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Inflation

joneszj
Posts: 1,202
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9/18/2012 9:42:10 PM
Posted: 4 years ago
The way I see economics as related to socailist governments:

Socialized programs require funding. There is a limited pool of funds. The programs require more funds then is available. Government inflates the economy to support the programs. In effect the total ammount of funds is increased while at the same time decreasing the value of each unit of currency. This allows a government to (at least temporarily) sustain the programs and it also increases the ammount (though decreased in its value) usable by the people.

Is there ever a situation in which inflation would be considered a good thing not to indlude 1) funding of socialized programs and 2) permitting the wealth a wide scope of use by the people?

Personally I feel inflation is self-defeating and destructive. But I am not an economic guru and I want to believe that the government has a good intention beyond that of 1 and 2 for inflating the economy.
16kadams
Posts: 10,497
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9/18/2012 9:51:15 PM
Posted: 4 years ago
At 9/18/2012 9:42:10 PM, joneszj wrote:
The way I see economics as related to socailist governments:

Socialized programs require funding. There is a limited pool of funds. The programs require more funds then is available. Government inflates the economy to support the programs. In effect the total ammount of funds is increased while at the same time decreasing the value of each unit of currency. This allows a government to (at least temporarily) sustain the programs and it also increases the ammount (though decreased in its value) usable by the people.

Is there ever a situation in which inflation would be considered a good thing not to indlude 1) funding of socialized programs and 2) permitting the wealth a wide scope of use by the people?

It is often believed, by most economists standards, that low rates of inflation help the economy grow.


Personally I feel inflation is self-defeating and destructive. But I am not an economic guru and I want to believe that the government has a good intention beyond that of 1 and 2 for inflating the economy.
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darkkermit
Posts: 11,204
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9/18/2012 9:56:20 PM
Posted: 4 years ago
Well one of the reason why inflation might be considered good is because it decreases unemployment. The reason for this is because wages are sticky (resilient to change) so that when inflation occurs, labor becomes cheaper and companies can hire more people.

Another reason why inflation is good, is because If your already at steady state inflation, it might be better to keep it at that level, rather than decrease the rate. One for the reason I mentioned above. The second being that it hurts businesses. Businesses make future calculations based on expected levels of inflation. So if businesses expect inflation, and instead deflation occurs this puts them into massive amounts of debt which can't be paid off. This is turn hurts banks, and then ordinary citizens as well since the money in your bank is given out as loans to businesses owners, creating a solvency crisis (the bank can't gurantee that you will have all your money). This in turn causes bank runs, which are bad.
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joneszj
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9/18/2012 10:10:19 PM
Posted: 4 years ago
At 9/18/2012 9:56:20 PM, darkkermit wrote:
Well one of the reason why inflation might be considered good is because it decreases unemployment. The reason for this is because wages are sticky (resilient to change) so that when inflation occurs, labor becomes cheaper and companies can hire more people.

Thanks, I had that in mind when I was speaking of widening the wealths usage by the people.

Another reason why inflation is good, is because If your already at steady state inflation, it might be better to keep it at that level, rather than decrease the rate. One for the reason I mentioned above. The second being that it hurts businesses. Businesses make future calculations based on expected levels of inflation. So if businesses expect inflation, and instead deflation occurs this puts them into massive amounts of debt which can't be paid off. This is turn hurts banks, and then ordinary citizens as well since the money in your bank is given out as loans to businesses owners, creating a solvency crisis (the bank can't gurantee that you will have all your money). This in turn causes bank runs, which are bad.

Thats an interesting point. Thanks. But is such a practice safe indefinatly? It is essentially imaginary money. Would it be anologous to an unstobable time-bomb? Inflation it seems would be good to enable the usage of wealth to a wider ammount of people. But it seems that such a practice would be best used for that purpose only. Using it to fund programs seems impossible to end unless the programs end. Idk, just thoughts.
darkkermit
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9/18/2012 10:40:52 PM
Posted: 4 years ago
At 9/18/2012 10:10:19 PM, joneszj wrote:
At 9/18/2012 9:56:20 PM, darkkermit wrote:
Well one of the reason why inflation might be considered good is because it decreases unemployment. The reason for this is because wages are sticky (resilient to change) so that when inflation occurs, labor becomes cheaper and companies can hire more people.

Thanks, I had that in mind when I was speaking of widening the wealths usage by the people.

Another reason why inflation is good, is because If your already at steady state inflation, it might be better to keep it at that level, rather than decrease the rate. One for the reason I mentioned above. The second being that it hurts businesses. Businesses make future calculations based on expected levels of inflation. So if businesses expect inflation, and instead deflation occurs this puts them into massive amounts of debt which can't be paid off. This is turn hurts banks, and then ordinary citizens as well since the money in your bank is given out as loans to businesses owners, creating a solvency crisis (the bank can't gurantee that you will have all your money). This in turn causes bank runs, which are bad.

