Honest
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Nearly 60 and I still don't "get" inflation. Can anyone explain?
Thank you.I find this easier to understand with comic books, since I'm a bit of a collector:
Action Comics #1, the first issue to feature Superman, originally printed 200,000 issues in 1938 and sold for 10¢ each.
But because it's a highly desirable issue and there are currently less than 100 copies left in existence (that we know of), their value has skyrocketed. One copy sold for $6 million last year! It's worth a lot because it's so rare and so many people want a copy for their collection. Scarcity makes the price go up, because it's valuable and desirable to so many collectors.
Money works the same way, but in reverse. Back in 1938, when that Action Comics #1 released, it was only worth 10¢. Back then, there wasn't as much money in circulation in the US, so 10¢ could buy you a lot of things. Comics, groceries, gas, etc. all were less than a dollar.
But every single year, the Federal Reserve orders more money to be printed for circulation. More money in circulation means that it's all worth less.
Remember that Action Comics #1? When there were 200,000 copies available, they were worth only 10¢. But now that there are less than 100 left, they're worth millions. Money is the same way, but it's moving in reverse. As more is printed, it's all worth less.
Back in 1938, a comic cost 10¢. But today, there is so much money printed and in circulation, that a modern comic costs about $5. That's 50x more expensive! The overall value of comics hasn't changed; they're just paper with printings on it. Heck, you could argue that it should be worth less today because they're so much easier to print with modern technology. But because there's so much money in circulation, its value has tanked and you need lots more money to buy the same product.
Granted, money doesn't stay in circulation forever. Bills get old and tattered and eventually become destroyed and unusable. Coins disappear or get melted down. Both types of currency get returned to the Federal Reserve to be removed from circulation and destroyed. But we still print much more money than what falls out of circulation each year. And they estimate how much money is in circulation annually to better approximate inflation each year.
So why do we keep printing money? Because more and more people are born, more products and services are being made and sold, and our economy keeps growing. We can't just circulate the same amount of currency forever; our economy would stagnate and certain groups of people would just never earn money. And in our capitalist society, if you don't have money, you can't survive.
So... We keep printing money to keep up with the demands of capitalism, and the growth in circulating currency means it's all worth less. Therefore, it costs much more to buy the same item as time goes on. A comic in 1938 costs 10¢. Today, it costs $5. Because there's so much more money in the world, the value of money is less and you need more money to buy the same things.
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Nearly 60 and I still don't "get" inflation. Can anyone explain?
Thank you.Change in purchasing power of money over time. Practically imperceptible in real time to the naked eye. The higher the rate, the sooner you'll notice the change.
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Nearly 60 and I still don't "get" inflation. Can anyone explain?
Thank you.A combo meal at in n out used to be $5. Now it’s $12.
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Nearly 60 and I still don't "get" inflation. Can anyone explain?
Thank you.“Everything is made up and the points don’t matter!”
I am of no help on this topic other than, the value of money is literally made up. We just sort of agree how much it’s worth at this point. Which doesn’t seem to be decided by you or me.
Also, “it’s complicated” is usually code for: this is really straight forward but bad so let’s make it hard to understand to hide the bad part.
But, as I understand it, we all collectively hallucinate value and when we start to sober up they have to rush and hit us with another dose. We’re just perpetually rebalancing our illusion.
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Nearly 60 and I still don't "get" inflation. Can anyone explain?
Thank you.Amount of stuff to buy = Doesn't change
Amount of [currency] = Increase
Voila, inflation
Why does amount of [currency] increase? Loans, government decide to print them, and... if you ask me why does government print more money? Honestly I don't know why governments print more money, like... I'm still confused on why we can't just have the same amount of money forever (I mean: other than re-printing bills to replace damaged ones)
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Nearly 60 and I still don't "get" inflation. Can anyone explain?
Thank you.Imagine money was made of ice cubes. The longer you have them, the more they melt, the less value they have. When you want to buy a hamburger it takes so much ice, but the ice cubes you have keep getting smaller, so the longer you wait the more ice cubes that hamburger will cost.
That's basically inflation, and the reason this is better than deflation, is you don't want people hoarding transactional currencies. So governments want their currency to be ever so slightly inflationary, they want the ice melting just a little bit, so it's better that people use it than hold on to it.
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Nearly 60 and I still don't "get" inflation. Can anyone explain?
Thank you.Aside from the useful answers you’ve gotten here, this should help as well.
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You didn't ask why. With all due respect. You said you didn't get it. Maybe next time be more descriptive of what you're looking for.
The joys of the internet. My "respect" comment was genuine.
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Nearly 60 and I still don't "get" inflation. Can anyone explain?
Thank you.Ok, let's start simple and work our way to inflation. Let's imagine a world where the government prints a certain amount of money, to make things easier let's say 1 trillion dollars, and no more will ever be printed, this makes it so that in absolute terms you can think as 1$ as a 1/1 trillion so you can buy stuff relatively to how common they are, if we produced 1 trillion kg of rice, then 1kg of rice should cost 1$, but if we produced 2 trillions then the price drops to 50 cents.
