It has long been a rule of thumb to have $1 million saved for a comfortable retirement; but, thanks to inflation, the youngest generation of workers likely will need three times as much. According to...
My issue was with using econ101 as part of an argument, I’m sure you’ve heard of the saying about economics is that you spend most of the course learning why econ101 doesn’t actually work when applied to most real world scenarios.
Anyone with an economics background would agree that the money supply increasing will cause inflation if there isn’t a corresponding increase in the supply of goods/services.
How else could it work? People print money and somehow just buy more stuff consequence-free?
Money supply is a specific term and it will not always result in inflation. You’ve acknowledged that several times but still repeat it. It will depend how that increase in money supply is used, if at all.
If I got a trillion dollars printed and did nothing with it, no change in inflation. If I deposit it at banks, there would probably be some knock on effects on interest rates that make their way to the broader system.
If I go on a coordinated buying spree of oranges with the explicit goal of owning every last orange and orange producing land possible, inflation in oranges and substitute goods of oranges will occur. Easy conclusion.
You can argue that: When the capital owners get free money in bailouts, while workers get crumbs, there is an obvious disparity. Capitalists see less value in currency and will want more of it in exchange for their contributions (leeching) to society. So they raise prices because selling an orange for $1 doesn’t feel as good as before.
If workers got more money while capitalists got nothing, that disparity is reversed. Capitalists want to compete for a supply of cash that they didn’t have access to before. Prices will rise in inelastic markets because the opportunity to exploit presents itself, but in competitive markets there is a real drive to entice more purchasing. That’s not to say that prices will go down (they can!) But raising your prices on food because everyone got $1000 could mean missed sales if the price raise isn’t coordinated across the industry.
You saying that inflation is driven by money supply is not the direct reason for prices rising.
If I got a trillion dollars printed and did nothing with it, no change in inflation. If I deposit it at banks, there would probably be some knock on effects on interest rates that make their way to the broader system.
The rich are spending the money, and just because regular people don’t buy yachts doesn’t change the fact that this reallocates labor, land, and raw materials from benefiting the regular person to benefiting the billionaire.
Even if they choose not to spend it, it would be invested into some other assets that do command resources in the economy. They buy stocks, raising the price, followed by the company liquidating stock value to fund expansion, which bids up the prices of inputs.
If a rich person gets money, what evidence do you have that they would spend it or invest it? It is not a factual assumption and depends on many factors, and not just in a pedantic way. If market conditions are sour, a rich person would avoid investing it for fear of losing it.
Capitalists are middle men who sell our labor + a product back to us at a higher price. If they don’t need cash right now, they will raise prices and sell fewer units at a higher rate to maximize the margin (on durable goods). If they do want cash, they will lower prices and trade margins for volume. Take oil as an example - if you can sell a barrel now for X or tomorrow for more, you would price the oil higher as long as opportunity cost < selling it lower now. How does other people having more money affect this?
Consider your labor and pretend you are fairly compensated right now. If the money supply increases, do you demand, or at least deserve, higher wages? If so, why?
If a rich person gets money, what evidence do you have that they would spend it or invest it?
Is this your argument, that the stimulus of trillions of dollars has no effect because they just sit on it?
The whole reason for the program is to give the recipients more y to spend, not just shits and giggles. Even if they just deposited it into a bank account, the bank reinvests the money into stocks, bonds, and loans.
There is evidence, if you really need to see the numbers, the FRED website tracks the exact money supply, including reinvested deposits.
Capitalists are middle men who sell our labor + a product back to us at a higher price. If they don’t need cash right now, they will raise prices and sell fewer units at a higher rate to maximize the margin (on durable goods).
If you could just raise prices and make more money, they wouldn’t have kept inflation to 2% for decades.
Raising prices can reduced volume and lose money, so businesses limit it. Recently, the money circulating has increased, and businesses that raise prices can keep sales up.
Consider your labor and pretend you are fairly compensated right now. If the money supply increases, do you demand, or at least deserve, higher wages? If so, why?
Of course, because I want to keep getting the same share of the total credits that I did before. If I’m getting less of the pie then I’m getting a pay cut.
Imagine a microeconomy, a small isolated village. One day the local currency changes and you go from making 2% of the currency to 1%, but the absolute number doesn’t change. You still make 20 coins per day, but the total money supply has grown. That’s a paycut in purchasing power.
The entire point of giving one group more % the money supply is so that they can command more of the resources that currency trades for. To think they just do that for no reason is naive.
Since the financial crisis banks have taken deposits and reinvested them at the Fed or other banks. Purchases of stock do not necessarily raise prices either. Prices can fall on heavy volume and rise in light volume.
That’s a paycut in purchasing power.
