This is overly simplistic. IF the only thing to buy in the economy is bread, then surely the only thing produced in the economy is bread. If that is the only thing produced then the bakery would be the only employer. If the 5 unemployed guys each got a job it would have to be at the bakery, which would naturally mean a greater production of bread. While their might be a correlation between inflation and unemployement (the phillip's curve), this video does not really explain that relationship.
This...just doesn't explain the real world situation. In the real world, you don't have 50% of people employed and sudently 50% more emplyed. THe employlemnt of people usually falls and we have 17% inflation in the last 5 years. THe inflation is the increase of money supply.
@lieschen53177 Exactly. Inflation is more and more money chasing fewer and fewer goods. As more money is added, the existing money becomes worth less.
Yeah the trade-off you describe between unemployment and inflation only exists in the short term when you assume wages are sticky (slower to adjust then general prices). In the long-term wages must also adjust and therefore unemployment will remain unchanged.
gaahhhh this is horribly explained. Inflation is nominal, in other words if price of bread went from 3 dollars to 6 dollars, you could expect wages of the workers to also be increasing. changing nothing!
All this demonstrates is the dynamic balance of price equilibrium being found in the market.
JesseForgione got it right: Inflation is caused by an increase in the money supply. This is surprising easy to predict if you work for the Central Bank.
Fractional Reserve Banking practices are really the ONLY inflationary force out there that should be addressed. It dwarfs all other drivers by inflation and it's not even close.
see this chart for more: nowandfutures,com/key_stats,html
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The downside is that, the poor man who does not invest in a bank gets screwed up. The money that he earns is constantly being devalued. He cannot SAVE money in the conventional sense.
The poor man is literally ROBBED of his earnings. Thats the price we pay for supporting(spoiling) the entrepreneurs.
The government does this so that this money in the bank can be loaned to people who really need it like an entrepreneur which results in growth and development of the country.
So inflation is a TRICK used by the government so that people would not hold on to their wealth and instead deposit them in a bank as their money is constantly being devalued. Note that usually the inflation rates and interest rates in a country are nearly equal.
ummm both of the top comments are kindof wrong... inflation is essentially an increase in the CPI, and increasing the amount of money in the economy actually has very little to do with it unless prices increase proportionately. and that doesn't tend to happen. However, i did say KINDOF wrong, as they are both right.
The govt realizes there is increased productivity, which generates increased income, and decides to tap into that resource for political purposes, through force of law. They become addicted to spending the people's income and soon there's not enough money to fulfill all their promises. So they just start making up fake money out of thin air, with nothing of substantial value to back it up. Increased "money" supply means each dollar is worth less, so "prices" rise.
The dudes in the beginning with no bread and no money formulate a business plan, secure a loan from a capitalist investor, and open a 2nd bakery that COMPETES with the first. Supply for the town is doubled, prices go down to $2.50, everybody gets a job, everybody gets bread, the capitalist investor helped his local economy and makes some profit as well, & the monopolist 1st baker is not allowed to take advantage anymore.
This video is not an example of inflation. Inflation is an increase in the supply of federal reserve notes (aka dollars) which is the result of the United States Federal Reserve's (aka the central bank) policy of printing fiat paper money.
Ron Paul Money Bomb! July 19th! Ready Ames Fire! Stop the same establishment trash every four years and get a REAL Constitutionalist in office! wwwdotronpaul2012dotcom End the Fed! Bring Sound Money back to America!
The guy who posted this video didn't understand the real character of inflation which is a monetary phenomenon and not a rise of consumer prices (which is only a side effect). So, this video is keynesian bullshit.
Very poor understanding of economics. Inflation is the "inflation" of the money supply! More dollars mean that each is worth less. Prices do not go up. The value of each dollar goes down therefore requiring more dollars to purchase the same number of goods.
My friend, you are doing a disservice to everyone who has seen or will see this video! Please correct it or remove it! There are enough people in the world who do not understand the dangers of inflation=(expansion of money supply and credit) and allow the devaluation of their currency by central banks.
Only the FDR Glass-Steagall principle will separate commercial from speculative banking, thus freeing the nation from obligations to Wall St. and the City of London, and re-establishing a credit system for rebuilding the nation.
H.R. 1489, Return to Prudent Banking Act of 2011, is before the House of Representatives, which aims to revive the separation between commercial banking and the securities business, in the manner provided in the Banking Act of 1933, the so called 'Glass-Steagall Act
but this does not illustrate inflation, it just shows how microeconomics works , major inflation occurs in macroecnomoics ! but apart from that it's really funny lool
Its a nice try :-) but i agree with other comments it is demand and supply. I believe you tried to simplify the macro economy into the exam of the bakery and in doing so you turned it into a micro economics :-P
The graph for inflation is the marco economic agreegate demand + supply graph, google it.
Increasing demand from having more employed is shown by the increase in AD on that graph.
dollarpages [] org on the Billions for Bankers page.
Politicians love using this type of supply-demand scenario but the fallacy is clearly demonstrated at the url above. They use it to hide the real causes as indicated in other comments.
You would think that an overproducing and overpriced bakery that not all available buyers are patronizing would drop their prices to raise income, but the bakery can't do that... the baker owed six dollars a loaf on that particular bread *months* before the dough ever saw the oven.
Economic theory is fine, but running a business has next to nothing to do with economic theory.
Inflation and Supply & Demand go hand in hand. You just have to view currency as a product like bread. If people were to save all of their money into their savings account, then the business has to lower prices to entice people to take that money out of savings and give it to them.
I have to join those who say this video is NOT an explanation of inflation. It is a demonstration of supply and demand. If we can't do better than this in educating everyone about inflation, then we really are in big trouble.
what about lower prices because of cometition in town. This is an unrealistic monopoly. what a biased piece of propaganda against that "greedy business"
Bullshit! This is price inflation. Real inflation is the increase in money supply. Another words printing money. Any time you have more supply than demand it makes something worth less. That's what the fed is doing, destroying the value of the dollar printing money for a broke government which can't stop spending money it doesn't have. Destroying the poor and middle class. Government cannot create demand where there is none. As long as we have a central bank and Keynesians boobs like Paul K
If all 10 were employed and there was only a bakery in town as well as 10 residents then the bakery would have 10 employees and therefore could produce 10 pieces of bread (as the ratio seems to be 1:1 of workers to bread). So this would have no inflationary consequences.
that isnt inflation, its supply and demand and how the free market is supposed to work. If the price of bread gets too high then one of those people holding on to a wad of money should open their own bakery then theres 2 bakeries that compete for business and the price comes back down.
@rustyscrapper exactly!!! inflation is process when value of money goes down witch has effect on prices that goes up. Imho inflation is just another hidden tax.
I know a bunch of people have already said this, but this misses the integral part of inflation. The reason why prices go up isn't because more people have jobs, its because the amount of money in the system went up.
Thankfully we have competition and when the government does not interfere the market tends to lower prices to satisfy market demand.Not only does the cost go down but choices tend to increase, however government would perfer higher prices higher prices lead to higher taxes.Higher sales revenue=higher tax rate, higher personal income= higher income tax, higher cost of goods= higher sales taxes collected.More success= more regulation,more regulation=more fee's and fines collected=less choices&jobs
The baker bakes bread because he's a baker and makes a living from being one.
If I were the baker I'd by very happy making more loaves and charging the same.
I would make more money from more people wanting to enjoy my excellent bread, not make the people poor by working a financial asset management system used by the banks!
I want to feed people and be loved for my fine bread, I'm a baker not Goldman Sachs!