Cool, things make sense, however there are some problems with this approach, money gets destroyed, or otherwise lost forever, so in the long run $1 becomes rarer than 1/1 trillion, let's exaggerate that and imagine there are now only $1000, it doesn't make sense that a 1$ buys only 1kg of rice anymore. This is called a deflationary currency, and this is bad, because if you know this is the way money works you wouldn't spend your money because it will be more in the future.
Ok, let's try to combat that, let's then say that the government prints a certain fixed amount of money every year. Some years less money would be lost, those years the value of money would decrease, other years more money would be destroyed, and those years the money would be worth more.
What happens now? Well, people would speculate, and not spend in some years, overspend in others, and the economy would be a wild mess because some years people would hoard money because it would be worth more next year.
Ok, what if the government tried to estimate exactly how much money got lost and printed the same amount, so you (in theory) always have the same amount of money going around.
Turns out this also is a bad idea in the long run. Because while money won't increase in value because there's a limited amount it becomes a 0-sum game. Why is that a bad thing? Well, if there are only 1 trillion dollars in circulation, each dollar I hold and refuse to use increases the value of every other dollar I have, so people with lots of money would hoard their money as much as possible to make the rest worth more, allowing him to earn more and store more and turn the currency into a deflationary currency again.
This leaves us with only one option, the government has to print more money than what's lost, this makes money be worth less with time, but also forces people to invest their money instead of hoarding it, because otherwise it's worth less, and if they invest it it's circulating in the economy so in theory everyone wins.
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Nearly 60 and I still don't "get" inflation. Can anyone explain?
Thank you.Thanks everyone for the replies. I understand more about the mechanics now. Made me hate capitalism a bit more than I already do, but I guess someone was right when they said a little knowledge is a dangerous thing.
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It's easy to get the "what", while the "why" is a bit more complex. But I'll try to provide a simplified explanation through 3xWhy:
In short, more money is available for bargaining over the same resources.
Why?
When economic growth outpaces production, you pretty much create money that isn't backed by anything.
Why?
You put money in the bank, you earn some interest. The bank loans this money to someone else, they also earn interest. And the thing is, banks don't need to actually have the money they loan out. They only need to cover a percentage of it. In effect, money is created from nothing.
Why?
It's called fractional reserve banking. IIRC, the Dutch started it, but don't quote me on that. It was done in an effort to make it easier to keep me ney in circulation and foster economic growth. In short, the bank doesn't have to wait for person A to repay the loan before providing a loan to person B.
Isn't this a horrible idea?
Not necessarily. If handled poorly, it truly can be horrible. See 2008 for more details. But when done right it allows more people to do more with less. So inflation isn't inherently a bad thing, provided that wage growth keeps up. If I'm not mistaken, 2% is a pretty common inflation target in developed economies during stable periods.
It was done in an effort to make it easier to keep me ney in circulation and foster economic growth.
There was no large plan or design to it. It was done because it's profitable and there was no rule against it. This was a time before banking and government was so heavily intertwined through regulation.
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Amount of stuff to buy = Doesn't change
Amount of [currency] = Increase
Voila, inflation
Why does amount of [currency] increase? Loans, government decide to print them, and... if you ask me why does government print more money? Honestly I don't know why governments print more money, like... I'm still confused on why we can't just have the same amount of money forever (I mean: other than re-printing bills to replace damaged ones)
wrote last edited by [email protected]why does government print more money?
Voters want free stuff now! So if a government doesn't spend more than their income, other politicians that do so will get voted in, and the next government will overspend. Therefore governments tend to be in debt perpetually.
It's easier to print the money to get out of the consequences of that debt, than to govern well, create value and get out of debt that way.
It works up untill people think it won't work. A self-fulfilling proficy. (1)
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Thanks everyone for the replies. I understand more about the mechanics now. Made me hate capitalism a bit more than I already do, but I guess someone was right when they said a little knowledge is a dangerous thing.
wrote last edited by [email protected]Lack of knowledge is literally more dangerous. It's why fascists and the ruling class don't want people largely educated.
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Ok, let's start simple and work our way to inflation. Let's imagine a world where the government prints a certain amount of money, to make things easier let's say 1 trillion dollars, and no more will ever be printed, this makes it so that in absolute terms you can think as 1$ as a 1/1 trillion so you can buy stuff relatively to how common they are, if we produced 1 trillion kg of rice, then 1kg of rice should cost 1$, but if we produced 2 trillions then the price drops to 50 cents.
Cool, things make sense, however there are some problems with this approach, money gets destroyed, or otherwise lost forever, so in the long run $1 becomes rarer than 1/1 trillion, let's exaggerate that and imagine there are now only $1000, it doesn't make sense that a 1$ buys only 1kg of rice anymore. This is called a deflationary currency, and this is bad, because if you know this is the way money works you wouldn't spend your money because it will be more in the future.