Thats an interesting point. Thanks. But is such a practice safe indefinatly? It is essentially imaginary money. Would it be anologous to an unstobable time-bomb? Inflation it seems would be good to enable the usage of wealth to a wider ammount of people. But it seems that such a practice would be best used for that purpose only. Using it to fund programs seems impossible to end unless the programs end. Idk, just thoughts.

I have no idea what you mean? i don't see why the practice isn't safe? The point is that it is steady state, predictable inflation. Its not about wealth generation, but rather keeping prices stable.
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MouthWash
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9/18/2012 10:55:26 PM
Posted: 4 years ago
At 9/18/2012 9:56:20 PM, darkkermit wrote:
Well one of the reason why inflation might be considered good is because it decreases unemployment. The reason for this is because wages are sticky (resilient to change) so that when inflation occurs, labor becomes cheaper and companies can hire more people.

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slo1
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9/19/2012 7:34:16 AM
Posted: 4 years ago
Also need to consider the effects of deflation as a steady state 0% inflation is not attainable on any standard. Is 2 to 3% inflation better than deflation? I think most people would agree so as the environment with modest inflation floats more boats than a deflationary environment.
lewis20
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9/19/2012 1:38:41 PM
Posted: 4 years ago
What's wrong with deflation? The value of money goes up as the cost of goods and services go down, sounds good to me.
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lewis20
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9/19/2012 1:42:03 PM
Posted: 4 years ago
If people didn't have inflation engraved in their minds why wouldn't deflation work?
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darkkermit
Posts: 11,204
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9/19/2012 1:58:05 PM
Posted: 4 years ago
At 9/19/2012 1:38:41 PM, lewis20 wrote:
What's wrong with deflation? The value of money goes up as the cost of goods and services go down, sounds good to me.

Because real wages would have to fall as well. However, since wages as sticky (resilient to change) people get laid-off.

Behavior economists have shown this behavioral problem. If there is 4% inflation while only a 2% increase in wages, people are more content, while those believe that 2% wage cut with no inflation/deflation is unfair. Even though the real wage is the same, and its only the nominal wage that is different.
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lewis20
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9/19/2012 2:22:43 PM
Posted: 4 years ago
At 9/19/2012 1:58:05 PM, darkkermit wrote:
At 9/19/2012 1:38:41 PM, lewis20 wrote:
What's wrong with deflation? The value of money goes up as the cost of goods and services go down, sounds good to me.

Because real wages would have to fall as well. However, since wages as sticky (resilient to change) people get laid-off.

Behavior economists have shown this behavioral problem. If there is 4% inflation while only a 2% increase in wages, people are more content, while those believe that 2% wage cut with no inflation/deflation is unfair. Even though the real wage is the same, and its only the nominal wage that is different.

I know that, but if you somehow changed everyone's perception and they took pay cuts knowing they were still gaining wealth, is there anything inherently wrong with deflation?
Sticky wages aren't set in stone.
"If you are a racist I will attack you with the north"- Abraham Lincoln

"Do not wear clothing woven of two kinds of material" - Leviticus 19 19

"War is a racket" - Smedley Butler
darkkermit
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9/19/2012 2:56:50 PM
Posted: 4 years ago
At 9/19/2012 2:22:43 PM, lewis20 wrote:
At 9/19/2012 1:58:05 PM, darkkermit wrote:
At 9/19/2012 1:38:41 PM, lewis20 wrote:
What's wrong with deflation? The value of money goes up as the cost of goods and services go down, sounds good to me.

Because real wages would have to fall as well. However, since wages as sticky (resilient to change) people get laid-off.

Behavior economists have shown this behavioral problem. If there is 4% inflation while only a 2% increase in wages, people are more content, while those believe that 2% wage cut with no inflation/deflation is unfair. Even though the real wage is the same, and its only the nominal wage that is different.

I know that, but if you somehow changed everyone's perception and they took pay cuts knowing they were still gaining wealth, is there anything inherently wrong with deflation?
Sticky wages aren't set in stone.

If we're going to say that we can throw away human behavior, then why not argue for a communist utopian society.
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lewis20
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9/19/2012 3:14:55 PM
Posted: 4 years ago
At 9/19/2012 2:56:50 PM, darkkermit wrote:
At 9/19/2012 2:22:43 PM, lewis20 wrote:
At 9/19/2012 1:58:05 PM, darkkermit wrote:
At 9/19/2012 1:38:41 PM, lewis20 wrote:
What's wrong with deflation? The value of money goes up as the cost of goods and services go down, sounds good to me.