This is one of the worst videos I've seen on this topic. First, very very rarely does a monopoly exist on a product like bread. Competition keeps prices down even when demand is up. Government monetary policy is mostly responsible for inflation. Unemployment over the years does not vary by 100% as this video suggests (5 people demanding bread going to 10 people demanding bread). Money is a commodity just like bread!
There is an unseen factor in this animation: the jobs the other people are getting. To have a real microcosm, it should be implied that there is only the bakery in the town, and nothing else. This way, the video would demonstrate that rising prices for the same product creates a mathematical problem in the money supply itself...
Very misleading; the author lacks basic understanding how economics works, his example is good only for situation when people get money for nothing (social payments, unemployment doles, welfare – funded not by taxes, but through money emission) – money supply grows but amount of goods they can purchase for these money stays the same. If 5 previously unemployed people start to produce goods that can be purchased but other people, this would never lead to inflation.
When 6 people are employed and 4 unemployed the market will presumably still clear at $3 and so all 6 employed people will be able to buy bread. However, when the 4 unemployed workers become employed, those same six people must pay $6 each. This IS inflation. The value of each dollar has decreased! In this case, instead of the gov't printing more money, the wages of the newly employed add to the money supply, thus decreasing the value of money.
When 6 people are employed and 4 unemployed the market will presumably still clear at $3 and so all 6 employed people will be able to buy bread. However, when the 4 unemployed workers become employed, those same six people must pay $6 each. This IS inflation. The value of each dollar has decreased! In this case, instead of the gov't printing more money, the wages of the newly employed add to the money supply, thus decreasing the value of money.
Yeah, that video really shows how it basically works. The one thing it doesn't show is how everyone of us can fight back inflation before it actually happens. You don't know how that works? Try againstinflation[dot]com on google and you will see how that works.
so the only way to fight inflation is for entrepreneurs to open new bakerys. but the increasing government control of healthcare and high taxes on small businesses keeps that from happening. so who is to blame? once more, government growth. in the words of Ronald Reagan, "government is not the solution to the problem, government IS the problem."
@petrafied77 not quite, because this video is a bit off, inflation is when the money supply is inflated. so money needs to be a literal of human labour (gold, silver, salt, oil, lumber, something real) which in turn can be 'traded' for something equally real like bread from a bakery. a 'trade' is a 4-point process: Bread for Gold, receipt for dollar.... Bread is the thing being purchased, gold is the base commodity of exchange, and both have a receipt (dollars being a receipt, nothing more).
Inflation is increase in the overall money supply which will increase the prices eventually as a result, but the prices may not rise for a long time even when the increase of fiat money supply is happening, but it still means inflation and the distortion IS occurring even tho the prices are not rising yet. Price increase can happen gradually or rapidly ,in unpredictable industry or not. Today inflation is in education, financial assets, healthcare sectors (because of the heavy Govt involvement).
cute vid! but completely off topic. you are confusing price fluctuations due to supply and demand, which is a very important for the economy function of the free market.(If the Govt regulated the price to stay low during the unemployment for example, it would mean no profit and the Bakery would have to close= bread shortages. but more demand= higher prices= signal for potential profit= more Bakeries!) So the price fluctuations play a very important role in a free market but its NOT an inflation.
I agree with BourneAccident and garybsg and benhuey etc. This has nothing to do with inflation. Inflation is caused by increased money supply. This video is simply about supply and demand.
In this example, the bakery has a monopoly. It assumes that the bakery has complete control over prices. This is not true in a perfectly (or near) competitive market, as they must take the price as given. If the bakery raised the price from $3 to $5, the buyers would simply go somewhere else to buy bread at a cheaper price.
very simplistic and primitive explainations, also fails to address other important types of inflation such as hyperinflation, and also doesn't use economic language (i will help you - the type of inflation you talk about is demand - pull).
Inflation is not the same as rising prices,,, good video,, but false information... Inflation is the expansion of the money supply... Rising prices may be the result,,,, but that is different.
INFLATION = EXPANSION OF THE MONEY SUPPLY..
RESULT OF INFLATION = RISING PRISES (but this is not always the case)..
Inflation is an INCREASE of the money supply and/or credit. This video explains supply and demand principles which is what drives growth and recessions in an economy, not an increase or decrease in prices. Prices are a production of supply and demand of MONEY.
This video does not illustrate "inflation". This video shows how supply and demand works. But that's not inflation.
Inflation is the increasing of a economy's money supply relative to the amount of goods and services being produced. When more money is produced beyond GDP, that money causes all the rest of the money, already in circulation, to be worth less.
Inflation is NOT rising prices. Rising prices are a consequence of adding too much money into an economy relative to GDP.
So does that mean that if GDP increased more than the money supply you'd have lower prices along with inflation? If so then why do they use the consumer price indexes to determine inflation rather than the three M's (well four if you include the MZM?
It says the others go and spend their money elsewhere, but there is only one bakery. So do the three buyers who leave first, go to the cemetery to buy a plot, cause with no food, there is no life. With only one bakery, the town has to be pretty small. I mean the first three that left were probably related to the owner. So, when his family stopped benefitting his business, he essentially starved them to death, rather than help them. Is this about inflation, or our future health care system?
Actually, this trade off of unemployment for inflation is only true in a Keynesian system, which is based on demand management. Basic economics shows that supply side management can result in lower unemployment and lower inflation. The video doesnt mention that if the bakery can lower its marginal cost of production, it can produce more bread at a lower cost, thus producing more and still making the same if not more profit.
This video is as simplistic and innaccurate as the graphics used in the video. Inflation has more to due with fractional lending than supply and demand.
This video HIDES the fact that the government NWO has been secretly increasing our debt and taxes, and flooding the market with dollars thus causing hyperinflation and DEVALUING THE DOLLAR.
This video ignores the fact that if the baker doubles the price of his bread (and his profits) - at least one of the people who walked away from his $6 bread will go start a bakery of their own and drive prices back down. A high price may be the result of a producer's "greed" or the result of changing labor and resources. Either way, the high price and the profits it implies is a call for labor, resources and creativity to produce more of that good. freely fluctuating prices are crucial.
This is soooooooooo Wrong The bakery will either meet the demand or someone else will. The market loves a void. A higher price will produce demand for a sub. Those paying for the higher price didn't get the money out of thin air. The dropped their demand for something else to get the extra money. INFLATION IS IMPOSSIBLE WITHOUT GOVERNMENT AND AN INCREASE IN THE MONEY SUPPLY. THEY WOULD LIKE YOU TO BELIEVE OTHERWISE BUT IT IS A GOVERNMENT CREATED MONSTER!!!!!
if one good gets more expensive, it will become less desired and therefore people will direct demand to other things, which will then increase in price.
On a side note, this video left out SUPPLY, and it also said that supply affected demand. It does not.
@jusahah no well done this does help with the basic principle of inflation. Shows aggregate demand higher than aggregate supply causing inflation, good job (Y). Maybe you should have also showed the bakery's employees demanding higher wages, which forces the business to pass on some of the cost to consumers.
@BourneAccident Inflation has more than one origin. It comes mainly from too much money created by private banks, but also from profits, investments, stock purchases, etc...
@Simboiss - Yes... you're correct. Inflation can have several contributing factors with fractional reserve lending being the main culprit along with government issued bonds. I don't see where profits, investments, or stock purchases create inflation. Profits occur through exchanges in goods and or services. Investments and stock purchases are more simple exchanges. Please explain. Thanks.
@BourneAccident actually, this video explains inflation very well, because yes, inflation is about prices going up due to a currency devaluing, BUT the reason WHY money devalues due to increased supply is because of the simple things that happen in the supply and demand of goods and services. if there is more money there is more spending, which can lead to overdemand, which can lead to a rise in general prices. however this video is a little over simplified.