Ok, let's try to combat that, let's then say that the government prints a certain fixed amount of money every year. Some years less money would be lost, those years the value of money would decrease, other years more money would be destroyed, and those years the money would be worth more.
What happens now? Well, people would speculate, and not spend in some years, overspend in others, and the economy would be a wild mess because some years people would hoard money because it would be worth more next year.
Ok, what if the government tried to estimate exactly how much money got lost and printed the same amount, so you (in theory) always have the same amount of money going around.
Turns out this also is a bad idea in the long run. Because while money won't increase in value because there's a limited amount it becomes a 0-sum game. Why is that a bad thing? Well, if there are only 1 trillion dollars in circulation, each dollar I hold and refuse to use increases the value of every other dollar I have, so people with lots of money would hoard their money as much as possible to make the rest worth more, allowing him to earn more and store more and turn the currency into a deflationary currency again.
This leaves us with only one option, the government has to print more money than what's lost, this makes money be worth less with time, but also forces people to invest their money instead of hoarding it, because otherwise it's worth less, and if they invest it it's circulating in the economy so in theory everyone wins.
Holy crap, that was great. I never really even thought about it until OP asked the question. I just accepted it as a fact if life. But bottom line is, like most things, it's because people suck.
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Nearly 60 and I still don't "get" inflation. Can anyone explain?
Thank you.When Capitalism was being theorized, a guy name Sonic Smith had discovered that over time as more money is minted, it loses value, and thus inflation. Thus, when it came time to implement capitalism, it became the 34th rule of capital that was defined.
To learn more, google "rule 34 sonic inflation"
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Ok, let's start simple and work our way to inflation. Let's imagine a world where the government prints a certain amount of money, to make things easier let's say 1 trillion dollars, and no more will ever be printed, this makes it so that in absolute terms you can think as 1$ as a 1/1 trillion so you can buy stuff relatively to how common they are, if we produced 1 trillion kg of rice, then 1kg of rice should cost 1$, but if we produced 2 trillions then the price drops to 50 cents.
Cool, things make sense, however there are some problems with this approach, money gets destroyed, or otherwise lost forever, so in the long run $1 becomes rarer than 1/1 trillion, let's exaggerate that and imagine there are now only $1000, it doesn't make sense that a 1$ buys only 1kg of rice anymore. This is called a deflationary currency, and this is bad, because if you know this is the way money works you wouldn't spend your money because it will be more in the future.
Ok, let's try to combat that, let's then say that the government prints a certain fixed amount of money every year. Some years less money would be lost, those years the value of money would decrease, other years more money would be destroyed, and those years the money would be worth more.
What happens now? Well, people would speculate, and not spend in some years, overspend in others, and the economy would be a wild mess because some years people would hoard money because it would be worth more next year.
Ok, what if the government tried to estimate exactly how much money got lost and printed the same amount, so you (in theory) always have the same amount of money going around.
Turns out this also is a bad idea in the long run. Because while money won't increase in value because there's a limited amount it becomes a 0-sum game. Why is that a bad thing? Well, if there are only 1 trillion dollars in circulation, each dollar I hold and refuse to use increases the value of every other dollar I have, so people with lots of money would hoard their money as much as possible to make the rest worth more, allowing him to earn more and store more and turn the currency into a deflationary currency again.
This leaves us with only one option, the government has to print more money than what's lost, this makes money be worth less with time, but also forces people to invest their money instead of hoarding it, because otherwise it's worth less, and if they invest it it's circulating in the economy so in theory everyone wins.
Great answer. I thought I had a grasp, but you helped flesh out my understanding, thanks
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When Capitalism was being theorized, a guy name Sonic Smith had discovered that over time as more money is minted, it loses value, and thus inflation. Thus, when it came time to implement capitalism, it became the 34th rule of capital that was defined.
To learn more, google "rule 34 sonic inflation"
I think you've maybe confused being almost 60 with being an idiot.
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I think you've maybe confused being almost 60 with being an idiot.
Sorry, whenever inflation gets mentioned the maggots in my brain force me to make a sonic inflation joke
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When Capitalism was being theorized, a guy name Sonic Smith had discovered that over time as more money is minted, it loses value, and thus inflation. Thus, when it came time to implement capitalism, it became the 34th rule of capital that was defined.
To learn more, google "rule 34 sonic inflation"
In 1989, A Japanese Professor who teaches in the University of Tokyo named, Rantaro Futanari, found a loophole in the Japanese Economy. Prof. Futanari found a way to legally counterfeit money without any repercussions. Prof. Futanari still does this and is a well known billionaire. Want to found out how he does it? Just search for, "Futanari Inflation" in Google Images.
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Nearly 60 and I still don't "get" inflation. Can anyone explain?
Thank you.Greedy people being greedy is what inflation is.
They will say this and that economic factor.. blah blah blah...it's all bullshit. Greed is the reason for inflation.
