" still means in increase in the money supply there is no context required to know what it means, though obviously that's not all the information you need to understand the economy.
    - interestica 2y ago
      What's "shrinkflation"?
    - bluecalm 2y ago
      https://www.merriam-webster.com/dictionary/inflation https://www.merriam-webster.com/dictionary/inflation You are wrong and that's why you are misunderstood. I would suggest just saying "increase in money supply" if you mean increase of money supply instead of using a term that means "a continuing rise in the general price level". That will make people understand what you mean.
- monktastic1 2y ago
  It's not just "used in many ways," it has several definitions. The one that almost everybody uses -- including the Fed[0], US Dept of Labor[1], and the ECB[2] -- is about rise in prices. Nobody is saying that your definition is bad or wrong, but to claim that it's the only (or even primary) one is disingenuous. [0] https://www.clevelandfed.org/center-for-inflation-research/inflation-101 https://www.clevelandfed.org/center-for-inflation-research/i... [1] https://www.dol.gov/general/topic/statistics/inflation https://www.dol.gov/general/topic/statistics/inflation [2] https://www.ecb.europa.eu/ecb-and-you/explainers/tell-me-more/html/what_is_inflation.en.html https://www.ecb.europa.eu/ecb-and-you/explainers/tell-me-mor...
  - _heimdall 2y ago
    Sure, though it makes sense that most economists use the price inflation term. The change in how "inflation" was being used largely goes back to Keynes and Modern Monetary Theory. Most economists today fall into that bucket, of course they use the term in the same way. That doesn't change the fact that the attempt to redefine it both co-opted the word and made it functionally useless. Prices change for all kinds of reasons. The amount of change alone is meaningless and using that meaning of the word allows economists today to play a lot of shell games with the numbers.
    - JumpCrisscross 2y ago
      > change in how "inflation" was being used largely goes back to Keynes and Modern Monetary Theory This is totally false. It dates to the inter-War period, specifically, to describe Weimar hyperinflation. (If you just look at money supply, it was bad. If you look at prices it was the disaster that it was.)
- jjk166 2y ago
  > Its used in many ways, that doesn't redefine the word though. That's exactly how words get redefined.
erulabs 2y ago
> Word X means Y, NOT Z Wittgenstien would like a word. Words always mean whatever the hell the speaker thinks they mean, which is always unverifiable. We should always endeavor to understand what people _think they mean_ instead of insisting on some (faulty) denotation. The inflation argument is always frustrating. In a vacuum, inflating the _supply of money_ would delate the _price of money_ which inflates the _prices of goods_. Most people say "inflation" to mean the price of goods, but it does no good to insist that one definition means you can't use the word in other ways!
- lottin 2y ago
  So I can use the word 'dog' to mean a cat? Nonsense. The purpose of words is to communicate meaning. Therefore we must agree on what that meaning is beforehand in order to communicate effectively.
  - singlow 2y ago
    Don't for heaven's sake, be afraid of talking nonsense! But you must pay attention to your nonsense.
  - erulabs 2y ago
    What's a dog? Is a child's plastic toy in the shape of a dog a dog? Maybe. Is a cross-bread wolfhound a dog? Maybe. Language games! Meaning is "fuzzy around the edges". If you insist a cat is a dog, we're not playing a fun game - but that's up to me and up to you - Maybe someone in an undiscovered tribe doesn't know these words and wouldn't balk. If you say "dog" when you mean to insult someone, I might know what you're saying. But there is no mechanism to verify internal meaning. I _strongly_ suggest reading some Wittgenstien if you're interested in this topic! If I say I speak Swedish fluently but refuse to ever utter a word, do I speak Swedish? Only our actions can vaguely point at our meaning. Language is a game we play with each other which does not and cannot communicate ultimate meaning. All we can do is agree or disagree to play games - animals dancing around a fire.
  - _heimdall 2y ago
    This is my main beef with "inflation" being used differently now from what it had been historically. Going back to the roman empire it was always about money supply increase, Keynes and crew decided that didn't sit well with them since money supply manipulation was their whole game.

echoangle 2y ago

> Inflation is actually the increase in the money supply. The term is used wrong almost everywhere today. Do you have a source that this is the „correct“ definition? Wikipedia for example uses the definition you think is wrong, and specifically says that CPI measures inflation.