@theboiljulia-...I respectfully disagree... however... increased money supply "may" lead to more spending, but most of this spending is does not translate to goods and services for "we the people" with prices increasing due to more demand... more so for government spending, etc. Let's get even simpler... new money gets its value from "existing" money... thereby making the existing money worth.... less.... separate from supply and demand issues...
@BourneAccident. youre absolutely right, BUT, demand does not go up for no reason, whether its more demand for money or trade, if there is more money there will be more spending and thus more demand for trade, but if the supplies of trade are still at same rate, employers and employees alike will end up demanding more money for there work from customers, that is also the reason why the prices of some things go DOWN during inflation because if consumers have more money buy less low quality stuff.
.....new money doesnt devalue existing money for no reason, its not like "oh no there is more money in the money supply that would mean that money is worth less", its all to do with business. if theres mor cash, theres mor spending, thus more trade demanded, thus mor jobs demanded, thus more employment, thus more spending again coz the newly employed spend more, thus more demand again. and it just continues until traders put prices up due to limited supplies of stock.
@israrahmedkhail in some cases, more money in the money supply can cause the prices on lower quality goods and services to go down. think about it, if everyone had more money, they'd rather buy a dinner at the ritz rather than a burger at mcdonalds, so the demand for mcdonalds meals would go down, so mcdonalds would put the prices down. but the oposite would happen to meals at the ritz. get it?
@BourneAcciden The only value currency has is what i can buy. Inflation is the rise of the price level. The rise in price level causes the devaluing of the currency not the other way around.
@atki2828 - I respectfully disagree. Dilution of the overall money supply is a causative factor in inflation. That's a fairly well accepted fact, even by the mass media. The less your money is worth, the more of it you need to purchase things. Supply and demand causes rises and falls in price level. If you think about it objectively, it will become clear.
@BourneAccident I disagree. An overall change in the price level can and does happen without a change in the monetary base or the money supply. There are productive shocks such as the change of the price of oil or a natural disaster that affects the price level. There are other complicating factors such as the fact that a lot of prices are not determined by market forces, but currenciec only value is what it can get currency has no value of its own.
@BourneAccident If currencies were pegged to gold than that could determine value, but since their floating there value is determined only by what can be purchased with them. Your statement is right just flipped around the higher the prices are the more money you need.
@atki2828 - Okay then... but keep in mind that.... money... is really just like any other commodity... gold, wheat, corn, etc... and by the way... you really don't ever want money to be backed by gold... guess who owns all the gold? Tee hee hee...
Stagflation is not "inflation subsequent to a retraction of the overall money supply." It is inflation with a stagnant economy i.e. low GDP growth. Plus retraction in the money supply causes deflation not inflation.
@Keeban3 - You're right... Stagflation is not inflation... directly... Stagflation is slow growth and high unemployment, but with essential goods and services rising... The root cause of this is due to a retraction in the overall money supply. Inflation is a result of devalued currency, mainly through quantitative easing....
@unfad1ng - Right... Technically... it is a real word ... and I agree.. it sounds fake... but what's really fake is all the economic jibberish that we are bombarded with from the Fed, the news, economists, etc. Take Greenspan for example... Just like that old comic Norm Crosby... Greenspan intentionally convoluted his sentences and not really saying anything at all... just smoke and mirrors...
Well i agree that sometimes people just talk bullshit but stagflation is a real phenomenon and the reason why its sounds so wierd is because its a crossing of the two words stagnation and inflation and crossings liek that always tend to end up with a strange result
Inflation is a consequence of governments printing too much money. The employment explanation of inflation fails to account for historical phenomenon.
this might have been true hundreds of years ago in a simple economy but in today's economy the price of goods has less to do with supply and demand than with money policies of banks and trade... the inflation that has been experienced in the US comes mostly from the money supply inflated by the Fractional reserve system backed by a central banking system..money use to have real value based on gold.. now money has value as debt.. debt being the largest industry in the US..
This is bogus. Its always the countries with the highest unemployment that have the highest inflation and countries with low unemployment and high growth usually have low inflation. More unemployment means less productivity which means more inflation. This video has it backwards. Its no wonder all south American economies with high inflation have high unemployment. It goes hand in hand. Switzerland has low unemployment so they have low inflation. Inflation just means expanding the money supply
at times the inflation rate was over 20 percent during the 19th century. every 20-30 years there would be a gold rush and there would be massive inflation.
look it wikipedia inflation during the 19th century
that's a patently false statement. the marketplace is run by suppl and demand. why is cpi going down and production going down right now.
Also there is inflation with the gold standard also, except it occurs randomly when people find gold and silver. why do think the industrial revolution happened. The nobles fearful of inflation (since gold was discovered in the new world) kicked all the peasants off there property and sent them to the city where they were to work in factories.)
there are 3 types of price inflation demand pull, which occurs from an overall increase income in the economy thus creating an increase in demand for all goods. cost push which results from an increase in factor costs such as oil. oil is a key component for all goods since it is a cost for all goods when the price of oil goes up the price of all goods go up to maintain a profit. and finally monetary inflation which is a long run phenomena associated with the supply and demand of money
True however nairu is a long run position. in the short run their is still a trade off between inflation and unemployment. its called the triangle model it allows for shifts in the short run phillips curve so as people change their expectations of inflation the curve shifts so it ends up on nairu. the recessions of the 1980's clearly show this point when volcker deflated the money supply he created a recession in 1980 as a result
This is about supply and demand. Inflation is NOT rising prices; it is an increase in the amount of currency in circulation.
The Federal Reserve ("not federal, no reserves") prints money out of thin air & loans it out at very low interest rates, enticing people (& govts) to borrow much more than they otherwise could have. As people have easy access to more dollars, sellers can raise prices. Rising prices are a RESULT of inflating the money supply.
Unlike on a whiteboard, when people can't afford bread they don't just go away--they steal it. It the baker gets in the way, he's toast. Fewer bakers, less bread, higher prices, more toast, fewer bakers...
inflation has everything to do with the interest rate since the monetary base is what we use to manipulate the interest rate. the interest rate is determined by the supply and demand for money. when the fed increases the money supply the nominal interest rate goes down. it is only when people increase their demand for money and the nominal interest rate goes up that we we experience inflation
Nominal Interest rate = real interest rate + inflation
the thing is price inflation is more tangible because it actually as an effect on the economy while monetary inflation is more of an idea and only effects the economy in the long run when people change there demand for money as a reaction to the change in the money supply
no the greater demand creates inflation in this case since everyone has more income demand shifts outward and prices go up, this is called demand pull inflation
in the long run as it takes time for for factor prices to adjust because of contracts. Also our country isn't in a closed system, its a large open economy so the analogy holds since we trade and borrow from other countries.
Also deficits do not increase the money supply as the government sells bonds to cover them. the money supply is increased by the fed when it buys back bonds from the private sector (banks)
MV=PY
Velocity is a function of price inflation as it is a tax on saving.
This is Price inflation and is determined by the goods market in the short run. in the long run monetary policy is associated with inflation as factor prices (stick in the short run) adjust. in the short run suppliers increase production as price goes up however since prices go up workers bid up there wages in the next contract negotiation and output then drops and prices increase as factor costs increase. this is called the natural level of output, however monetary inflation only holds ..
It seems to me that inflation is essentially the ratio of money supply in relation to goods and services. In a closed system it behaves essentially as any other commodity - an increase in the money supply lowers its value (e.g. printing fiat money). The analogy in this video breaks down because it's not a closed system. The employer is outside the box.
More accurately we should have the non-working stick figures picking money off of trees or something, to buy bread and drive up the price.
