The proof is the observation that endemic inflation only happens in countries with fiat money systems.
So you're just going to ignore a war involving two of the biggest exporters of some of the main raw materials we have (foodstuffs and energy) on the planet and associated supply problems on crucial things? Not to mention a pandemic that wrecked havoc on supply lines. None of that matters, your theory goes, it's purely a monetary phenomenon, because only countries with fiat money systems are impacted. Could you share some countries with alternative money systems that aren't impacted?
Another way to understand it is to consider, what happens if the price of gas rises? Does that automatically put more money in your pocket to pay for it? Nope. You just have less money to spend on other things. But inflation (with a lag period) does put more money in your pocket.
> Could you share some countries with alternative money systems that aren't impacted?
Modern countries have all gone fiat. But we can look at the US from 1800-1914, which was not fiat money. There was zero net inflation in that period, while we've had endemic inflation ever since (aside from a brief period of deflation during the Depression).
> I'm not sure you deserve engaging
What I wrote is not the general opinion, though it is the opinion of economists. At least you were willing to talk about it, which is nice.
Obviously it's a more complicated than that, especially in the context of the US Dollar, but for smaller countries it's pretty basic stuff.
Like in India, inflation is almost back in control, and we didn’t print much money.
Same in China.
I haven’t run the numbers but if you were to chart inflation vs the money printing done by an economy, you’d likely find a positive correlation.
> I haven’t run the numbers but if you were to chart inflation vs the money printing done by an economy, you’d likely find a positive correlation.
As a member of the Eurozone, Estonia can't print money. That didn't stop it from inflation hitting 23%.
It's almost as if inflation is influenced by local factors...
Actually, according to Wikipedia, Estonia joined the Euro in 2010. There have been a lot of Euros created in the last few years (looking at the M2, we're roughly at the point where most Euro appeared after Estonia joined in to the project).
The printing never stops
Inflation is the measure of the price of goods
> It's the result of funding the deficit by running the printing press
Increasing the money supply indirectly increases the price of goods. It matters in the long run, but the price of goods can change in the short-term based on supply. The oil crisis of the 1970s caused oil prices to increase because oil supply was limited. This would have caused inflation even without an increased money supply.
> creating debt backed by nothing. ... fiat money systems.
This is more of a tangent, but the money supply can also shrink in fiat systems. Fiat currency can be shrunk via taxes. Debts can be defaulted. Fiat systems aren't inherently inflationary; but they target a low level of inflation because they prefer it to deflation.
> Fiat systems aren't inherently inflationary; but they target a low level of inflation because they prefer it to deflation.
That's just the excuse. The real reason is so the government can spend money without raising taxes. So they sell you on the idea that inflation is good.
Where do you think Biden's trillions in extra spending is coming from? Not from raising taxes.
More generally anything that increases the money supply. Non-fiat monetary systems have suffered from inflation due to debasement of the currency or an influx of precious metals use to create coins (e.g. when gold from the new world flooded the Spanish economy).
Also, Quantitative Easing was literally printing money and yet EU rates (inflation & sovereign debt interest) remained low, many times negative - with some EU countries observing actual deflation.
Only when the supply shock did happen (Covid & Ukraine), rates started to increase. And only after that, price gouging practices started by riding the supply shock public perception - resulting in said record corporate profits.
If there was inflation caused by excess money, how could corporate profits be at record highs?
Besides, if inflation is 10%, profits would have to rise 10% just to stay even.
Besides, America did try fiat money with the colonial government, and again in the Civil War. Particularly in the Confederacy.
Each of those instances suffered from galloping inflation.
Interestingly, in each of the two gold rushes, the US had inflation due to the influx of gold.
gas prices? electronics supply issues? general supply chain issues? (expected soon) energy/food supply issues?
how does commodity money fix that?
It's Supply&Demand at work. Create lots of money (add Supply) and the value of it goes down (Inflation).
The same thing happens to the price of refrigerators if 10 million gets dumped on the market. The price for a refrigerator goes down.
For example, if you take out a mortgage, your house is collateral.
The government just issues more debt to pay off the old debt.
A 'straight forward fix' is to ban foreign ownership of homes and AirBnB. Poof. Now, I wouldn't support that, but it would be 'straight forward'.
#2 is reasonable.
#3 is a big glib tough. "Hey, everyone should just get a raise!", if it were only that easy!
This has pretty much already been done in Vancouver, which has layers of Foreign Buyer Taxes, Speculation Taxes, Empty Home Taxes and strict Airbnb regulation.
It absolutely did not make the problem go 'poof.'
All these things were well worth doing and helped in various ways, but it remains that the core underlying problem is that there's not enough homes for everyone and scarcity ensures high rents and high prices. The dull solution is that a hell of a lot of homes need to be built.
AirBnB is still running strong as well, which should be much more heavily taxed.
The biggest impacts have already happened. We had developers building hyper luxury condos explicitly marketed to an asian audience and overnight with the foreign buyer tax everyone stopped making those and the same developers have pivoted to building purpose built rental for locals.
The taxes worked. There's still a housing crisis.
> In 2020, the share of foreigners in the fair market value of homes was almost zero.
> It was 0.56 percent to be exact, based on figures compiled by Brendon Ogmundson, chief economist with the B.C. Real Estate Association.
> Ogmundson used official B.C. government data on property transfer taxes.
https://www.straight.com/news/no-scapegoats-this-time-bc-eco...
