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Does inflation have to occur?

lewis20
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12/13/2010 12:50:21 PM
Posted: 5 years ago
I've spent most of my life assuming inflation was just part of every day life. Money is just never worth what it was years past and you just have to live with it.
My question is why is inflation so necessary? Would the world end if there was a standard or fiat money was worth as much as it was 5 years ago?
"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

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Reasoning
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12/13/2010 1:01:41 PM
Posted: 5 years ago
Hulsman has an interesting theory on interest.
"What we really ought to ask the liberal, before we even begin addressing his agenda, is this: In what kind of society would he be a conservative?" - Joseph Sobran
SuperRobotWars
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12/13/2010 1:08:25 PM
Posted: 5 years ago
It wouldn't have to if our money was physically based rather than debt based (I advise platinum, silver, diamonds, and uranium) or if humans would stop reproducing in which case there would be zero need for inflation . . .
Minister Of Trolling
: At 12/6/2011 2:21:41 PM, badger wrote:
: ugly people should beat beautiful people ugly. simple! you'd be killing two birds with the one stone... women like violent men and you're making yourself more attractive, relatively. i met a blonde dude who was prettier than me not so long ago. he's not so pretty now! ha!
:
: ...and well, he wasn't really prettier than me. he just had nice hair.
lewis20
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12/13/2010 1:15:29 PM
Posted: 5 years ago
The more I look at it the more the Austrian school of thought makes sense. I just assumed somewhere out there they surely had a valid reason for keeping a 3% inflation rate.
"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
lewis20
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12/13/2010 1:18:04 PM
Posted: 5 years ago
At 12/13/2010 1:08:25 PM, SuperRobotWars wrote:
It wouldn't have to if our money was physically based rather than debt based (I advise platinum, silver, diamonds, and uranium) or if humans would stop reproducing in which case there would be zero need for inflation . . .

I wouldn't advise diamonds and I don't see how humans reproducing effects how my dollar today doesn't buy as much as it did 5 years ago.
"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
SuperRobotWars
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12/13/2010 1:21:15 PM
Posted: 5 years ago
At 12/13/2010 1:18:04 PM, lewis20 wrote:
At 12/13/2010 1:08:25 PM, SuperRobotWars wrote:
It wouldn't have to if our money was physically based rather than debt based (I advise platinum, silver, diamonds, and uranium) or if humans would stop reproducing in which case there would be zero need for inflation . . .

I wouldn't advise diamonds and I don't see how humans reproducing effects how my dollar today doesn't buy as much as it did 5 years ago.

As more people are around the more money must be available for those people to live which in the end leads to inflation which leads to the decrease in over all money value . . .
Minister Of Trolling
: At 12/6/2011 2:21:41 PM, badger wrote:
: ugly people should beat beautiful people ugly. simple! you'd be killing two birds with the one stone... women like violent men and you're making yourself more attractive, relatively. i met a blonde dude who was prettier than me not so long ago. he's not so pretty now! ha!
:
: ...and well, he wasn't really prettier than me. he just had nice hair.
Sieben
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12/13/2010 1:30:49 PM
Posted: 5 years ago
If prices were increasing by 50% a year, it would be okay. So long as all prices were increasing symmetrically, you could predict it and it would just be built into contracts. Everyone would be effected by it equally.

The problem with inflation is that it is asymmetric. The economic actors who get the new money first are able to use it to gain advantage in the market. It is only after money has changed hands many times that the general price level gets bid up.

Mainstream economists never point out the asymmetric nature of inflation, but they aaalways highlight the asymmetric nature of deflation... (even though the asymmetry of correctional deflation is beneficial).
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SuperRobotWars
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12/13/2010 1:32:30 PM
Posted: 5 years ago
At 12/13/2010 1:30:49 PM, Sieben wrote:
If prices were increasing by 50% a year, it would be okay. So long as all prices were increasing symmetrically, you could predict it and it would just be built into contracts. Everyone would be effected by it equally.

The problem with inflation is that it is asymmetric. The economic actors who get the new money first are able to use it to gain advantage in the market. It is only after money has changed hands many times that the general price level gets bid up.

Mainstream economists never point out the asymmetric nature of inflation, but they aaalways highlight the asymmetric nature of deflation... (even though the asymmetry of correctional deflation is beneficial).