Because real wages would have to fall as well. However, since wages as sticky (resilient to change) people get laid-off.

Behavior economists have shown this behavioral problem. If there is 4% inflation while only a 2% increase in wages, people are more content, while those believe that 2% wage cut with no inflation/deflation is unfair. Even though the real wage is the same, and its only the nominal wage that is different.

I know that, but if you somehow changed everyone's perception and they took pay cuts knowing they were still gaining wealth, is there anything inherently wrong with deflation?
Sticky wages aren't set in stone.

If we're going to say that we can throw away human behavior, then why not argue for a communist utopian society.

Oh ok.
"If you are a racist I will attack you with the north"- Abraham Lincoln

"Do not wear clothing woven of two kinds of material" - Leviticus 19 19

"War is a racket" - Smedley Butler
Jake-migkillertwo
Posts: 67
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9/19/2012 4:34:04 PM
Posted: 4 years ago
At 9/19/2012 12:29:03 AM, Greyparrot wrote:
Inflation is a great way to sneak taxes on the poor.

Inflation is a mandatory flat tax on every consumer. Everyone pays.

This is such a stupid argument, I can only imagine why this is in the GOP platform.

Inflation is an increase in the *overall* price level, ie the price of everything increases. When the price of everything increases, the goods you have to buy go up in price, but the goods that you sell also go up in price.
lewis20
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9/19/2012 4:53:42 PM
Posted: 4 years ago
At 9/19/2012 4:34:04 PM, Jake-migkillertwo wrote:
At 9/19/2012 12:29:03 AM, Greyparrot wrote:
Inflation is a great way to sneak taxes on the poor.

Inflation is a mandatory flat tax on every consumer. Everyone pays.

This is such a stupid argument, I can only imagine why this is in the GOP platform.

Inflation is an increase in the *overall* price level, ie the price of everything increases. When the price of everything increases, the goods you have to buy go up in price, but the goods that you sell also go up in price.

Right, so a flat tax on consumers which everyone pays.
Who sells things? It's business' that sell things and their costs go up which is the only reason prices go up.
It really only hurts the consumer and benefits the govt. and big business through cheap credit.
"If you are a racist I will attack you with the north"- Abraham Lincoln

"Do not wear clothing woven of two kinds of material" - Leviticus 19 19

"War is a racket" - Smedley Butler
keepinitreal
Posts: 58
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9/19/2012 10:17:07 PM
Posted: 4 years ago
Inflation is basically a persistent rise in the general price levels of domestic goods which results in the decrease of the currency's value. Now keep in consideration that printing money out of thin air is not the only cause for inflation. Even if a nation does not have a central bank, there will still be inflation. I will go over the main causes.

Demand Pull Inflation-The economy prospers which results in companies hiring more workers. This leads to more people with income or people with higher level of income. This leads to more consumerism and savings which typically results in an increase demand of goods and services. To meet the demand of producing goods, companies employ more works to fulfill consumers increased demand. Now this will eventually lead into a demand that is higher than the supply or capacity to produce those goods. This is economics 101 Demand > Supply=Price goes up.

Cost Push Inflation-this affects the supply side. For example, a heat wave hits the nation which results in many dry or dead corn. This is a disruption in the corn supply and therefore the price of corn will go up. This has a ripple effect because other goods and services that demand on corn will have their price go up too.

Built-in Inflation-Due to a historic trend of inflation, employees expect an inflation and will demand for a higher wage to offset the expected inflation. If this is the case, higher wages for companies means that they will have to transfer the higher wages cost to goods that consumers purchase. The price of goods go up.

So, really inflation is a sign that the economy is prospering or if a central bank has a lot of control over the economy, it can be considered a false indicator of economic success.

Inflation will be good for people with a lot of debt prior to inflation. The reason is you are paying the lenders less due to the decrease of the currency value. So in the end, lenders are losing more than what expected from the borrowers.

IMO, I would advocate for a deflation over an inflation especially like times like this. When asset prices are suppose to fall, why is the government preventing this and let the market fix the inefficiencies? This will only prolong the damage because if it's meant to fall, it will fall. So it will eventually fall in the future even if the government prevented it from falling in the short term. Think about it, would you rather paying more or less at the grocery story? Based on the policies of the central bank and the politicians, they are implementing policies that will result in us paying more
Greyparrot
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9/19/2012 10:37:51 PM
Posted: 4 years ago
I think a reason inflation is better than deflation is that inflation tends to undermine crappy government regulations and restrictions such as minimum wage.