Only if prices rise. Consider that this island only sells widgets in this currency. Will they raise prices because the money supply has increased? They were “maximizing” profit before, but now the money supply is different and the employee on the island still makes 20 coins. Will selling widgets at a new price point get them more money?
The money they pay for the stocks goes to the person who had it before, that’s how this money flows into the economy. That person then spends the money on something, that was the point in selling.
deleted by creator
My issue was with using econ101 as part of an argument, I’m sure you’ve heard of the saying about economics is that you spend most of the course learning why econ101 doesn’t actually work when applied to most real world scenarios.
Anyone with an economics background would agree that the money supply increasing will cause inflation if there isn’t a corresponding increase in the supply of goods/services.
How else could it work? People print money and somehow just buy more stuff consequence-free?
Money supply is a specific term and it will not always result in inflation. You’ve acknowledged that several times but still repeat it. It will depend how that increase in money supply is used, if at all.
If I got a trillion dollars printed and did nothing with it, no change in inflation. If I deposit it at banks, there would probably be some knock on effects on interest rates that make their way to the broader system.
If I go on a coordinated buying spree of oranges with the explicit goal of owning every last orange and orange producing land possible, inflation in oranges and substitute goods of oranges will occur. Easy conclusion.
You can argue that: When the capital owners get free money in bailouts, while workers get crumbs, there is an obvious disparity. Capitalists see less value in currency and will want more of it in exchange for their contributions (leeching) to society. So they raise prices because selling an orange for $1 doesn’t feel as good as before.
If workers got more money while capitalists got nothing, that disparity is reversed. Capitalists want to compete for a supply of cash that they didn’t have access to before. Prices will rise in inelastic markets because the opportunity to exploit presents itself, but in competitive markets there is a real drive to entice more purchasing. That’s not to say that prices will go down (they can!) But raising your prices on food because everyone got $1000 could mean missed sales if the price raise isn’t coordinated across the industry.
You saying that inflation is driven by money supply is not the direct reason for prices rising.
The rich are spending the money, and just because regular people don’t buy yachts doesn’t change the fact that this reallocates labor, land, and raw materials from benefiting the regular person to benefiting the billionaire.
Even if they choose not to spend it, it would be invested into some other assets that do command resources in the economy. They buy stocks, raising the price, followed by the company liquidating stock value to fund expansion, which bids up the prices of inputs.
If a rich person gets money, what evidence do you have that they would spend it or invest it? It is not a factual assumption and depends on many factors, and not just in a pedantic way. If market conditions are sour, a rich person would avoid investing it for fear of losing it.
Capitalists are middle men who sell our labor + a product back to us at a higher price. If they don’t need cash right now, they will raise prices and sell fewer units at a higher rate to maximize the margin (on durable goods). If they do want cash, they will lower prices and trade margins for volume. Take oil as an example - if you can sell a barrel now for X or tomorrow for more, you would price the oil higher as long as opportunity cost < selling it lower now. How does other people having more money affect this?
Consider your labor and pretend you are fairly compensated right now. If the money supply increases, do you demand, or at least deserve, higher wages? If so, why?
Is this your argument, that the stimulus of trillions of dollars has no effect because they just sit on it?
The whole reason for the program is to give the recipients more y to spend, not just shits and giggles. Even if they just deposited it into a bank account, the bank reinvests the money into stocks, bonds, and loans.
There is evidence, if you really need to see the numbers, the FRED website tracks the exact money supply, including reinvested deposits.
If you could just raise prices and make more money, they wouldn’t have kept inflation to 2% for decades.
Raising prices can reduced volume and lose money, so businesses limit it. Recently, the money circulating has increased, and businesses that raise prices can keep sales up.
Of course, because I want to keep getting the same share of the total credits that I did before. If I’m getting less of the pie then I’m getting a pay cut.
Imagine a microeconomy, a small isolated village. One day the local currency changes and you go from making 2% of the currency to 1%, but the absolute number doesn’t change. You still make 20 coins per day, but the total money supply has grown. That’s a paycut in purchasing power.
The entire point of giving one group more % the money supply is so that they can command more of the resources that currency trades for. To think they just do that for no reason is naive.
Since the financial crisis banks have taken deposits and reinvested them at the Fed or other banks. Purchases of stock do not necessarily raise prices either. Prices can fall on heavy volume and rise in light volume.
Only if prices rise. Consider that this island only sells widgets in this currency. Will they raise prices because the money supply has increased? They were “maximizing” profit before, but now the money supply is different and the employee on the island still makes 20 coins. Will selling widgets at a new price point get them more money?
The money they pay for the stocks goes to the person who had it before, that’s how this money flows into the economy. That person then spends the money on something, that was the point in selling.