Re:Global real interest rates and the ‘suprasecular’ decline...
by imtringued on Friday January 29, 2021 @07:59AM
(#25956774)
Inflation happens when demand outstrips supply. This not only applies to consumer goods but also to labor.
If there are more jobs than workers those workers will pick the highest paying jobs. That's inflation.
Here, I'll give you a simplified example. There is this game called prosperous universe. You can buy FE (Iron) to make BBH (construction material). People need BBH to build factories or farms or whatever. When everyone is producing BBH the demand for FE goes up. There is only a limited amount of FE on the market. You are buying the cheapest FE first. Eventually all the cheap FE is gone and only the expensive FE remains. The price of FE has risen. That's inflation. How do other players respond? They start investing into production of FE because there is a very clear profit motive.
Every factory you build in the game needs workers. By building factories you directly decrease unemployment.
I can also give you the opposite example. There is a high end facility that creates ES (Einsteinium) but there is very little demand for it. You run the factory for a month and start stockpiling a months worth of production. Then you demolish the factory because you don't need it anymore. Those workers are now unemployed.
You have to consider that unemployment has a greater impact on your finances than the inability to make money off of a checking/savings account. Actually, the interest rates are generally high enough that your returns cover inflation so in practice you are not losing anything.
If there are more jobs than workers those workers will pick the highest paying jobs. That's inflation.
Here, I'll give you a simplified example. There is this game called prosperous universe. You can buy FE (Iron) to make BBH (construction material). People need BBH to build factories or farms or whatever. When everyone is producing BBH the demand for FE goes up. There is only a limited amount of FE on the market. You are buying the cheapest FE first. Eventually all the cheap FE is gone and only the expensive FE remains. The price of FE has risen. That's inflation. How do other players respond? They start investing into production of FE because there is a very clear profit motive.
Every factory you build in the game needs workers. By building factories you directly decrease unemployment.
I can also give you the opposite example. There is a high end facility that creates ES (Einsteinium) but there is very little demand for it. You run the factory for a month and start stockpiling a months worth of production. Then you demolish the factory because you don't need it anymore. Those workers are now unemployed.
You have to consider that unemployment has a greater impact on your finances than the inability to make money off of a checking/savings account. Actually, the interest rates are generally high enough that your returns cover inflation so in practice you are not losing anything.