This has nothing to do with inflation whatsoever. The objective purchasing power of money is solely determined by the supply of, and demand for any given form of money; or expressed quantitatively as MV=PQ (quantity theory). Inflation and employment are not related at all, at least in the long run. Also, RedKatushya, money does not have to be backed by the government, only fiat money does. And it's not really the case that it's "backed" by the government, but rather imposed by the government.
If the economy destroys $50Trillion in wealth over 18 months (stock market prices and real estate/ balance sheets values etc) And then the Gov comes in and prints about $3 Trillion in new Paper dollars - what is the result over the NEXT 18 months?
What are ALL the elements affecting/ driving Deflation?
Inflation. At first prices will rise slower than monetary growth, and then at the same rate, and eventually, prices will rise faster than monetary growth. The final stages of an inflationary scenario will have prices outpace the printing press.
Deflation occurs when fake computer dollars are deleted. All of the credit transactions not backed by actual money, or what some economists call "money proper," contracts. We may see a deflationary type of scenario in the U.S, it all depends on the gov.
Economic beginner, it's ok. The cost of things going up is supply and demand, not inflation. INFLATION IS WHEN THE GOVERNMENT PRINTS MORE MORE MONEY THEN GOODS PRODUCED. Ask Mr. Obama he's an expert on this.
This is overly simplistic. IF the only thing to buy in the economy is bread, then surely the only thing produced in the economy is bread. If that is the only thing produced then the bakery would be the only employer. If the 5 unemployed guys each got a job it would have to be at the bakery, which would naturally mean a greater production of bread. While their might be a correlation between inflation and unemployement (the phillip's curve), this video does not really explain that relationship.
luffis1985 2 weeks ago
the music so not suitable for the situation
eeee184 3 weeks ago
This...just doesn't explain the real world situation. In the real world, you don't have 50% of people employed and sudently 50% more emplyed. THe employlemnt of people usually falls and we have 17% inflation in the last 5 years. THe inflation is the increase of money supply.
marketanarchist2011 4 weeks ago
160 people are immigrants..
iamjacobnz 2 months ago
your music choices are so dramatic
tricky12321 2 months ago in playlist More videos from jusahah
Took awhile to get the equilibrium price :P
heheDawgz 2 months ago
good intent but not explained properly
broncojonnes 2 months ago
this is not at all about inflation. It's about supply and demand
electstar 3 months ago
Inflation is the creation of money, rising prices are an effect but not the root cause.
lieschen53177 3 months ago
@lieschen53177 Exactly. Inflation is more and more money chasing fewer and fewer goods. As more money is added, the existing money becomes worth less.
JustinThought1980 3 months ago
songs ? :P
Atulbarosee 3 months ago
Yeah the trade-off you describe between unemployment and inflation only exists in the short term when you assume wages are sticky (slower to adjust then general prices). In the long-term wages must also adjust and therefore unemployment will remain unchanged.
dick391 3 months ago
gaahhhh this is horribly explained. Inflation is nominal, in other words if price of bread went from 3 dollars to 6 dollars, you could expect wages of the workers to also be increasing. changing nothing!
8peregrint8 4 months ago
@8peregrint8 how do wages increase?
Daski69 3 months ago
boring explanation
sai3250 4 months ago
All this demonstrates is the dynamic balance of price equilibrium being found in the market.
JesseForgione got it right: Inflation is caused by an increase in the money supply. This is surprising easy to predict if you work for the Central Bank.
Fractional Reserve Banking practices are really the ONLY inflationary force out there that should be addressed. It dwarfs all other drivers by inflation and it's not even close.
see this chart for more: nowandfutures,com/key_stats,html
Hamking1 4 months ago
This is not at all how inflation works.
circleoftwo 5 months ago
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EcoMadeEasy 5 months ago
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crashprp92 5 months ago
The downside is that, the poor man who does not invest in a bank gets screwed up. The money that he earns is constantly being devalued. He cannot SAVE money in the conventional sense.
The poor man is literally ROBBED of his earnings. Thats the price we pay for supporting(spoiling) the entrepreneurs.
Raeez100 5 months ago
The government does this so that this money in the bank can be loaned to people who really need it like an entrepreneur which results in growth and development of the country.
So inflation is a TRICK used by the government so that people would not hold on to their wealth and instead deposit them in a bank as their money is constantly being devalued. Note that usually the inflation rates and interest rates in a country are nearly equal.
Raeez100 5 months ago
Actually MONETARY inflation is the main cause of rising prices.
Suppose there are only 10 loafs of bread in the world worth buying. Lets assume the total "currency" supply to be $10.
Next year due to better "technology" bread production increases to 12. But the government increases the "currency" supply to $14.
So the new price of bread is $(14/12).
The government actually supports inflation so that people would put money in a bank to get interest which "protects" them from inflation.
Raeez100 5 months ago
ummm both of the top comments are kindof wrong... inflation is essentially an increase in the CPI, and increasing the amount of money in the economy actually has very little to do with it unless prices increase proportionately. and that doesn't tend to happen. However, i did say KINDOF wrong, as they are both right.
RocketSquirrel111 5 months ago
I don't know what are the comment talking about
This video is just explaining the relationship between the unemployment rate and inflation rate.
If the gov. wants to overcome the unemployment rate, the inflation rate will goes up
If the gov. wants to overcome the inflation rate, the unemployment rate will goes up
This is what I learned from the text book
iPohHoFeN 5 months ago
Until . . .
The govt realizes there is increased productivity, which generates increased income, and decides to tap into that resource for political purposes, through force of law. They become addicted to spending the people's income and soon there's not enough money to fulfill all their promises. So they just start making up fake money out of thin air, with nothing of substantial value to back it up. Increased "money" supply means each dollar is worth less, so "prices" rise.
Hence, inflation.
rmcdaniel423 6 months ago
Or . . . .
The dudes in the beginning with no bread and no money formulate a business plan, secure a loan from a capitalist investor, and open a 2nd bakery that COMPETES with the first. Supply for the town is doubled, prices go down to $2.50, everybody gets a job, everybody gets bread, the capitalist investor helped his local economy and makes some profit as well, & the monopolist 1st baker is not allowed to take advantage anymore.
rmcdaniel423 6 months ago
This video is not an example of inflation. Inflation is an increase in the supply of federal reserve notes (aka dollars) which is the result of the United States Federal Reserve's (aka the central bank) policy of printing fiat paper money.
EdReeves52 6 months ago
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Ron Paul Money Bomb! July 19th! Ready Ames Fire! Stop the same establishment trash every four years and get a REAL Constitutionalist in office! wwwdotronpaul2012dotcom End the Fed! Bring Sound Money back to America!
honkycabbit 6 months ago
The guy who posted this video didn't understand the real character of inflation which is a monetary phenomenon and not a rise of consumer prices (which is only a side effect). So, this video is keynesian bullshit.
joernbroeker 6 months ago
my god, is there even an officially agreed definition on what inflation is? I just want to know what the damn thing is
mo42086 6 months ago
This is NOT INFLATION. it's supply and demand
damnevilpig 8 months ago
Very poor understanding of economics. Inflation is the "inflation" of the money supply! More dollars mean that each is worth less. Prices do not go up. The value of each dollar goes down therefore requiring more dollars to purchase the same number of goods.
edwardschlosser1 8 months ago
My friend, you are doing a disservice to everyone who has seen or will see this video! Please correct it or remove it! There are enough people in the world who do not understand the dangers of inflation=(expansion of money supply and credit) and allow the devaluation of their currency by central banks.
peaches1944 8 months ago
Comment removed
peaches1944 8 months ago
Pretty much everyone is correct!
