prices go up?
Why.
Help.
Why is government printing more money and giving it to me a bad thing. I need it to live.
I’d like both the econ101 (fake, lib, propaganda) and the marxist (real, truth, based) answer pls.
Inflation is when shit costs more. It can cost more because money supply goes up and devalues the money. It can cost more because of supply or transportation issues inducing scarcity. It can cost more because of capitalist restrained production output. It can cost more because capitalists know they can get away with charging more
The last 2 years have basically just been supply chain issues setting up the expectation for inflation, allowing capitalists to gouge prices and pretend they have no influence. But all you need to see is how they're posting record profits over and over to see that isn't the case.
Also huge consolidation during Covid. A lot of smaller fossil fuel producers were acquired during Covid, giving big oil companies even more control. Of course, they had to somewhat follow what OPEC was doing, but OPEC was just doing the same thing (pushing up prices), since they are a cartel by definition.
My favourite thing about opec is they'll have a production quota X and they'll produce some Y which is acrually below the quota X, then they'll decrease their quota Z, which is less than X but still more than they produced. Somehow the markets respond by increasing prices even though the supply uasn't decreased and there isn't even a potential for a decrease based on the new information. Very rational system.
But all you need to see is how they’re posting record profits over and over to see that isn’t the case.
You more specifically want to look at profit margins (profit as a percentage of revenue) and not total profit. When there is inflation, total profit will go up by nature of things costing more. However, when companies are using their market power to specifically extract more profit by raising prices, that will be reflected in profit margin.
Everything costs more and people have to take debt till they can’t pay anything anymore. That leads to recession, right? When the govt bails out the banks and causes another inflation because they’re printing more money? So now everything costs more etc etc etc.
But can’t the govt, at the bailout stage, bail out the people and tell the companies to not increase price, thus not causing inflation?
When the govt bails out the banks and causes another inflation because they’re printing more money?
Not necessarily. If owners of big banks (rich people) lose all their money and the government prints money to make them whole, this shouldn't create any inflation. Printing by itself is not what creates inflation, you can print $100B and hand it to Bill Gates and this won't cause inflation since it won't increase demand. Of course doing that is unfair and a total waste of money, but that is capitalism...
yes https://en.wikipedia.org/wiki/Nixon_shock
but :porky-happy: didn't like that so they don't do it anymore
the only reason prices go up is because companies decide to charge more.
they may spout a lot of bullshit for why prices go up, most of which is bullshit. Check out Richard Wolff because he covers this a lot
:RIchard-D-Wolff:
The other replies explain the excuses which is also useful, but at the end of the day, it's this.
why did they suddenly decide to charge more? If they always had that price making power, why weren't they already using it to charge as much as they could?
I listened to the Richard Wolff episode and he never covered this, even after I was shouting into my device my question.
His it-really-is-that-simple schtick got tired. Why wouldn't he answer my question?
The only possible answer would be that covid gave them an excuse. Oh I'm sorry, capitalists need an excuse to raise prices or else they cannot get away with it? Sounds unlikely, knowing capital the way I know it.
Nowadays? Price goes up because computer tells business price up = more money. My first desk job was building that crap for a company :deeper-sadness: :gun-hubris:
:meow-hug:
So computer says to increase price. Business increases price. We pay more. But then we have less to pay for other stuff. Right? So other businesses have to reduce price? No?
Edit: or we just chose company that didn’t increase price?
It's not coordinated well enough between firms, so the computers could always break the economy. There's a few valves being turned, part of the model are wage surveys and government stats so in theory the market can bear the cost increase. My particular thing was retail self storage, so people renting storage lockers, usually because they got evicted or were in otherwise dire straits. A portion of the business came from things like pharma reps/drug dealers, like lawn care businesses and some other types that wanted to store things around and not have to drive further somewhere to get some equipment or whatever. So those could pass the cost on to someone, or just take lower profit margins themselves.