Previously the government didn't track details around who was buying homes, and this is something that changed along with the foreign buyer tax.
a) What is the precise meaning of "foreigners" in this context? How is it measured? When the identity is hidden behind a numbered company, does our expert source disclose that?
b) If someone who has gained citizenship then accepts a wire transfer of $10M+ (from someone who is not a citizen) and then proceeds to buy 10 houses (overbidding for each), is that "foreign" involvement?
c) By what methodology were these numbers compiled, from which data sources, and can people examine these processes with no restrictions?
> It was 0.56 percent to be exact, based on figures compiled by Brendon Ogmundson, chief economist with the B.C. Real Estate Association.
"Was" (to be within reality) "exact" and "based on..." is an interesting claim from an epistemological perspective. Is Mr. Ogmundson, chief economist with the B.C. Real Estate Association, guaranteed to be a trustworthy source of information?
> Ogmundson used official B.C. government data on property transfer taxes.
Is there some reason one should believe that this data, or the government that administers it, is trustworthy? (There is a fairly substantial amount of historic stories to believe that they are not.)
> Previously the government didn't track details around who was buying homes, and this is something that changed along with the foreign buyer tax.
There is what is claimed has changed, and what has actually changed. Often, the difference is impossible to resolve - it is also often difficult to realize that a difference between the two is even possible.
As the amount of foreign buyers is now explicitly recorded in all real estate purchases, presumably Mr. Ogmundson looked up that data. He wouldn't have had to do anything creative or difficult to come up with this data.
> Is there some reason one should believe that this data, or the government that administers it, is trustworthy?
If you're at the point where you're not trusting data the government collects I dunno man. Keep your tin foil hat on tight bud.
Canada is oddly one of the places in the world wherein it's difficult to discover who owns what.
"B.C.’s beneficial ownership registry being used in tax cases, visa applications"
https://www.theglobeandmail.com/canada/british-columbia/arti...
BC is certainly the first place in Canada to do this and they haven't even finished the registry yet. Seems like it's quite tricky to sort out.
"B.C.’s land registry aimed at finding hidden owners bogged down by concerns over clarity, confidentiality" https://www.theglobeandmail.com/canada/british-columbia/arti...
Even though the thing isn't fully up and running yet, the government has been so clear years ago that they will do this that it probably would have had a chilling effect on future purchases.
What's wrong with large industrial projects?
It's exactly what we need at this moment - in fact, both Portugal and EU-scale.
This would cost a small fraction of the Quantitative Easing program from the European Central Bank.
(and these Massive Real Estate buildouts must include the lessons in Urbanism learned from past such projects)
2. (y)
3. State sector raises salaries, private sector is forced to follow. Just raising minimum wage is positive, but not enough. This tends to compress people to the bottom salary tier and promote even more brain drain.
"State sector raises salaries, private sector is forced to follow." ... my god man, no, that's not how it works.
More like: "Already inefficient state bureaucracies raise salaries, attracting workers from private sector who cannot afford to pay higher wages, requiring massive budgetary increase from government i.e. 'more taxes' just as economy goes into tailspin due to private sector layoffs.
Probably the EU needs to re-think the fact that it's designed to send all young workers to Germany or at least out of Portugual/Spain/S. Italy and Greece and leave them as octegenarian tourist centres with illegal Turkish workers doing the actual work.
Either 1) the EU starts massive transfer payments or 2) get rid of the Euro and have some limits on mobility, or it will just limp along. #1 might require political and fiscal integration which would probably just exasperate the problem.
In the short term, they should probably raise taxes on foreign home ownership.
But yes, Europe needs a genuine Hamiltonian Moment (share the debt burden) and also a genuine New Deal, instead of the current beggar-thy-neighbor EU order where Germany & friends benefit all.
In a country with a TFR of ~1.4 and a median age of ~47. What could possibly go wrong? It's not like Portugal is seeing a declining population or anything. Oh, wait.
What? This makes no sense. You basically leave out a large chunk of the induced demand. There you have your prices lowering.
When people suggest that adding more new housing, either public or private, doesn't work, this is usually left out: how much housing actually was being added?
Looking at Switzerland, which printed a lot of money in the past years but still has low inflation and had mostly deflation over the same period, there isn't a simple connection between money supply and inflation.
Inflation isn't merely a monetary issue.
It won't be affordable at first, of course, but as you flood the market with new high-rise apartments, the price will inevitably plummet.
1. Flood the market with affordable state housing, Austria-style - with the bonus of building new, boosting the national economy.
2. Create very progressive (rapidly rising) taxes based on property value - making untenable the current practice of parking money and profit by simply buying & holding empty flats and the like.
3. Raise salaries - currently portuguese salaries, and their weight on GDP, rank the lowest in the EU.
(and no, it won't create an inflation spiral: the current inflation spike is, first and foremost, the result of a supply shock, price-gouging and speculative/cartel practices - corporate profits being at a record high is proof of that)
Unfortunately, incentives are heavily stacked on leaving things as they are, as the ruling class is mostly made up of the landlord class, and, is not sensitive to (sometimes even not aware of) the struggles of assetless commoners that only earn income from their (low) salaried labor. Or, even worse, stands to lose their current large gains on capital/assets if this is fixed - and most portuguese media outlets trumpet their - private - master's voice and interests. Additionally, just leaving things as they are, also scores brownie points with the EU by making the Government (even if "center-left") appear "frugal". And PM Costa has personal ambitions for future EU high office.
(...who will be the next head of the European Commission or the European Council?)