EtienneLuu 9 months ago
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Only the FDR Glass-Steagall principle will separate commercial from speculative banking, thus freeing the nation from obligations to Wall St. and the City of London, and re-establishing a credit system for rebuilding the nation.
H.R. 1489, Return to Prudent Banking Act of 2011, is before the House of Representatives, which aims to revive the separation between commercial banking and the securities business, in the manner provided in the Banking Act of 1933, the so called 'Glass-Steagall Act
tepstolog 9 months ago
this doesnt show inflation... this is supply and demand... kind of
rugbyf0rlife 9 months ago
but this does not illustrate inflation, it just shows how microeconomics works , major inflation occurs in macroecnomoics ! but apart from that it's really funny lool
MultiMcawesomeville 9 months ago
this is sooo funny loool well explained
MultiMcawesomeville 9 months ago
fuckin good
manfromtheearth 9 months ago
I can imagine random school kids watching this....... >_<
Gabez1303 10 months ago
Its a nice try :-) but i agree with other comments it is demand and supply. I believe you tried to simplify the macro economy into the exam of the bakery and in doing so you turned it into a micro economics :-P
The graph for inflation is the marco economic agreegate demand + supply graph, google it.
Increasing demand from having more employed is shown by the increase in AD on that graph.
JMThought 11 months ago
The best explanation is at
dollarpages [] org on the Billions for Bankers page.
Politicians love using this type of supply-demand scenario but the fallacy is clearly demonstrated at the url above. They use it to hide the real causes as indicated in other comments.
see also
KillerSpray [] com
BankofBC [] com
bcnumber1 [] ca
vhsjvc 11 months ago
Moral conclusion of video: Bakeries are bad.Vegetables>Bread.
kostasmouratidis 11 months ago
You would think that an overproducing and overpriced bakery that not all available buyers are patronizing would drop their prices to raise income, but the bakery can't do that... the baker owed six dollars a loaf on that particular bread *months* before the dough ever saw the oven.
Economic theory is fine, but running a business has next to nothing to do with economic theory.
SnarkLicker 11 months ago
Inflation and Supply & Demand go hand in hand. You just have to view currency as a product like bread. If people were to save all of their money into their savings account, then the business has to lower prices to entice people to take that money out of savings and give it to them.
munkyusm 11 months ago
FUNNYY HAHAHA! THE MUSIC IS LIKE LOOL
unrivaled37 1 year ago
I have to join those who say this video is NOT an explanation of inflation. It is a demonstration of supply and demand. If we can't do better than this in educating everyone about inflation, then we really are in big trouble.
ConstantViewer 1 year ago
what about lower prices because of cometition in town. This is an unrealistic monopoly. what a biased piece of propaganda against that "greedy business"
chbs4122 1 year ago
This is a LIE. Delete it, because it's wrong to lie.
richardcadbury 1 year ago
Bullshit! This is price inflation. Real inflation is the increase in money supply. Another words printing money. Any time you have more supply than demand it makes something worth less. That's what the fed is doing, destroying the value of the dollar printing money for a broke government which can't stop spending money it doesn't have. Destroying the poor and middle class. Government cannot create demand where there is none. As long as we have a central bank and Keynesians boobs like Paul K
motto775 1 year ago
If all 10 were employed and there was only a bakery in town as well as 10 residents then the bakery would have 10 employees and therefore could produce 10 pieces of bread (as the ratio seems to be 1:1 of workers to bread). So this would have no inflationary consequences.
93emiel 1 year ago
Fucking dickhead.
St00ge1 1 year ago
that isnt inflation, its supply and demand and how the free market is supposed to work. If the price of bread gets too high then one of those people holding on to a wad of money should open their own bakery then theres 2 bakeries that compete for business and the price comes back down.
rustyscrapper 1 year ago
@rustyscrapper exactly!!! inflation is process when value of money goes down witch has effect on prices that goes up. Imho inflation is just another hidden tax.
sebek23b 1 year ago
I know a bunch of people have already said this, but this misses the integral part of inflation. The reason why prices go up isn't because more people have jobs, its because the amount of money in the system went up.
Keeban3 1 year ago
Perfect!
stollincash 1 year ago
Thankfully we have competition and when the government does not interfere the market tends to lower prices to satisfy market demand.Not only does the cost go down but choices tend to increase, however government would perfer higher prices higher prices lead to higher taxes.Higher sales revenue=higher tax rate, higher personal income= higher income tax, higher cost of goods= higher sales taxes collected.More success= more regulation,more regulation=more fee's and fines collected=less choices&jobs
goldsilverandiamonds 1 year ago
What is the song called?
SmoothCriminalAaron 1 year ago
Profit is a side effect of good business.
The baker bakes bread because he's a baker and makes a living from being one.
If I were the baker I'd by very happy making more loaves and charging the same.
I would make more money from more people wanting to enjoy my excellent bread, not make the people poor by working a financial asset management system used by the banks!
I want to feed people and be loved for my fine bread, I'm a baker not Goldman Sachs!
:-)
smudge6699 1 year ago
This is one of the worst videos I've seen on this topic. First, very very rarely does a monopoly exist on a product like bread. Competition keeps prices down even when demand is up. Government monetary policy is mostly responsible for inflation. Unemployment over the years does not vary by 100% as this video suggests (5 people demanding bread going to 10 people demanding bread). Money is a commodity just like bread!
mikebri527 1 year ago
this about supply and demand in a free market system......NOTHING TO DO WITH INFLATION!!!
REALLY!!?
HermandLo 1 year ago
This aint inflation kid
NAWRARESNAW 1 year ago
There is an unseen factor in this animation: the jobs the other people are getting. To have a real microcosm, it should be implied that there is only the bakery in the town, and nothing else. This way, the video would demonstrate that rising prices for the same product creates a mathematical problem in the money supply itself...
Simboiss 1 year ago
Thanks to the US government, we'll all get a crash course in inflation very, very soon!
jln55 1 year ago
Very misleading; the author lacks basic understanding how economics works, his example is good only for situation when people get money for nothing (social payments, unemployment doles, welfare – funded not by taxes, but through money emission) – money supply grows but amount of goods they can purchase for these money stays the same. If 5 previously unemployed people start to produce goods that can be purchased but other people, this would never lead to inflation.
greedybustard 1 year ago
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This video DOES show inflation!
When 6 people are employed and 4 unemployed the market will presumably still clear at $3 and so all 6 employed people will be able to buy bread. However, when the 4 unemployed workers become employed, those same six people must pay $6 each. This IS inflation. The value of each dollar has decreased! In this case, instead of the gov't printing more money, the wages of the newly employed add to the money supply, thus decreasing the value of money.
Anytus2007 1 year ago
This video DOES show inflation!
When 6 people are employed and 4 unemployed the market will presumably still clear at $3 and so all 6 employed people will be able to buy bread. However, when the 4 unemployed workers become employed, those same six people must pay $6 each. This IS inflation. The value of each dollar has decreased! In this case, instead of the gov't printing more money, the wages of the newly employed add to the money supply, thus decreasing the value of money.
Anytus2007 1 year ago
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Yeah, that video really shows how it basically works. The one thing it doesn't show is how everyone of us can fight back inflation before it actually happens. You don't know how that works? Try againstinflation[dot]com on google and you will see how that works.
againstinflation 1 year ago
next time I want some audio
TheHomelessCripple 1 year ago
You wasted 5 minutes and 5 seconds of my life
MrSystematic01 1 year ago
@MrSystematic01 You loved it!
