10 ms·

Disagree. :-) Printing money does not automatically lead to inflation. Since inflation is just the price of stuff rising, the question becomes, when do prices

Disagree. :-) Printing money does not automatically lead to inflation. Since inflation is just the price of stuff rising, the question becomes, when do prices rise? The price can rise for multiple reasons: The price can rise because the company just wants to charge more, like Apple. The price can rise because a company's underlying cost rises. Maybe some type of metal became more expensive. Either way, the only way that money printing can lead to inflation is if that money creates so much demand that a company needs to expand production capacity to produce more, and if that capacity has rising costs. If a company expands from, let's say 65% capacity to 75% capacity, and has constant costs, then it doesn't matter. Then more people will be employed due to increased demand, and the economy will boom. This makes money printing a good policy. If, however, the company goes from 85% to 95%, then the company might start to invest in extra capacity, which might add costs, and thereby might raise prices. So, do prices rise just because a certain amount of dollars were added to an economy ? No, certainly not. Which is why the money printing should only happen when the economy is dysfunctional. Basically Keynes in a nutshell. :-)

deleted 6y ago
[deleted]
ghastmaster 6y ago
> Since inflation is just the price of stuff rising... Inflation literally is money printing. Price increases is not inflation. Price increases can be caused by inflation. Prices can remain nominally the same while money supply has increased. > So, do prices rise just because a certain amount of dollars were added to an economy ? No, certainly not. Which is why the money printing should only happen when the economy is dysfunctional. The prices while having not risen nominally are still artificially inflated. A dysfunctional economy is not a real thing. It is just the economy. If you are referring to a recession, printing money during a recession arguably may not cause prices to rise nominally, but it artificially inflates them. During a recession prices typically go down due to falling demand. This is a good thing. It allows people who are suffering to enjoy lower prices. Recessions are a healing process for a previous period of misallocation of resources. Money printing only serves to exacerbate and extend the misallocation. As the period of misallocation is extended and exacerbated, the recession necessary to balance that is larger and more frightening. We left the gold standard because we were afraid to deal with the recession from the spending of '60s and we've been afraid to deal with our issues ever since. One day we won't have a choice. Tough times are ahead.
- jrs235 6y ago
  This is the definition of inflation that I was taught too. However it seems that people now days mean for inflation to be about price increases rather than money supply inflation (increases). The money supply inflates and deflates. Prices increase and decrease. I think it would be best if we all start being more clear and specific when talking about "inflation". Printing money DOES automatically lead to inflation. It leads to inflating the money supply or MONEY SUPPLY inflation. However printing money and inflating the money supply does not necessarily lead to price increases or price inflation. Most of us care about price increases, which are a symptom, but not allows present, of money supply inflation/printing money.
  - Anon1096 6y ago
    When talking about inflation, there's no such thing as "money supply inflation". The term inflation IS clear, you're just choosing to try and redefine it to match your purposes. Inflation is a rise in the price of goods, full stop.
    - ghastmaster 6y ago
      When using the word "inflation" without context is is referring to increased money supply. When using the word "inflation" with regard to prices it is in a different context. The assumed context is what has changed due to the fact that money supply no longer is directly correlated with price increases. When gold and silver were directly debased, prices of goods were directly inflated. If we still used gold/silver currency "inflation" by itself would be synonymous with price increases. We use fiat currencies and the money supply is increased in certain industries or assets and therefore "inflation" has to be defined more clearly. Debasing fiat is not as direct as debasing commodity backed dollars or gold/silver currency. The article author does a decent job of defining these, but fails to be clear as the writing progresses.
    - jrs235 6y ago
      Prices across the board could increase if say the cost to produce and deliver them went up across the board, perhaps because the cost of energy/oil goes up, perhaps due to constrained supply. This isn't inflation and the price increase isn't due to inflation. Prices across the board could also go up if war breaks out. That's not inflation. Those types of price increases are due to the supply side. Inflation is due to the demand side and the available dollars chasing the [same amount of] goods. Price increases and inflation are not the same thing. They are typically related though.

deleted 6y ago

[deleted]

ghastmaster 6y ago

> Since inflation is just the price of stuff rising... Inflation literally is money printing. Price increases is not inflation. Price increases can be caused by inflation. Prices can remain nominally the same while money supply has increased. > So, do prices rise just because a certain amount of dollars were added to an economy ? No, certainly not. Which is why the money printing should only happen when the economy is dysfunctional. The prices while having not risen nominally are still artificially inflated. A dysfunctional economy is not a real thing. It is just the economy. If you are referring to a recession, printing money during a recession arguably may not cause prices to rise nominally, but it artificially inflates them. During a recession prices typically go down due to falling demand. This is a good thing. It allows people who are suffering to enjoy lower prices. Recessions are a healing process for a previous period of misallocation of resources. Money printing only serves to exacerbate and extend the misallocation. As the period of misallocation is extended and exacerbated, the recession necessary to balance that is larger and more frightening. We left the gold standard because we were afraid to deal with the recession from the spending of '60s and we've been afraid to deal with our issues ever since. One day we won't have a choice. Tough times are ahead.

jrs235 6y ago
This is the definition of inflation that I was taught too. However it seems that people now days mean for inflation to be about price increases rather than money supply inflation (increases). The money supply inflates and deflates. Prices increase and decrease. I think it would be best if we all start being more clear and specific when talking about "inflation". Printing money DOES automatically lead to inflation. It leads to inflating the money supply or MONEY SUPPLY inflation. However printing money and inflating the money supply does not necessarily lead to price increases or price inflation. Most of us care about price increases, which are a symptom, but not allows present, of money supply inflation/printing money.
- Anon1096 6y ago
  When talking about inflation, there's no such thing as "money supply inflation". The term inflation IS clear, you're just choosing to try and redefine it to match your purposes. Inflation is a rise in the price of goods, full stop.
  - ghastmaster 6y ago
    When using the word "inflation" without context is is referring to increased money supply. When using the word "inflation" with regard to prices it is in a different context. The assumed context is what has changed due to the fact that money supply no longer is directly correlated with price increases. When gold and silver were directly debased, prices of goods were directly inflated. If we still used gold/silver currency "inflation" by itself would be synonymous with price increases. We use fiat currencies and the money supply is increased in certain industries or assets and therefore "inflation" has to be defined more clearly. Debasing fiat is not as direct as debasing commodity backed dollars or gold/silver currency. The article author does a decent job of defining these, but fails to be clear as the writing progresses.
  - jrs235 6y ago
    Prices across the board could increase if say the cost to produce and deliver them went up across the board, perhaps because the cost of energy/oil goes up, perhaps due to constrained supply. This isn't inflation and the price increase isn't due to inflation. Prices across the board could also go up if war breaks out. That's not inflation. Those types of price increases are due to the supply side. Inflation is due to the demand side and the available dollars chasing the [same amount of] goods. Price increases and inflation are not the same thing. They are typically related though.