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Thread: What causes normal inflation

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    What causes normal inflation

    Not the rampant periods of heavy inflation, like what we are seeing in 2022. But rather:

    Why do prices, housing cost, business cost, salaries, etc rise steadily over time?
    Is it merely an unaffordable by product of trade?
    Do we really even know?
    And perhaps most importantly

    Who wins the most from this?
    Working class families? LOL

    I purposely did not Goggle this and I ask you to respond off the cuff, even if your answer is as clueless as my questions.

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    Inflation is a rise in general price levels and that happens for one reason and one reason only: Expansion of the money supply relative to the total supply of goods and services.

    Put simply: If the money supply increases faster than the supply of goods and services, then general price levels will increase.

    This is econ 101. Anyone who argues otherwise is either lying or ignorant.

    Who wins? The people who can access the newly created liquidity (money) the fastest, which is usually big banks and other politically connected entities.
    Power always thinks it has a great soul, and vast views, beyond the comprehension of the weak. And that it is doing God service when it is violating all His laws.
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    Quote Originally Posted by Ethereal View Post
    Inflation is a rise in general price levels and that happens for one reason and one reason only: Expansion of the money supply relative to the total supply of goods and services.

    Put simply: If the money supply increases faster than the supply of goods and services, then general price levels will increase.

    This is econ 101. Anyone who argues otherwise is either lying or ignorant.

    Who wins? The people who can access the newly created liquidity (money) the fastest, which is usually big banks and other politically connected entities.
    It is sad how ignorant so many people are about such basic things.
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    There’s more than one one cause for inflation. When demand exceeds supply/production you will see intention.

    When monitory Policy devalues currency through excessive debt, you will see inflation.


    Taxation also can create inflation. When the the costs to the corporations who provide our goods and services are increased, those costs will be passed on to the consumer.


    However, it’s generally correct to say to say that government’s create inflation
    Last edited by Tahuyaman; 08-12-2022 at 03:09 PM.
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    Quote Originally Posted by Ethereal View Post
    Inflation is a rise in general price levels and that happens for one reason and one reason only: Expansion of the money supply relative to the total supply of goods and services.

    Put simply: If the money supply increases faster than the supply of goods and services, then general price levels will increase.

    This is econ 101. Anyone who argues otherwise is either lying or ignorant.

    Who wins? The people who can access the newly created liquidity (money) the fastest, which is usually big banks and other politically connected entities.
    Sounds like a perfect explanation.
    One of the things I wondered about before posting was the supply of goods and services. Not the supply of existing goods and services but new goods and services to compete with the old.
    For example, I look around my house. Satellite TV, pay for channels, NFL Sunday Ticket, cell phone. range finder, laptops, remote controls for almost all of it and largely the same in our cars.
    The entertainment budget ain't what it used to be. Even some entertainment is now considered quasi necessities. Yet the people seem to still have all the outdoor toys, boats wheelers, snow machines, etc.
    Is a modern family living hand to mouth the same as a 1980's family living hand to mouth? If so what goods and services have we given up to pay for the thousands worth of electronics complete with monetary umbilical cord payments.
    Last edited by donttread; 08-12-2022 at 03:31 PM.

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    In addition to Ethereal's excellent summary I would add that a money supply only has value in the goods and services it actually represents. Since money no longer has intrinsic value like gold and silver it is no more than a promissory note these days, a paper or electronic convenience of trade. Money represents a trust that actual tangible economic value is behind it and is stable.

    If a Federal Reserve system is honest it will try and keep the supply of money as close to the actual economic worth as it can and restrain heavy borrowing, especially Government spending vast sums they do not have. This is not a perfect science as an economy grows so some mild inflation is considered normal. But you can easily see where this gets off track as we simply print and spend in a reckless manner and call that a "Stimulus" along with wealth redistribution to unproductive persons.
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    Quote Originally Posted by Peter1469 View Post
    It is sad how ignorant so many people are about such basic things.
    It is.
    When the people find that they can vote themselves money, that will herald the end of the republic.“ - Benjamin Franklin.


    “When people get used to preferential treatment equal treatment seems like discrimination.” - Thomas Sowell

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    Quote Originally Posted by RMNIXON View Post
    In addition to Ethereal's excellent summary I would add that a money supply only has value in the goods and services it actually represents. Since money no longer has intrinsic value like gold and silver it is no more than a promissory note these days, a paper or electronic convenience of trade. Money represents a trust that actual tangible economic value is behind it and is stable.

    If a Federal Reserve system is honest it will try and keep the supply of money as close to the actual economic worth as it can and restrain heavy borrowing, especially Government spending vast sums they do not have. This is not a perfect science as an economy grows so some mild inflation is considered normal. But you can easily see where this gets off track as we simply print and spend in a reckless manner and call that a "Stimulus" along with wealth redistribution to unproductive persons.
    The Fed is not honest however. In 2008 they cut interest rates into the teeth of out of control housing prices.

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    Quote Originally Posted by donttread View Post
    The Fed is not honest however. In 2008 they cut interest rates into the teeth of out of control housing prices.

    Note I said "If" as a clue.

    A Fed designed early last century to avoid Recession and inflation has obviously failed and we can debate on how much intentional?
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    Quote Originally Posted by Peter1469 View Post
    It is sad how ignorant so many people are about such basic things.
    I don't see myself as ignorant but some of the explanations were enlightening to me so maybe?
    I don't think anyone totally gets economy. Just like no one party has all the answers. If they understood everything they'd manipulate the economy to be good all the time. Well except for now Biden may be trying to burn it down or maybe just trying to enshrine his party.

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