_heimdall 2y ago
You can see glimmers of the original definition on the wikipedia page, but the term has been misused for decades noe and basically anything you try to find for a definition of inflation will talk only about prices. https://en.m.wikipedia.org/wiki/Inflation https://en.m.wikipedia.org/wiki/Inflation I can't get deep links in wikipedia on my mobile browser for some reason, but here's the full page. The "Terminology" section vaguely references the original Latin word and gives a few nods to when currency was tied to gold. It is a bit hand wavy, though when it talks about new gold supplies being found or later mentions when the cost of money changes, those are both related to the original (correct) definition. Finding more gold increased the money supply, which may change prices though it doesn't have to. Toman history sometimes covers the idea well as they inflated the currency by minting more coins to increase supply. I can't find a great link at the moment that covers it well from that angle though, I'll try to come back here when I'm at my desk if I find a good link down that rabbit hole.
- drawkward 2y ago
  >the term has been misused for decades now Am I out of touch? No it is all of modern economists who are wrong.jpg
  - _heimdall 2y ago
    Wait, is your argument that modern economists couldn't possible be wrong? Or in this case, that modern economists couldn't possibly have co-opted the term to better work with Keynesian economics and MMT? If physicists decide to reuse the word "meter" for a unit of measuring volume does that mean anyone that uses it as a measure of distance is wrong? Wouldn't it make more sense to create a new term for the new need, a term that doesn't collide with centuries of use?

asdasdsddd 2y ago

The increase in money supply means nothing if goods and services are produced in larger quantities.

RpmReviver 2y ago
I'm not sure I understand this thought, it's possible producing larger quantities would actually increase the velocity of money which would increase money supply
- _heimdall 2y ago
  Velocity of money itself is a funny term in modern economics. Modern monetary theory, or at least the economists that follow it, argue that the velocity of money doesn't mean anything and they basically ignore it. Arguably, with a fiat currency where they can freely manipulate the money supply, they aren't wrong. That's a problem of fist in my opinion though, there are too many moving pieces and the data can be too easily manipulated to say whatever you want it to say.
  - RpmReviver 2y ago
    In my mind part of the calculus in a high interest rate environments has to include the reduced movement in investments and into more stationary savings, maybe it's accounted for indirectly?

drawkward 2y ago

I am sorry, but you are wrong, since about the 1960s. Inflation could be caused by money supply, sure. But don't take it from me: https://www.imf.org/en/Publications/fandd/issues/Series/Back-to-Basics/Inflation https://www.imf.org/en/Publications/fandd/issues/Series/Back... https://www.investopedia.com/terms/i/inflation.asp https://www.investopedia.com/terms/i/inflation.asp https://en.wikipedia.org/wiki/Inflation https://en.wikipedia.org/wiki/Inflation https://www.mckinsey.com/featured-insights/mckinsey-explainers/what-is-inflation https://www.mckinsey.com/featured-insights/mckinsey-explaine... https://www.dol.gov/general/topic/statistics/inflation https://www.dol.gov/general/topic/statistics/inflation https://gisme.georgetown.edu/news/what-the-hell-is-inflation-anyway/ https://gisme.georgetown.edu/news/what-the-hell-is-inflation... (Inflation used to mean what you claim it means...but doesn't anymore) https://www.econlib.org/library/Topics/HighSchool/Inflation.html https://www.econlib.org/library/Topics/HighSchool/Inflation.... https://www.bankofengland.co.uk/explainers/what-is-inflation https://www.bankofengland.co.uk/explainers/what-is-inflation https://www.rba.gov.au/education/resources/explainers/inflation-and-its-measurement.html https://www.rba.gov.au/education/resources/explainers/inflat... https://www.axios.com/2024/05/26/inflation-definition-evolution-high-prices https://www.axios.com/2024/05/26/inflation-definition-evolut... (There is some argument that I may too be wrong, and inflation is coming to mean high prices, but when the DNC campaign was talking about low inflation, it was not referring to prices, but change in prices.)

_heimdall 2y ago
My point wasn't that the term is used this way, its that the definition of inflation has always been an increase in money supply. The common use of the term to mean a change in prices is a useless definition. Its extremely common to hear "inflation" used to describe price changes, but the number is then used in isolation. Prices change for countless reasons and without detailed context related to supply/demand, strength of the dollar, etc you have NP idea why prices changed. Maybe we printed trillions and prices went up because the supply of money went up Maybe prices increased because demand is outpacing supply. The response to those situations and economic sentiment should be wildly different, but the inflation number may be exactly the same.
- 2y ago

wasabi991011 2y ago

> Inflation is actually the increase in the money supply. The term is used wrong almost everywhere today. I'm sorry I just can't find a single source backing you up. All sources I find define inflation as increase in prices.