EXACTLY!!!
Minister Of Trolling
: At 12/6/2011 2:21:41 PM, badger wrote:
: ugly people should beat beautiful people ugly. simple! you'd be killing two birds with the one stone... women like violent men and you're making yourself more attractive, relatively. i met a blonde dude who was prettier than me not so long ago. he's not so pretty now! ha!
:
: ...and well, he wasn't really prettier than me. he just had nice hair.
lewis20
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12/13/2010 1:33:29 PM
Posted: 5 years ago
At 12/13/2010 1:21:15 PM, SuperRobotWars wrote:
As more people are around the more money must be available for those people to live which in the end leads to inflation which leads to the decrease in over all money value . . .

I disagree, more fiat money doesn't have to be available for those people to live, money just becomes more valuable.

Also as it stands the rate of inflation is much higher than the increase in population. A dollar is worth a lot less to an individual now than it was worth to an individual years ago.
"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
Reasoning
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12/13/2010 1:35:56 PM
Posted: 5 years ago
At 12/13/2010 1:30:49 PM, Sieben wrote:
If prices were increasing by 50% a year, it would be okay.

Absolutely not.
"What we really ought to ask the liberal, before we even begin addressing his agenda, is this: In what kind of society would he be a conservative?" - Joseph Sobran
SuperRobotWars
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12/13/2010 1:37:18 PM
Posted: 5 years ago
At 12/13/2010 1:33:29 PM, lewis20 wrote:
At 12/13/2010 1:21:15 PM, SuperRobotWars wrote:
As more people are around the more money must be available for those people to live which in the end leads to inflation which leads to the decrease in over all money value . . .

I disagree, more fiat money doesn't have to be available for those people to live, money just becomes more valuable.

Also as it stands the rate of inflation is much higher than the increase in population. A dollar is worth a lot less to an individual now than it was worth to an individual years ago.

The value gets spread thin, we all cant live on a single penny . . .
Minister Of Trolling
: At 12/6/2011 2:21:41 PM, badger wrote:
: ugly people should beat beautiful people ugly. simple! you'd be killing two birds with the one stone... women like violent men and you're making yourself more attractive, relatively. i met a blonde dude who was prettier than me not so long ago. he's not so pretty now! ha!
:
: ...and well, he wasn't really prettier than me. he just had nice hair.
lewis20
Posts: 5,093
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12/13/2010 1:39:14 PM
Posted: 5 years ago
At 12/13/2010 1:35:56 PM, Reasoning wrote:
At 12/13/2010 1:30:49 PM, Sieben wrote:
If prices were increasing by 50% a year, it would be okay.

Absolutely not.

I think/hope he meant theoretically, I don't want to need a wheelbarrow to carry around my cash in ten years.
"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
lewis20
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12/13/2010 1:44:42 PM
Posted: 5 years ago
At 12/13/2010 1:37:18 PM, SuperRobotWars wrote:
At 12/13/2010 1:33:29 PM, lewis20 wrote:
At 12/13/2010 1:21:15 PM, SuperRobotWars wrote:
As more people are around the more money must be available for those people to live which in the end leads to inflation which leads to the decrease in over all money value . . .

I disagree, more fiat money doesn't have to be available for those people to live, money just becomes more valuable.

Also as it stands the rate of inflation is much higher than the increase in population. A dollar is worth a lot less to an individual now than it was worth to an individual years ago.

The value gets spread thin, we all cant live on a single penny . . .

Joke, right?
"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
SuperRobotWars
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12/13/2010 1:59:49 PM
Posted: 5 years ago
At 12/13/2010 1:44:42 PM, lewis20 wrote:
At 12/13/2010 1:37:18 PM, SuperRobotWars wrote:
At 12/13/2010 1:33:29 PM, lewis20 wrote:
At 12/13/2010 1:21:15 PM, SuperRobotWars wrote:
As more people are around the more money must be available for those people to live which in the end leads to inflation which leads to the decrease in over all money value . . .

I disagree, more fiat money doesn't have to be available for those people to live, money just becomes more valuable.

Also as it stands the rate of inflation is much higher than the increase in population. A dollar is worth a lot less to an individual now than it was worth to an individual years ago.

The value gets spread thin, we all cant live on a single penny . . .

Joke, right?