519realshit 1 year ago
so the only way to fight inflation is for entrepreneurs to open new bakerys. but the increasing government control of healthcare and high taxes on small businesses keeps that from happening. so who is to blame? once more, government growth. in the words of Ronald Reagan, "government is not the solution to the problem, government IS the problem."
petrafied77 1 year ago
@petrafied77 not quite, because this video is a bit off, inflation is when the money supply is inflated. so money needs to be a literal of human labour (gold, silver, salt, oil, lumber, something real) which in turn can be 'traded' for something equally real like bread from a bakery. a 'trade' is a 4-point process: Bread for Gold, receipt for dollar.... Bread is the thing being purchased, gold is the base commodity of exchange, and both have a receipt (dollars being a receipt, nothing more).
Peonmite 1 year ago
Inflation is increase in the overall money supply which will increase the prices eventually as a result, but the prices may not rise for a long time even when the increase of fiat money supply is happening, but it still means inflation and the distortion IS occurring even tho the prices are not rising yet. Price increase can happen gradually or rapidly ,in unpredictable industry or not. Today inflation is in education, financial assets, healthcare sectors (because of the heavy Govt involvement).
alennna 1 year ago
cute vid! but completely off topic. you are confusing price fluctuations due to supply and demand, which is a very important for the economy function of the free market.(If the Govt regulated the price to stay low during the unemployment for example, it would mean no profit and the Bakery would have to close= bread shortages. but more demand= higher prices= signal for potential profit= more Bakeries!) So the price fluctuations play a very important role in a free market but its NOT an inflation.
alennna 1 year ago
I agree with BourneAccident and garybsg and benhuey etc. This has nothing to do with inflation. Inflation is caused by increased money supply. This video is simply about supply and demand.
lukehawthorne 1 year ago
In this example, the bakery has a monopoly. It assumes that the bakery has complete control over prices. This is not true in a perfectly (or near) competitive market, as they must take the price as given. If the bakery raised the price from $3 to $5, the buyers would simply go somewhere else to buy bread at a cheaper price.
kevc015 1 year ago
fail
6StringSlingerX 1 year ago
This is demand-pull inflation..
dangerbaig1 1 year ago
Inflation = increase in the supply of money
Deflation = increase in productivity
ntn1987 1 year ago
At 2:40 you said: "Now the new higher price will lower the demand"
Price only lowers the QUANTITY demanded, as in a movement along the curve.
Price never shifts the demand curve.
itsjusttennis321 1 year ago
Intensely emotional music. I almost cried when the bakery had to raise the price of bread for the second time.
GrundleKing32 1 year ago 17
Actually, I have to disagree with the people who said this illustrates supply and demand rather than inflation. It correctly illustrates neither.
Inflation is an increase in the quantity of money, which devalues each unit of money, raising prices.
S&D, in an unhampered market, would bring the price of the loaves to it's competitive level, in this case $3.
What the cartoon illustrates is monopoly prices, which are only possible if the firm charging them is protected by force from competition.
JesseForgione 1 year ago 22
very simplistic and primitive explainations, also fails to address other important types of inflation such as hyperinflation, and also doesn't use economic language (i will help you - the type of inflation you talk about is demand - pull).
Overall, decent, but could do better - B grade
ilovepooloads 1 year ago
Supply and Demand...rename it, it wasn't very easy to watch, would be better with voice over.
TheMrchilled 1 year ago
Lol 6.00$ for a bread. That must be the most expensive bread in the world. :)
EMPPT 1 year ago
Inflation is not the same as rising prices,,, good video,, but false information... Inflation is the expansion of the money supply... Rising prices may be the result,,,, but that is different.
INFLATION = EXPANSION OF THE MONEY SUPPLY..
RESULT OF INFLATION = RISING PRISES (but this is not always the case)..
bjarnet3 1 year ago
lol funny video but ur explanation of inflation is WRONG.
check my channel for the right explanation.
edjuh10 1 year ago
wt 'bout the fed? lol
luisdaniel84 1 year ago
very moving, i think i got too into the senario
dombristow 1 year ago
Inflation is an INCREASE of the money supply and/or credit. This video explains supply and demand principles which is what drives growth and recessions in an economy, not an increase or decrease in prices. Prices are a production of supply and demand of MONEY.
residentzombie 1 year ago
This video does not illustrate "inflation". This video shows how supply and demand works. But that's not inflation.
Inflation is the increasing of a economy's money supply relative to the amount of goods and services being produced. When more money is produced beyond GDP, that money causes all the rest of the money, already in circulation, to be worth less.
Inflation is NOT rising prices. Rising prices are a consequence of adding too much money into an economy relative to GDP.
sspiega 1 year ago 41
@sspiega It's an equivalent, then. If the prices rise, it implies that your dollar is worth less...
Simboiss 1 year ago
@sspiega
So does that mean that if GDP increased more than the money supply you'd have lower prices along with inflation? If so then why do they use the consumer price indexes to determine inflation rather than the three M's (well four if you include the MZM?
Keeban3 1 year ago
@sspiega I was thinking... "I hope no one thinks this is what inflation is..." You nailed it =P
ParrhesiaJoe 9 months ago
It says the others go and spend their money elsewhere, but there is only one bakery. So do the three buyers who leave first, go to the cemetery to buy a plot, cause with no food, there is no life. With only one bakery, the town has to be pretty small. I mean the first three that left were probably related to the owner. So, when his family stopped benefitting his business, he essentially starved them to death, rather than help them. Is this about inflation, or our future health care system?
bobbyoverturf 2 years ago
This is so far off the real reason of inflation it's funny. Good try though.
bweazel 2 years ago
Actually, this trade off of unemployment for inflation is only true in a Keynesian system, which is based on demand management. Basic economics shows that supply side management can result in lower unemployment and lower inflation. The video doesnt mention that if the bakery can lower its marginal cost of production, it can produce more bread at a lower cost, thus producing more and still making the same if not more profit.
nimloc 2 years ago
Now add the speculators and the front traders and hedgers. and by golly you'll need to measure that currency every second against other currencies..
lastly we'll need to add the worst of all: the commodity speculators.
this is a great starter vid though! I say great job! 5*s!
uturniaphobic 2 years ago
This video is as simplistic and innaccurate as the graphics used in the video. Inflation has more to due with fractional lending than supply and demand.
we3pugs 2 years ago
this is more acurate as supply and demand
Penksimo 2 years ago
This video HIDES the fact that the government NWO has been secretly increasing our debt and taxes, and flooding the market with dollars thus causing hyperinflation and DEVALUING THE DOLLAR.
PREPARE FOR THE STOCK MARKET CRASH! .
mkmason2002 2 years ago 2
Already has...
timetraveler3797 2 years ago
@mkmason2002
yeah it didn't go there but I think to do so would defeat this author's intention which I think is to demonstrate basic inflation cause/effect.
And I agree the DXY is being assaulted! poor dixie. I'd be digging gold if I could find a spot.
uturniaphobic 2 years ago
This video ignores the fact that if the baker doubles the price of his bread (and his profits) - at least one of the people who walked away from his $6 bread will go start a bakery of their own and drive prices back down. A high price may be the result of a producer's "greed" or the result of changing labor and resources. Either way, the high price and the profits it implies is a call for labor, resources and creativity to produce more of that good. freely fluctuating prices are crucial.
gergenheimer 2 years ago
Thanks for bullcrap video !
davidguywilson 2 years ago
This is soooooooooo Wrong The bakery will either meet the demand or someone else will. The market loves a void. A higher price will produce demand for a sub. Those paying for the higher price didn't get the money out of thin air. The dropped their demand for something else to get the extra money. INFLATION IS IMPOSSIBLE WITHOUT GOVERNMENT AND AN INCREASE IN THE MONEY SUPPLY. THEY WOULD LIKE YOU TO BELIEVE OTHERWISE BUT IT IS A GOVERNMENT CREATED MONSTER!!!!!
auxano 2 years ago
thats demand pull but doesn't explain cost push
rawchicken123 2 years ago
that's because cost-push is bullcrap.
if one good gets more expensive, it will become less desired and therefore people will direct demand to other things, which will then increase in price.
