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.

  • fox [comrade/them]
    ·
    edit-2
    2 years ago

    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.

    • stinky [any]
      hexagon
      ·
      2 years ago

      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.