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| ▲ | hvb2 3 days ago | parent | next [-] | | > Riding salaries do not lead to inflation by themselves. What leads to inflation is the increase in money circulating on the market Not necessarily, if price of product A goes up and I have to buy that it means I have less money to spend on product B. Meaning demand on product B goes down so its price goes down. If we go back to the point that we're talking about, being how it affects the lowest incomes, then you can see how an ever increasing % of their income is locked up in food/housing etc. By your logic
"What leads to inflation is the increase in money circulating on the market."
Why is the rate of inflation even a value that isn't known beforehand? Surely we control our own printers, no? | |
| ▲ | JumpCrisscross 3 days ago | parent | prev [-] | | > Riding salaries do not lead to inflation by themselves. What leads to inflation is the increase in money circulating on the market This is nonsense. If an economy doubles and the money supply grows 10%, you get deflation. If the money supply is stable and half the country gets bombed, you get inflation. Price levels are a function of both money demand and money supply. Ignoring the demand side of the equation doesn’t work. | | |
| ▲ | reliabilityguy 3 days ago | parent [-] | | > This is nonsense. Nope. This is one of the reasons we had insane inflation after Covid: we printed too much. For example, here: https://www.investopedia.com/ask/answers/042015/how-does-mon... | | |
| ▲ | JumpCrisscross 3 days ago | parent [-] | | Nobody said printing money can’t cause inflation. Just that it’s not the only factor at play. You can have an economy with zero money printing that experiences inflation or deflation. | | |
| ▲ | reliabilityguy 3 days ago | parent [-] | | > Nobody said printing money can’t cause inflation. You said in the comment above. | | |
| ▲ | JumpCrisscross 3 days ago | parent [-] | | > You said in the comment above How do you read “price levels are a function of both money demand and money supply” and get that? Going back to the top, you claimed “riding [sic] salaries do not lead to inflation.” That is nonsense. Even if we ignore that rising salaries cause the money supply to increase through increased velocity, wealth effect and credit creation. (This is why when the economy is strong central banks raise rates to keep price levels stable. You have to destroy money to make up for the money being created by the private sector.) | | |
| ▲ | reliabilityguy 3 days ago | parent [-] | | > You have to destroy money to make up for the money being created by the private sector. In other words, to keep inflation at bay, one of the things you do, you restrict money supply. | | |
| ▲ | JumpCrisscross 3 days ago | parent [-] | | > to keep inflation at bay, one of the things you do, you restrict money supply Again, nobody said money supply doesn’t affect price levels. But in this example, rising wages caused the inflationary impetus without any money printing. To correct for that, the money supply must be reduced. If you’re piloting a plane, deflecting the control surfaces will move the plane. But so will winds. If winds buffet your plane you have to deflect control surfaces to get back to where you were. That doesn’t mean the wind doesn’t exist. Rising salaries can cause inflation all on their own. Even in an economy with a fixed money supply. (So can printing money, but nobody was debating that.) |
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