Inflation

Lunatick
Lunatick

What is inflation? Is iy good or bad? Is it avoidable?What areeeeee the greatests policies to fight against it?

Harmless_Venom
Harmless_Venom

@Lunatick
trumpcoin

Boy_vs_Girl
Boy_vs_Girl

@Lunatick
should i ask to /pol/

MPmaster
MPmaster

1. "Inflation is a sustained increase in the general price level of goods and services in an economy over a period of time" -Wikipedia

For example, I buy a coffee for $1, inflation may cause the price to increase to $1.03 (based on average inflation in most developed countries) the next year.

2. Inflation isn't generally considered bad, unless it gets way out of hand (see Zimbabwean Dollar, German Mark, etc.). It is however, a lot better than the alternative, deflation. Deflation causes people to want to save money and stop spending, slowing economic growth.

Inflation is the opposite, it encourages people to purchase goods now because the price may go up. High inflation does cause problems for people on fixed incomes or those who have most of their assets in a savings account (like the elderly or the poor).

3. Well prices either inflate, deflate or nothing changes. It is not avoidable in any realistic sense.

4. You can pick one of three options,

"Monetary policy – Higher interest rates. This increases cost of borrowing and discourages spending. This leads to lower economic growth and lower inflation.

Tight fiscal policy – Higher income tax and / or lower government spending, will reduce aggregate demand, leading to lower growth and less demand pull inflation

Supply side policies – These aim to increase long-term competitiveness, e.g. privatization and deregulation may help reduce costs of business, leading to lower inflation." -The Economist

Soft_member
Soft_member

@MPmaster
thank you sir.

girlDog
girlDog

Inflation occurs when there is too much spending, or when the unemployment rate is too low (1-2%). There are two sides of inflations, Demand and Supply, demand inflation is always cyclical and occurs in booms and expansions. Supply is often structural.

It can be stopped by slowing spending, this an be done by increasing the interest rates, by doing this there is an incentive to save money instead of spending it.

haveahappyday
haveahappyday

@Soft_member
@girlDog

To add onto this, a lot of economics is a constant loop. Bad things to more bad things to worse things. Good things to better things, etc.

High spending>Inflation>More people want to spend to get best value>More inflation>Repeat

5mileys
5mileys

Is inflation an earth version of entropy?

Is there a calculator that will tell me how many years until a loaf of bread costs 10 dollars?

Sharpcharm
Sharpcharm

Is a long-term 0% inflation sustainable? So no inflation and deflation.

Snarelure
Snarelure

@Sharpcharm
bitcoin

WebTool
WebTool

@Sharpcharm
Taken from-

www.economicshelp.org/blog/13272/inflation/is-zero-inflation-a-good-thing/

"However, there is also a real danger that if we get stuck in a period of ultra-low inflation / deflation, then all the problems of deflation will become more prominent and start to hold back normal economic growth."

Essentially it is very hard for 0% inflation to be achieved consistently because there are so many factors in play (economies are affected by many things). On top of that, it may restrict growth in the long term.

TurtleCat
TurtleCat

@WebTool
thanks

StonedTime
StonedTime

@WebTool
It does not restrict growth.
What restricts growth is people not making companies and opting out of labor market (due to several reasons, hyperinflation being one).
Growth due to inflation is artificial and dangerous.

CouchChiller
CouchChiller

On a basic level it's simple. Inflation happens when there is more money. The replies in this thread describes the process by which changes in the money supply affects prices.

Do you doubt me? Alright, consider this simple logic:

The average price of a good/service=p
amount of goods traded a year=y
amount of money units (eg. dollars) = m
amount of times a currency unit is traded a year (velocity of money)=V

p*y = m*V

You cannot deny that simple formula. So let's proceed. In order for p to change, one of the following three can happen: the amount of traded goods can decrease (lower y), the velocity of money can change (higher V) or the amount of money can change (higher m).

If the amount of goods decreases and the price per good consequently increases, well, that's not generally what people refer to when they say inflation. Ib order for the velocity of money to increase we would simply have to use up our paychecks faster. And while that is possible, it seems to me there's an upper limit to how fat the money can get.

So, in practice it seems inflation is really mainly caused by an increased money supply.

Dreamworx
Dreamworx

@CouchChiller
the logic behind that formula doesn't always work though

Nude_Bikergirl
Nude_Bikergirl

There is an old saying we say at church . God created the world in 7 days and on the 8th he created inflation . That is the devils biggest lie. The devil created inflation so the good hearted cannot afford eggs

Garbage Can Lid
Garbage Can Lid

@MPmaster
This was a fucking excellent answer

Deadlyinx
Deadlyinx

Inflation is bad. Dont listen to shills saying its good.

AwesomeTucker
AwesomeTucker

@Deadlyinx
You're definitely going to have to expand on this or it will forever remain an overly simplified and narrow statement.

A small amount of inflation IS good because that's what keeps the economy healthy and growing and considering we need constant growth in the economy or else doom then it's certainly preferable to deflation. The problems occur with hyperinflation or when the average pleb's wages don't rise with the rate of inflation and thus they end up poorer.

So step up to the plate user and explain yourself. Don't just make an unsubstantiated off the cuff remark and call it a day.

likme
likme

@Deadlyinx

Inflation is only bad if you are not a Rothschild or friend.

Raving_Cute
Raving_Cute

@Dreamworx
Alrighty, when doesn't the logic hold true?

Sharpcharm
Sharpcharm

@MPmaster

Inflation isn't generally considered bad

currency losing value isn't bad

Central Banks inflating currency supplies as a means of confiscating wealth isn't bad

farquit
farquit

@Sharpcharm
it encourages you not just sit on your money but lend it or invest it.
it's alright. you still gonna have returns above inflation if you invest it.

Stupidasole
Stupidasole

@Lunatick
do my homework for me Veeky Forums

Firespawn
Firespawn

@farquit

What if they *should* sit on their money?

When the Federal Reserve manipulates interest rates rather than letting the market do it, they effect the market and give the consumer a false idea of how the market is doing. The consumer then makes purchases, investments and takes out loans that he or she probably shouldn't, due to this false impression. They are deceived, and they spend or save their money based on the deception.

Then bubbles pop, the truth is exposed, and they lose everything.

How is this good?

SniperGod
SniperGod

@Firespawn
What if they *should* sit on their money?
then you put it in metals

GoogleCat
GoogleCat

@CouchChiller
@Raving_Cute

p*y = x
where x is the total sum of money
but x !=mV

amount of money units = m
amount of times a unit is traded

I think you need to be more specific. x is the total money used to purchase all occurrences of a good or service. This isn't the same as the amount of money units times the amount it is traded in a year. These two don't seem related. You can sell a certain good a specific amount of times but that has nothing to do with the total money units traded a different amount of times.

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