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.
The proof is the observation that endemic inflation only happens in countries with fiat money systems.