_heimdall 2y ago
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... Here's a good one I just found as so many here were asking for sources.
- rodiger 2y ago
  This doesn't support your assertion- in fact it does the opposite. The definition(s) of inflation has changed over time. That does not make the current definition(s) less correct
  - _heimdall 2y ago
    Well I did try to caveat it that its one of the few sources I could even find that reference the fact that the definition was changed. My argument isn't with the fact that "inflation" is in fact being used to mean "price increase of goods." My issue is that economists co-opted the word at all and made it functionally useless, especially in isolation as it is often mentioned with no other context of why prices changed. The use of "inflation" to mean money supply increase goes all the way back to the roman empire.
- idunnoman1222 2y ago
  “Inflation” is measured based on the prices of a predefined list of goods.
  - _heimdall 2y ago
    Have you ever read up on that list of predefined goods? It is pretty interesting to see how regularly the list is changed and how many different factors they add in to adjust prices. Someone did a study looking at magazine prices for example. They picked magazines because they almost always had prices printed on the cover and cover images are cataloged. I don't remember the exact numbers, but they found that the actual prices went up by a much higher rate than how the CPI calculated it because they were discounting price increase with a claim that quality got better. Meaning you may have seen the price double over time but the CPI only said it went up by 30% because you got more value from the newer issues.

braincat31415 2y ago

There are many faces of inflation. The "money supply" you are talking about was not the primary driver in the last few years and there was robust demand for the treasury issuance. You will see the money supply inflation pick up when treasury auctions start to fail. I believe this will happen down the road but not soon. Most of the inflation was driven by other factors: low-income labor shortage, and a supply side shortage that fueled an increase of prices for commodities and anything else up the chain.

_heimdall 2y ago
> The "money supply" you are talking about was not the primary driver in the last few years and there was robust demand for the treasury issuance. Unless I'm mistaken, I don't believe we can be sure of that. The economy is extremely complex, ferreting out the impact of any one intervention is nearly impossible. On the surface it seems very unlikely to me that printing trillions in new money and giving it to banks, businesses, and directly to every citizen had no impact on prices. The supply of money increased dramatically and the cost of money (interest rates) was also extremely low. Beyond my hunch though, I haven't found any data that has clearly isolated the inflation out of the equation to be able to show that the price increases weren't driven by the new money at all.
- braincat31415 2y ago
  The Fed is really not printing anything, and they have a lot of power to control money supply through open market operations. It is incredibly efficient when doing this, and can increase the cost of capital very quickly. But like you said, it is hard to come to a definite conclusion or come up with a proof. The other parts of the equation that I mentioned are very hard for anyone to control.

coryfklein 2y ago

This is oddly reflective of the elitism that cost the DNC it's victory. "Well actually, my poor man, a tomato is a fruit and every PhD economist knows that inflation is connected to fiscal policy's influence on the monetary supply" The every day person uses the culinary definition of tomato, and inflation means that those tomatoes cost more at Walmart.

_heimdall 2y ago
I would expect a botanist to know that a tomato is technically a berry, just like I would expect an economist to know that inflation is technically defined as an increase in the money supply. Everyday people can use whatever definition they want. That doesn't mean economists, the Fed, etc should say "inflation" when they mean "price of goods".
- FollowingTheDao 2y ago
  The tomato price is too damn high! Get it yet?
  - aydyn 2y ago
    This exchange is like a microcosm of the educated elite trying to talk to ordinary people.
    - drawkward 2y ago
      This comment made my day.
- khana 2y ago
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- lottin 2y ago
  Inflation is technically defined as an increase in the price level. You'll find the term defined in this way in every single economics textbook.

JumpCrisscross 2y ago

> Inflation is actually the in the money supply No, that is expansion of the monetary base. Inflation is an increase in price levels. If a country’s money supply contracts while prices rise that’s inflation. The problem with the metallic definition is a country that loses half its territory and most of its reserves after losing a 19th-century war, thereby setting off double-digit price increases across its economy, doesn’t “inflate” from a monetary base perspective. Once we understood these concepts were separate, we segregated the terms. Insisting inflation refers exclusively to monetary-base expansion is phlogiston-theory stuff.