If we had a nation of 100 and only one penny for the entire nation, that penny would have the highest possible value in the entire nation upon terms of money, but that means that the monetary transactions can only go through one individual at a time so in order to bypass this problem they make several more pennies (99 pennies so each individual has at least one) but as more pennies are produced the value of the individual penny decreases, then account for those who make a profit and save up most of their money, they will lead to a net change in monetary distribution so there will be a need to make more pennies (lets make it 200 more) to sustain the overall population need further decreasing the monetary value, now account for children who are growing up and entering the work force there will be an absence of money and uneven distribution (lets say a 500% increase in workforce populace) so more money has to be mad to accommodate them further driving down monetary value and as some of them become wealthier the level of wealth displacement increases and more money needs to be made to cope . . .

Do you see where I am getting at here . . . ?
Minister Of Trolling
: At 12/6/2011 2:21:41 PM, badger wrote:
: ugly people should beat beautiful people ugly. simple! you'd be killing two birds with the one stone... women like violent men and you're making yourself more attractive, relatively. i met a blonde dude who was prettier than me not so long ago. he's not so pretty now! ha!
:
: ...and well, he wasn't really prettier than me. he just had nice hair.
lewis20
Posts: 5,093
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12/13/2010 2:17:36 PM
Posted: 5 years ago
At 12/13/2010 1:59:49 PM, SuperRobotWars wrote:
If we had a nation of 100 and only one penny for the entire nation, that penny would have the highest possible value in the entire nation upon terms of money, but that means that the monetary transactions can only go through one individual at a time so in order to bypass this problem they make several more pennies (99 pennies so each individual has at least one) but as more pennies are produced the value of the individual penny decreases, then account for those who make a profit and save up most of their money, they will lead to a net change in monetary distribution so there will be a need to make more pennies (lets make it 200 more) to sustain the overall population need further decreasing the monetary value, now account for children who are growing up and entering the work force there will be an absence of money and uneven distribution (lets say a 500% increase in workforce populace) so more money has to be mad to accommodate them further driving down monetary value and as some of them become wealthier the level of wealth displacement increases and more money needs to be made to cope . . .

Do you see where I am getting at here . . . ?

yes when the population reaches a few hundred trillion I can see how we might have an issue when deflation has brought the economy all the way down to 1 penny per 100 people.

You're argument assumes money itself is worth something.

Inflation and deflation are exactly the same just going in opposite directions. I can't see where either one changes the real value of a good or service. Inflation means 100 dollars is worth what 10 dollars used to be worth and deflation means 10 dollars is worth what 100 used to be worth. Why is the inflation route a better one? because printing 100's instead of 10's gives the false impression of growing wealth?

I can see why you would want a money supply that increases with the population, but if we simply printed only to keep up with a growing population wouldn't the rate of inflation be the same as the rate of population growth? <1%
"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
SuperRobotWars
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12/13/2010 2:21:00 PM
Posted: 5 years ago
At 12/13/2010 2:17:36 PM, lewis20 wrote:
At 12/13/2010 1:59:49 PM, SuperRobotWars wrote:
If we had a nation of 100 and only one penny for the entire nation, that penny would have the highest possible value in the entire nation upon terms of money, but that means that the monetary transactions can only go through one individual at a time so in order to bypass this problem they make several more pennies (99 pennies so each individual has at least one) but as more pennies are produced the value of the individual penny decreases, then account for those who make a profit and save up most of their money, they will lead to a net change in monetary distribution so there will be a need to make more pennies (lets make it 200 more) to sustain the overall population need further decreasing the monetary value, now account for children who are growing up and entering the work force there will be an absence of money and uneven distribution (lets say a 500% increase in workforce populace) so more money has to be mad to accommodate them further driving down monetary value and as some of them become wealthier the level of wealth displacement increases and more money needs to be made to cope . . .

Do you see where I am getting at here . . . ?

yes when the population reaches a few hundred trillion I can see how we might have an issue when deflation has brought the economy all the way down to 1 penny per 100 people.

You're argument assumes money itself is worth something.

Inflation and deflation are exactly the same just going in opposite directions. I can't see where either one changes the real value of a good or service. Inflation means 100 dollars is worth what 10 dollars used to be worth and deflation means 10 dollars is worth what 100 used to be worth. Why is the inflation route a better one? because printing 100's instead of 10's gives the false impression of growing wealth?