On a side note, this video left out SUPPLY, and it also said that supply affected demand. It does not.
latewire 2 years ago
it doesnt matter if its bullcrap its bullcrap thats on my exam.
rawchicken123 2 years ago
hey by the way beautiful song in the background. Mind telling me the title..?
joemama6287 2 years ago
Fun video, but not exactly about inflation.
It should be titled "Supply & Demand Explained."
Inflation = Increase in the price of goods and services through currency devaluation.
Deflation = Decrease in the price of goods and services due to a retraction in the overall money supply.
Stagflation = Presence of inflation subsequent to a retraction of the overall money supply.
Supply & Demand = Price shifting due to balance changes in the value and need for goods and services.
BourneAccident 2 years ago 34
Good comment...thanks
jusahah 2 years ago
@jusahah no well done this does help with the basic principle of inflation. Shows aggregate demand higher than aggregate supply causing inflation, good job (Y). Maybe you should have also showed the bakery's employees demanding higher wages, which forces the business to pass on some of the cost to consumers.
wimanwimanwimanwiman 1 year ago
@BourneAccident Inflation has more than one origin. It comes mainly from too much money created by private banks, but also from profits, investments, stock purchases, etc...
Simboiss 1 year ago
@Simboiss - Yes... you're correct. Inflation can have several contributing factors with fractional reserve lending being the main culprit along with government issued bonds. I don't see where profits, investments, or stock purchases create inflation. Profits occur through exchanges in goods and or services. Investments and stock purchases are more simple exchanges. Please explain. Thanks.
BourneAccident 1 year ago
@BourneAccident actually, this video explains inflation very well, because yes, inflation is about prices going up due to a currency devaluing, BUT the reason WHY money devalues due to increased supply is because of the simple things that happen in the supply and demand of goods and services. if there is more money there is more spending, which can lead to overdemand, which can lead to a rise in general prices. however this video is a little over simplified.
theboiljulia 1 year ago
@theboiljulia-...I respectfully disagree... however... increased money supply "may" lead to more spending, but most of this spending is does not translate to goods and services for "we the people" with prices increasing due to more demand... more so for government spending, etc. Let's get even simpler... new money gets its value from "existing" money... thereby making the existing money worth.... less.... separate from supply and demand issues...
BourneAccident 1 year ago
@BourneAccident. youre absolutely right, BUT, demand does not go up for no reason, whether its more demand for money or trade, if there is more money there will be more spending and thus more demand for trade, but if the supplies of trade are still at same rate, employers and employees alike will end up demanding more money for there work from customers, that is also the reason why the prices of some things go DOWN during inflation because if consumers have more money buy less low quality stuff.
theboiljulia 1 year ago
.....new money doesnt devalue existing money for no reason, its not like "oh no there is more money in the money supply that would mean that money is worth less", its all to do with business. if theres mor cash, theres mor spending, thus more trade demanded, thus mor jobs demanded, thus more employment, thus more spending again coz the newly employed spend more, thus more demand again. and it just continues until traders put prices up due to limited supplies of stock.
theboiljulia 1 year ago
@theboiljulia YOU SAID IN INFLATION PRICEES GOES DOWN I DIDN,T UNDERSTAND HOW?
israrahmedkhail 1 year ago
@israrahmedkhail in some cases, more money in the money supply can cause the prices on lower quality goods and services to go down. think about it, if everyone had more money, they'd rather buy a dinner at the ritz rather than a burger at mcdonalds, so the demand for mcdonalds meals would go down, so mcdonalds would put the prices down. but the oposite would happen to meals at the ritz. get it?
theboiljulia 1 year ago
@BourneAcciden The only value currency has is what i can buy. Inflation is the rise of the price level. The rise in price level causes the devaluing of the currency not the other way around.
atki2828 1 year ago
@atki2828 - I respectfully disagree. Dilution of the overall money supply is a causative factor in inflation. That's a fairly well accepted fact, even by the mass media. The less your money is worth, the more of it you need to purchase things. Supply and demand causes rises and falls in price level. If you think about it objectively, it will become clear.
BourneAccident 1 year ago
@BourneAccident I disagree. An overall change in the price level can and does happen without a change in the monetary base or the money supply. There are productive shocks such as the change of the price of oil or a natural disaster that affects the price level. There are other complicating factors such as the fact that a lot of prices are not determined by market forces, but currenciec only value is what it can get currency has no value of its own.
atki2828 1 year ago
@BourneAccident If currencies were pegged to gold than that could determine value, but since their floating there value is determined only by what can be purchased with them. Your statement is right just flipped around the higher the prices are the more money you need.
atki2828 1 year ago
@atki2828 - Okay then... but keep in mind that.... money... is really just like any other commodity... gold, wheat, corn, etc... and by the way... you really don't ever want money to be backed by gold... guess who owns all the gold? Tee hee hee...
BourneAccident 1 year ago
Stagflation is not "inflation subsequent to a retraction of the overall money supply." It is inflation with a stagnant economy i.e. low GDP growth. Plus retraction in the money supply causes deflation not inflation.
Keeban3 1 year ago
@Keeban3 - You're right... Stagflation is not inflation... directly... Stagflation is slow growth and high unemployment, but with essential goods and services rising... The root cause of this is due to a retraction in the overall money supply. Inflation is a result of devalued currency, mainly through quantitative easing....
BourneAccident 1 year ago
@BourneAccident
Surely you mean growth in overall money supply.
Keeban3 1 year ago
@Keeban3 - Yeah.... Kind of hard to sort out such complicated matters within the confines of YouTube comments... Thanks.
BourneAccident 1 year ago
@BourneAccident
stagflation sounds like a fake word
unfad1ng 1 year ago
@unfad1ng - It is... as is most all the other baloney you hear from the Fed and all these big time economists...
BourneAccident 1 year ago
@BourneAccident
well i happen to know its not a fake word even thought is sounds like one
unfad1ng 1 year ago
@unfad1ng - Right... Technically... it is a real word ... and I agree.. it sounds fake... but what's really fake is all the economic jibberish that we are bombarded with from the Fed, the news, economists, etc. Take Greenspan for example... Just like that old comic Norm Crosby... Greenspan intentionally convoluted his sentences and not really saying anything at all... just smoke and mirrors...
BourneAccident 1 year ago
@BourneAccident
Well i agree that sometimes people just talk bullshit but stagflation is a real phenomenon and the reason why its sounds so wierd is because its a crossing of the two words stagnation and inflation and crossings liek that always tend to end up with a strange result
unfad1ng 1 year ago
Inflation is a consequence of governments printing too much money. The employment explanation of inflation fails to account for historical phenomenon.
IVoteNone 2 years ago
this might have been true hundreds of years ago in a simple economy but in today's economy the price of goods has less to do with supply and demand than with money policies of banks and trade... the inflation that has been experienced in the US comes mostly from the money supply inflated by the Fractional reserve system backed by a central banking system..money use to have real value based on gold.. now money has value as debt.. debt being the largest industry in the US..
xadam2dudex 2 years ago
What you have demonstrated "very nicely" is NOT inflation. It is the Law of Supply and Demand.
Inflation is a decrease in the "purchasing power" of the medium of monetary exchange, as a result of the increase in the supply of said medium.
UtubeMyAccountName 2 years ago 2
YES! The maker of this video is confused.
unoitall 2 years ago
Unemployment effects velocity as unemployment goes down the velocity of money increases.