If existing customers couldn't afford it then they either moved their stuff out/threw it away, or called the store and the manager looked at the computer and decided based on how they were feeling that day and how racist/annoyed they were by the customer to give them a manual override on the price. Or stopped paying for the unit and then it went to collections, usually ended up auctioned off (sight-unseen by law) and hopefully that at least covered the back rent. Some people got checks because it covered more than the rent, but that was rare.
In the broader market, there will be people who (and businesses which) just run out of cash. They'll usually find some meager form of public assistance, or take on debt. Downsizing, reducing standard of living, theft to get by are also levers that consumers pull. The debts are held by banks, who get bailed out when things get really bad.
That sounds like a soul sucking job. Sorry you had to go through that.
I’m getting the sense that banks taking on the debt and then getting bailed out is a fundamental fucking aspect of this system, given how many people have mentioned it.
When the govt bails out the banks (by paying them what is owed by the people), that also causes inflation then right?
Do the govt can just “bail out” the people instead.
Why would they do that? People do not fund political donations, banks do. Also, all of these people and their kids have gone to the same schools, same circuits, same parties, sometimes for generations. It's real cool club, and you're not a part of it.
No no I know, I’m saying a good govt can bail out the people and tell companies to not increase costs and thus not have an inflation.
Maybe, but then investors won't invest into the country, capital flight and all of that. That being said, no.one knows what would happen if all the countries decided to do that.
What is happening is that we are stretched, and so we are inclined to negotiate wages even more.
When some companies start raising their prices and then other prices start raising theirs to catch up, there is higher inflation. When some companies raise prices but people buy less and most of their competitors don't follow along, there is lower inflation.
Inflation is increasing the supply of money. It is controlled by the feds through monetary policy. Counterfeiters also increase the supply of money and The Joker decreasing the supply of money when he sets money on fire.
Some inflation is good, it incentivizes the rich to put their money in investments so it doesn't devalue. We also have growth in our economy so more money is necessary, otherwise money will become deflationary.
Deflation happens when the supply of money is reduced or when net productivity increases. Deflation is generally bad and hurts people. Deflation causes a decrease in spending, why buy the loaf of bread now when it'll be cheaper tomorrow. Less demand can cause less production, which can lead to layoffs. So the feds always maintain the idea that inflation is always happening, to not incite a panic.
Threats of high inflation usually is a self fulfilling prophecy. When consumers think that inflation is high, they are willing to spend more on goods, which causes prices to go up.
When the feds said that inflation was transitory, they were talking about how the demand for labor was higher than it should be and that labor demand should shift down. They do this by putting the squeeze on companies by raising interest rates, which makes them hire less. This is seen more in the tech industry where demand for already extremely high wage tech workers were increasing, where it absolutely should not be. So this and the perceived high inflation was the reason why the feds said inflation was transitory. It probably still is, except now we have greed-flation and prices aren't coming down.
What are these “interest rates” I keep hearing about. Is that how the govt. puts more money in the system?
You should listen to the chapo episode from 3/8 that just turned free. It's pretty much a lecture from Richard Wolff, a Marxist economics professor. He answers a lot of the questions you have in a great way
Central banks can create money out of thin air by way of loans. The interest rate on those loans is how expensive borrowing new money is. A high interest rate means that it's more expensive to borrow money so less of it gets created. A low rate means it's really cheap to borrow money, and sometimes crazy shit will happen like rates going to zero, which means money is free to borrow, or rates will go negative, which means the central bank is paying you to borrow money.
Central banks only loan out to other banks, and those banks are the ones businesses and people use, so any loan you'll ever get is going to be based on the prime interest rate the central bank set.
Inflation can be caused by a lot of things and isn't inherently bad. More people means you need more money. More economic growth means you need more money. But if there's more money and things haven't changed value, then each unit money is worth less, so prices go up.