_heimdall 2y ago
The problem with the metallic definition, meaning the definition of "inflation" from the roman empire until the mid 1900s, is that it didn't really work well with Keynesian economics or modern monetary theory. Inflation has a bad connotation historically due to the number of examples where increasing the money supply too quickly ruined economies and destroyed empires. MMT and Keynesian economics use the money supply as the primary tool for controlling the economy. They may not like that "inflation" described the exact mechanism for the main tool of modern economics, but that doesn't make it wrong. The easily could have come up with a new term for an increase in the price of goods rather than co-opting an existing term. That strategy seems very much like a play driven by ulterior motives. It isn't so much that we had to understand new concepts as it was they had to redefine terms to put their new game in a better light. That's also why they talk about price increases rather than currency devaluation or theft. Both would be accurate, but price changes sound more benign.

kjrfghslkdjfl 2y ago

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FrustratedMonky 2y ago

"Inflation is actually the increase in the money supply." NO. It is the cost of the goods. What people will pay. Inflation Contributors: 30% money supply 30% was corporations raised prices specifically under cover of people blaming the government. This was actually listed on earnings calls, for profit. 30% supply chain shortages.

_heimdall 2y ago
> It is the cost of the goods. What people will pay. No. Even in the modern definition I'm arguing against here, this isn't right. The cost of goods is just a number, inflation in the CPI sense would be the rate of change of prices. > Inflation Contributors: 30% money supply 30% was corporations raised prices specifically under cover of people blaming the government. This was actually listed on earnings calls, for profit. 30% supply chain shortages. Where's the last 10%? And how do you come up with such specific numbers? Economies are extremely complex, I don't believe you could have untangled them so precisely or that the numbers behind it would be so evenly distributed.
- FrustratedMonky 2y ago
  That is needlessly pedantic. You said Inflation was Money Supply, I said it was the cost of what you are buying. YES, technically it is the "change" in the cost of what you are buying. Congratulations. I assumed that was understood. Percentages. Nothing is exact. There are ranges, and really more than 3 factors. I was going off memory. Congratulations again on your discernment. More ball park: "" While pinpointing exact percentages for each contributing factor to inflation is complex and can vary significantly depending on the economic context, a breakdown of major contributors could include: high demand for goods and services (30-40%), supply chain disruptions (20-30%), labor cost increases (15-25%), rising energy prices (10-15%), government spending (5-10%), and currency devaluation (5-10%); however, these percentages should be interpreted as a general guide and not a definitive breakdown" The point is, it is not Biden's spending, that is just another misleading right wing talking point. (lie)

barrkel 2y ago

Inflation is increase in the cost of living. You've linked to a privately written article ("The views authors express in Economic Commentary are theirs and not necessarily those of the Federal Reserve Bank of Cleveland ") by someone who worked for the Cleveland Fed, who blames printing currency for inflation. No doubt that debasement of the currency increases the nominal prices of things. But it's hard to square the idea that that's all there is to inflation when you consider that lots of countries had inflation after COVID. They didn't all coordinate on printing currency.

lottin 2y ago
> Inflation is increase in the cost of living. This isn't entirely accurate, either. An increase in the cost of living occurs when real wages fall (in other words, when workers paid less, in real terms (adjusted for inflation), for the same amount of work). In principle, inflation doesn't necessarily lead to an increase in the cost of living, although in practice usually it does.
_heimdall 2y ago
I've never actually seen anyone use "inflation" to refer to cost of living. Most economists use the term to talk about price increases of a subset of goods, but that isn't directly measuring cost of living.
- TheOtherHobbes 2y ago
  It's literally how most people use the word. Most people are not economists. All they know is they're spending more for less every month, and they don't like it. The money supply idea has always been Austerian crackpot nonsense, intended to dissuade governments from investing in public services of all kinds because that's socialism, and we certainly don't want any of that. In reality price rises are mostly driven by corporate profiteering, and sometimes - as in the oil crises of the 70s - by supply shocks.

Detrytus 2y ago

> Inflation is actually the increase in the money supply It's not that simple. That might be how it is defined in economy textbook, but in practice, how do government agencies measure inflation? You have predefined basket of consumer goods and record their prices over time, and that price increase is reported as "inflation rate", and that's what gets reported in TV news. And yet you somehow blame people for misunderstanding the term when the wrong definition is hammered into their brains all the time by all the mainstream media.

Supermancho 2y ago
> and that's what gets reported in TV news. That's the clue that it's a signal. If every merchant is mandated to drop the cost of goods to 1$, the measure becomes meaningless for this purpose, while people continue to trade more and more for the same amount of goods. The published values themselves are incidental and barter normalizes, detached from the edge effects, as the underlying cause remains. https://search.brave.com/search?q=inflation+origin&source=desktop&summary=1&conversation=f13da35bb4744733b372d9&summary_og=2cd4624c5ead7a501ec29d https://search.brave.com/search?q=inflation+origin&source=de...