Inflation, Deflation & Capacity Utilization

A discussion of inflation and deflation

Category:

Education

Tags:

• inflation
• money
• supply
• deflation

[ulysseinvest]

khanacademy,

You usually have excellent videos but this one was my first deception...

Inflation and/or deflation only refers to the increase or decrease of the money supply. Price fluctuations are merely a result of inflation/deflation. Price can fluctuate without any inflation/deflation of the money supply (increased need for a product, scarcity in ingredients, or product runs obsolete, etc). Inflation of the money supply is the most insidious way to redistribute "wealth" stored in dollars.

[ulysseinvest]

@jahege

If you decide to take the red pill, you stay in Wonderland and I can show you how deep the rabbit-hole goes. Welcome to the fallacy of our century - that with the CPI we can compute the degree of inflation of a currency. M0 is increasing at great speed but prices are not moving (decreasing?). Prices will start moving in xx months when M2 picks up. At which point they'll just raise rates up to yy% to bring back in the excess of money supply. Let me know what your dictionary thinks.

[IBMua]

9:00 Rolls Roys costs more. ;)

[QCREIGN]

17 people are ignorant

[midtra52]

@lugankid Except that the Fed never decreases the money supply. It's been in existence for almost 100 years now and we've had inflation the entire time. We would need 100 years of deflation to get back all the money the Fed has stolen from us. And you can't assume a savings account gives you more interest than the inflation rate. Right now true inflation is around 9% when it's calculated honestly. The most you can get out of a savings account is 1.5% and that's pushing it.

[lugankid]

@midtra52 Well Grandma's savings would not wither away if they were in a interest earning bank account. The interest would adjust with inflation in most savings. The hard currency would lose half its value (purchasing power). The fed provides liquidation when the banks need it (2008). And then they can decrease the money supply as well afterwards once the banks are solid again. The banks did a crap job, but its better than the alternative of not bailing them out.

[midtra52]

@lugankid I'm not talking about hard currency and neither is the video. We're talking about fiat currency. And an actual hard currencies value doesn't go up, it stays the same, just the value of the fiat currency drops due to dilution from printing and in fait dollar terms it looks like the hard currency is up.And the point is that irresponsible banks have a huge amount of debt so we're rewarding them by printing money while we punish the responsible banks that hold a higher level of assets.

[lugankid]

@midtra52

taking from this simplified version, you would also owe half as much as well. Most people have a lot more debt than savings

[lugankid]

@midtra52 98% of gramdmas' mattress account has lost its value. But then again if its hard currency, the antique value of it has gone up. So no your wrong

[ybulldog14]

@stellaconcepts this guy is a genius, man, come on.

[g7bgko]

Its difficult to realize, but you have to overcome the belief (which i see most commentors here have) that inflation is only dependant on money supply. It is nicely illustrated in this video that velocity of money is just as infuential in determining inflation as money supply. Inflation is simply the general price level of goods and services, and contrary to what commentors have insinuated, the information in this video is not misleading.