In the last few years, inflation has mostly been driven the other way: companies increase prices because all the other companies increase prices as well, so everything costs more instead of being roughly equal in terms of value trade.
Monetary policy is really weird and it's basically a form of collective agreement magic.
Why can’t the central bank just give loans to people and businesses directly? Why do we even need other banks? Can we set up a credit union or something and get money from the central bank?
Cuz the banks will obviously charge higher loans cuz they wanna make a profit. And they’ll give loans for real cheap to the rich.
We also have growth in our economy so more money is necessary
If there's growth wouldn't there be a higher rate of consumption and so money circulates quickly? (Assuming this isn't mostly growth in heavy industry and machinery)
Circulation of money does matter on inflation, however the rate of circulation of money, also called the velocity of money, doesn't change the overall supply of money unless the velocity of money is really low. Like if people in Idaho decide that putting money under your mattress is the best place to put money then inflation in Idaho could be worse than the surrounding areas because the velocity of money is low enough to cause deflationary pressure.
Money is a unit of measurement (like meters). Total volume of products bought and sold are measured in actively circulating money. If you double the amount of money in closed system, the prices would double.
But if we introduce production changes, say we learned to make bread easier, it should get cheaper. Actively developing productive forces will produce deflation on the same amount of money, which makes libs big sad (frankly for esoteric reasons).
If stuff disappears (logistic problems/wars), prices naturally rise (demand side curve is real, it’s supply and equilibrium which is shit), but not due to too much money volume. If stuff increases in price too much, workers suddenly start having opinions about their compensation, which makes porkies big sad.
Inflation also makes banks kinda sad, their nice loan of 100k now is 90k worth of stuff, so they hate it.
Mega eli5: imagine a measuring tape with notches for each billion in economy, and you measure amount of stuff in economy by this tape. If you increase amount of notches by 2, but still measuring exact same thing (same size of economy), you will receive doubled results on any measurement you get.
I’ve never thought of money like that. That’s interesting.
But why would prices double, if, say, the govt. gave everyone double the money they have, wouldn’t people just buy more stuff? And if there isn’t anymore stuff to buy (and it’ll take some time to make), then the money would just..be there? Right? You don’t spend it till you have something to spend it on?
But there isn’t any more stuff to buy, it is exactly where demand side kicks in. Say you have excess money and previously couldn’t buy, idk, ducati bike. Well now you and millions of people can buy it. Ducati will be like “omg, we can’t produce this shit this fast, but we can raise prices to a level where what we produce will be sold” (see gpus in pandemic). So prices immediately will rise across the economy. In actuality, some goods with flat demand (like necessities bread and stuff) won’t rise due to doubling of money that much, but rare stuff will more than double.
On average everything will double, but it will differ product by product.
With savings it’s why I included “closed system”. Yeah, some money will go to savings (again, as in covid), and will slowly bleed out back into economy. Some will be spent in financial gambling, inflating prices there.
Ok, so it’s the companies that choose to increase prices to make more money. They can keep selling the bike for $100,000 but they choose to sell it at $300,000.
But that doesn’t have to happen. If the govt. said “no, you can’t just increase the price”, then the bikes would sell at $100,000 via like a first come first serve or a random lottery or whatever.
And for essentials you can just divide the stuff like bread among everyone to ensure no one starves or dies.
Like, that would just be a fairer way to do things.
But, if I’m understand your point of money as measurement, that would mean you get $100,000 times the number of bikes sold as the “economy number” instead of $300,000 times that, which is bad)
Well, it’s what ussr did, goods were cheap, but for some of them you have to wait in a sort of a queue (I think they sold cars this way), maybe yugoslavia as well (?).
For economy number, it’s kinda meaningless thing in itself (it is why people talk about inflation-adjusted gdp, you can double gdp easy peasy otherwise).
Opposition to inflation is mainly in debt holders (banks/other states), and porkies aren’t too thrilled with it, but only if it’s accompanied by worker discontent, otherwise they also ironically benefit from inflation.