The equation is MV=PQ where Q is total output P is price level M is money supply and V is velocity.
rubindr 2 years ago
then why do we have high unemployment and price deflation cpi is negative
rubindr 2 years ago
Employment can be one factor, but the primary cause of rising prices is an increase in the supply of money.
IVoteNone 2 years ago
This is bogus. Its always the countries with the highest unemployment that have the highest inflation and countries with low unemployment and high growth usually have low inflation. More unemployment means less productivity which means more inflation. This video has it backwards. Its no wonder all south American economies with high inflation have high unemployment. It goes hand in hand. Switzerland has low unemployment so they have low inflation. Inflation just means expanding the money supply
30percentplusreturns 2 years ago
I'm no expert, but wouldn't both the examples you give cause inflation, since you're increasing the money supply in either case?
BlacksAreBeautiful 2 years ago
Inflation makes you wanna cry! :(
OmarThePug 2 years ago
inflation makes me happy.
ne1l007 2 years ago
at times the inflation rate was over 20 percent during the 19th century. every 20-30 years there would be a gold rush and there would be massive inflation.
look it wikipedia inflation during the 19th century
rubindr 2 years ago
that's a patently false statement. the marketplace is run by suppl and demand. why is cpi going down and production going down right now.
Also there is inflation with the gold standard also, except it occurs randomly when people find gold and silver. why do think the industrial revolution happened. The nobles fearful of inflation (since gold was discovered in the new world) kicked all the peasants off there property and sent them to the city where they were to work in factories.)
rubindr 2 years ago
you forgot to draw the Central banks in the background printing all that green stuff. This example has so many flaws its ridiculous!!!
increased production lowers prices ALWAYS
more people getting jobs and producing things LOWERS PRICES
it is the CENTRAL BANK INFUSIONS OF NEW PAPER that causes all of the inflation.
look to the record
GOLD STANDARD: +100 yrs of Dollar Price Stability money became more valuable
PAPER SCHEME: 96 yrs DOLLAR LOST 98% of value
joeymackaroni 2 years ago
there are 3 types of price inflation demand pull, which occurs from an overall increase income in the economy thus creating an increase in demand for all goods. cost push which results from an increase in factor costs such as oil. oil is a key component for all goods since it is a cost for all goods when the price of oil goes up the price of all goods go up to maintain a profit. and finally monetary inflation which is a long run phenomena associated with the supply and demand of money
rubindr 2 years ago
The historical phenomenon of stagflation refutes the keynesian notion that inflation and employment are inherently linked.
IVoteNone 2 years ago
True however nairu is a long run position. in the short run their is still a trade off between inflation and unemployment. its called the triangle model it allows for shifts in the short run phillips curve so as people change their expectations of inflation the curve shifts so it ends up on nairu. the recessions of the 1980's clearly show this point when volcker deflated the money supply he created a recession in 1980 as a result
rubindr 2 years ago
This is about supply and demand. Inflation is NOT rising prices; it is an increase in the amount of currency in circulation.
The Federal Reserve ("not federal, no reserves") prints money out of thin air & loans it out at very low interest rates, enticing people (& govts) to borrow much more than they otherwise could have. As people have easy access to more dollars, sellers can raise prices. Rising prices are a RESULT of inflating the money supply.
Elect congressmen who will abolish the Fed.
SaveCongress 2 years ago 3
Unlike on a whiteboard, when people can't afford bread they don't just go away--they steal it. It the baker gets in the way, he's toast. Fewer bakers, less bread, higher prices, more toast, fewer bakers...
JuanVoyce 2 years ago
This theory of inflation overestimates the amount of bread thievery that occurs in a developed country on a daily basis.
IVoteNone 2 years ago
Economic theory of developed countries is an aberation. The base line is profound scarcity...toward which the entropy of all systems returns.
JuanVoyce 2 years ago
inflation has everything to do with the interest rate since the monetary base is what we use to manipulate the interest rate. the interest rate is determined by the supply and demand for money. when the fed increases the money supply the nominal interest rate goes down. it is only when people increase their demand for money and the nominal interest rate goes up that we we experience inflation
Nominal Interest rate = real interest rate + inflation
rubindr 2 years ago
the thing is price inflation is more tangible because it actually as an effect on the economy while monetary inflation is more of an idea and only effects the economy in the long run when people change there demand for money as a reaction to the change in the money supply
rubindr 2 years ago
This video is not about inflation, it is about prices.
They are not the same thing, price is a result from inflation, but it is also a result from increase demand.
Inflation is the increase in money supply, it is when money loses value, not when demand is increased.
Visfen 2 years ago 2
People getting jobs creates inflation because the demand for bread goes up and they need to reach their equilibrium, thus raising the price level.
ThAtCrAzYgUy619 2 years ago
no the greater demand creates inflation in this case since everyone has more income demand shifts outward and prices go up, this is called demand pull inflation
rubindr 2 years ago
So ppl getting jobs creates inflation? just wrong.
d3th2u 2 years ago
in the long run as it takes time for for factor prices to adjust because of contracts. Also our country isn't in a closed system, its a large open economy so the analogy holds since we trade and borrow from other countries.
Also deficits do not increase the money supply as the government sells bonds to cover them. the money supply is increased by the fed when it buys back bonds from the private sector (banks)
MV=PY
Velocity is a function of price inflation as it is a tax on saving.
rubindr 2 years ago
Comment removed
rubindr 2 years ago
This is Price inflation and is determined by the goods market in the short run. in the long run monetary policy is associated with inflation as factor prices (stick in the short run) adjust. in the short run suppliers increase production as price goes up however since prices go up workers bid up there wages in the next contract negotiation and output then drops and prices increase as factor costs increase. this is called the natural level of output, however monetary inflation only holds ..
rubindr 2 years ago
It seems to me that inflation is essentially the ratio of money supply in relation to goods and services. In a closed system it behaves essentially as any other commodity - an increase in the money supply lowers its value (e.g. printing fiat money). The analogy in this video breaks down because it's not a closed system. The employer is outside the box.
More accurately we should have the non-working stick figures picking money off of trees or something, to buy bread and drive up the price.
EdgeRetro 2 years ago
This has nothing to do with inflation whatsoever. The objective purchasing power of money is solely determined by the supply of, and demand for any given form of money; or expressed quantitatively as MV=PQ (quantity theory). Inflation and employment are not related at all, at least in the long run. Also, RedKatushya, money does not have to be backed by the government, only fiat money does. And it's not really the case that it's "backed" by the government, but rather imposed by the government.
Questfortruth86 2 years ago 4
Next question:
If the economy destroys $50Trillion in wealth over 18 months (stock market prices and real estate/ balance sheets values etc) And then the Gov comes in and prints about $3 Trillion in new Paper dollars - what is the result over the NEXT 18 months?
What are ALL the elements affecting/ driving Deflation?
FreeAgain2 2 years ago
Inflation. At first prices will rise slower than monetary growth, and then at the same rate, and eventually, prices will rise faster than monetary growth. The final stages of an inflationary scenario will have prices outpace the printing press.
Deflation occurs when fake computer dollars are deleted. All of the credit transactions not backed by actual money, or what some economists call "money proper," contracts. We may see a deflationary type of scenario in the U.S, it all depends on the gov.
Questfortruth86 2 years ago
economics:the explination of the obvious in the terms of the incomprehensable
djboony 2 years ago
Economic beginner, it's ok. The cost of things going up is supply and demand, not inflation. INFLATION IS WHEN THE GOVERNMENT PRINTS MORE MORE MONEY THEN GOODS PRODUCED. Ask Mr. Obama he's an expert on this.
garybsg 2 years ago 9
very true...i guess
jusahah