I can see why you would want a money supply that increases with the population, but if we simply printed only to keep up with a growing population wouldn't the rate of inflation be the same as the rate of population growth? <1%

Yeah that's why I also said we need a new way to back up our monetary value . . .
Minister Of Trolling
: At 12/6/2011 2:21:41 PM, badger wrote:
: ugly people should beat beautiful people ugly. simple! you'd be killing two birds with the one stone... women like violent men and you're making yourself more attractive, relatively. i met a blonde dude who was prettier than me not so long ago. he's not so pretty now! ha!
:
: ...and well, he wasn't really prettier than me. he just had nice hair.
lewis20
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12/13/2010 2:23:43 PM
Posted: 5 years ago
At 12/13/2010 2:21:00 PM, SuperRobotWars wrote:
Yeah that's why I also said we need a new way to back up our monetary value . . .

I agreed with the need for a standard, I didn't buy population growth as an argument for inflation.
"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
SuperRobotWars
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12/13/2010 2:25:47 PM
Posted: 5 years ago
At 12/13/2010 2:23:43 PM, lewis20 wrote:
At 12/13/2010 2:21:00 PM, SuperRobotWars wrote:
Yeah that's why I also said we need a new way to back up our monetary value . . .

I agreed with the need for a standard, I didn't buy population growth as an argument for inflation.

But you still see where I am coming from . . . ?
Minister Of Trolling
: At 12/6/2011 2:21:41 PM, badger wrote:
: ugly people should beat beautiful people ugly. simple! you'd be killing two birds with the one stone... women like violent men and you're making yourself more attractive, relatively. i met a blonde dude who was prettier than me not so long ago. he's not so pretty now! ha!
:
: ...and well, he wasn't really prettier than me. he just had nice hair.
lewis20
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12/13/2010 2:41:59 PM
Posted: 5 years ago
At 12/13/2010 2:25:47 PM, SuperRobotWars wrote:
But you still see where I am coming from . . . ?

yes but I think population is a non issue when looking at the current economic situation, I'm looking for a valid reason we run a 3% inflation rate. Or I want to find the reasoning behind it. Printing more money simply to keep up with population growth wouldn't make $1 worth less than it was worth ten years ago, it would just mean more people with more 1's as the economy grows.
"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
FREEDO
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12/13/2010 2:44:43 PM
Posted: 5 years ago
At 12/13/2010 12:50:21 PM, lewis20 wrote:
I've spent most of my life assuming inflation was just part of every day life. Money is just never worth what it was years past and you just have to live with it.
My question is why is inflation so necessary? Would the world end if there was a standard or fiat money was worth as much as it was 5 years ago?

Money needs to continue being printed to match population growth.
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lewis20
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12/13/2010 2:51:06 PM
Posted: 5 years ago
At 12/13/2010 2:44:43 PM, FREEDO wrote:
At 12/13/2010 12:50:21 PM, lewis20 wrote:
I've spent most of my life assuming inflation was just part of every day life. Money is just never worth what it was years past and you just have to live with it.
My question is why is inflation so necessary? Would the world end if there was a standard or fiat money was worth as much as it was 5 years ago?

Money needs to continue being printed to match population growth.

Printing money =/= inflation
"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
lewis20
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12/13/2010 2:53:25 PM
Posted: 5 years ago
Or I mean to say inflation is 3% =/= population growth which is < 1%
"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
djsherin
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12/13/2010 8:26:32 PM
Posted: 5 years ago
At 12/13/2010 12:50:21 PM, lewis20 wrote:
I've spent most of my life assuming inflation was just part of every day life. Money is just never worth what it was years past and you just have to live with it.
My question is why is inflation so necessary? Would the world end if there was a standard or fiat money was worth as much as it was 5 years ago?

It's not necessary and the world definitely wouldn't end lol.
Sieben
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12/13/2010 8:34:56 PM
Posted: 5 years ago
Rich people keep all their assets in commodities, stocks, and real estate anyway. The "inflation" argument gets you thinking that there's this <one> medium of exchange.

In reality, fiat money is just one of many competing stores of value. There are MANY liquid assets (gold/silver being the obvious choices, though you can sell stock pretty quickly too). If deflation in fiat currency is so bad, then deflation in other (pseudo-, ex-, or defacto-) currencies must also be bad. Hmmmmmmmmmmmmm
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