There is also kind of uncontrolled mass psychology, that if inflation happens too rapidly, it can topple the government real fast, even if people can still eat. It introduces uncertainty of what your own holdings in bank are worth, so you transfer them into something tangible (gold/beans/collectibles), so amount of money increases further than government expects, because people “don’t trust the money”
Were the USSR and other socialist states that did that successful? Why did they fall? I know that’s wildly off topic, sorry.
I think people would have accepted increased prices for faster production tbh, but god (and couple of 80 year old russian dudes) knows how pricing in ussr worked. Ussr arrived at a problem where there is nothing to spend money on, cheap stuff is cheap, expensive stuff is queued and rare. Realistically they should have started fixing it from that rare side, but instead they imploded the cheap stuff production together with expensive stuff and allowed all savings vanish in inflation after the fall.
They could have used long queues as signal that “we need produce more of that” (same as capitalist does with prices), but they didn’t, or didn’t do it enough.
So I would describe it as mildly unsuccessful in adapting to changing reality, but successful in providing for people.
How did it collapse, do you know?
Were people’s basic needs met in the USSR and other socialist states?
I thought there was a black market which made some people very powerful (party members and private individuals). They orchestrated the coup to get more power right? That’s what I’m thinking might have happened.
I don’t know how it could collapse if people were happy.
Oh yeah I didn’t realise the part where the additional money you charge for the same product can be used to decrease the time needed to make more of that stuff. There might be a better solution than that but idk.
The basic idea is that dollars are a good that can be manufactured for almost no cost through a variety of ways.
If the amount of dollars increases faster than the amount of other goods that exist, each non dollar good will be worth more dollars over time to compensate.
Why would the price of other goods increase? I don’t understand that. Would it just mean some dollars go unspent, until there are more products to spend them on?
People tend to spend their dollars.
Think of prices as an informal “auction”.
If the audience has more money but the same number of goods to buy, the result will end up being a higher final sale price as the audience competes.
Ok that makes sense. Like two people want bread but there’s only one bread. The person with more money gets the bread and the other person starved.
But it doesn’t have to be that way. Like, can’t there be some law that says in that situation you can’t increase the price. You have to instead split the bread in two to make sure no one starves?
If you can do that, then…prices don’t have to go up all. It’s a choice.
You’re right, it doesn’t have to be that way. The system is unjust, and quite dysfunctional. Especially when the government constantly devalues worker dollars by giving free money to the finance industry
All capitalists countries actually suspend this system by resorting to rationing during serious crisis.
Especially when the government constantly devalues worker dollars by giving free money to the finance industry
This part especially is so fucked. Banks get free money to buy stuff that cost actual labor and time. Like…that’s just pure fuckery.
Price controls are generally regarded as bad by economists because capital tends to rebound and go to far in the other direction and cut production.
Any rational person would see the problem in that scenario being the capitalist but for some reason we don't talk about that.
Yeah, that’s what I’m realising via the comments lol. People assume it’s like a law of nature when it’s at most just general human behaviour. And a strong govt. can put a stop to it whenever it wishes.
The econ101 answer is that entities are always trying to negotiate a better deal for themselves. If we look at the entire population in aggregate, that means either a higher proportion of people in the workforce, or the people in the workforce increasing their output (usually through number of hours worked), or the firms acting to increase their constituents' share of the pie.
The way orthodox economists summarize this is that "there are 3 conflicting goals of monetary policy: full employment, full productivity, and stable prices". Any two of these preclude the third. Even the liberals admit that the system is unstable at its core.
This is something that is supplemented by LTV, and you can really see where the deal goes sour by having a currency that's set by market forces, instead of by something more constant and objective.
Richard wolff explained it in a recent chapo episode https://soundgasm.net/u/ClassWarAndPuppies/713-NO-MORE-BULLSHIT-Economy-Edition-feat-Richard-Wolff
