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.
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 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
Thanks for the rec :fidel-salute:
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.
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.