Blame Congress for Inflation
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The Almighty
Then enligheten us oh intelligent one.... When monetary policy remains constant (even when tight)... how can you still have inflation??????????
Monetary policy is used as an attempt to CONTROL inflation. A weak policy will most certainly exacerbate inflation as it weakens our currency. But inflation most certainly can exist without being caused by monetary policy, even when you have a tight monetary policy (which is meant to constrict growth and subsequently inflation).
Kamala Trump
Verified User
Excessive government spending, basically creating new money too much.
Monetary policy creates inflation. And is used to lessen it. None of this changes the definition of inflation.
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The Almighty
As I stated tool... IF monetary policy remains constant.... ie... there is no creation of new money. Creation of new money is inflationary. IF you hold it constant, you can still have inflation. This is because monetary policy is a primary driver, not the sole driver.
Kamala Trump
Verified User
We make money every year. When we exceed the budget and increase the national debt contractors and government agencies are not given IOU's to spend, they make more money.
Kamala Trump
Verified User
Monetary policy is one driver, deficit spending is another. High prices based on demand is not inflation, no matter how many times you insist it is.
Kamala Trump
Verified User
Consistently overspending is not an inflation fighting strategy, even if you want to consider the budget process "monetary policy".
hmm. prob a new home.
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The Almighty
a happy meal
Wow, you don't expect much of me. I guess I'll be living in a Happy Meal box...
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It can seem like inflation when the velocity of circulation of money increases at an abnormal rate but without an increase in the money supply the velocity will decrease back to equilibrium. Thus no real inflation occurred, it will balance. You can’t call inflation because of a short term increase of velocity….
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The Almighty
Quote:
Originally Posted by Superfreak
IF monetary policy remains constant.... ie... there is no creation of new money. Creation of new money is inflationary. IF you hold it constant, you can still have inflation. This is because monetary policy is a primary driver, not the sole driver.
"It can seem like inflation when the velocity of circulation of money increases at an abnormal rate but without an increase in the money supply the velocity will decrease back to equilibrium. Thus no real inflation occurred, it will balance. You can’t call inflation because of a short term increase of velocity…."
Read both of those again? How did you jump from my statement on the CREATION of new money and twist it to talking about velocity of money?
Originally Posted by Superfreak
IF monetary policy remains constant.... ie... there is no creation of new money. Creation of new money is inflationary. IF you hold it constant, you can still have inflation. This is because monetary policy is a primary driver, not the sole driver.
"It can seem like inflation when the velocity of circulation of money increases at an abnormal rate but without an increase in the money supply the velocity will decrease back to equilibrium. Thus no real inflation occurred, it will balance. You can’t call inflation because of a short term increase of velocity…."
Read both of those again? How did you jump from my statement on the CREATION of new money and twist it to talking about velocity of money?
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The Almighty
Which is a poor interpretation on your part. I am talking REAL inflation. When a basket of goods sees an increase in price. This can happen with or without changes in monetary policy. Monetary policy can exaggerate or moderate moves depending on how the policy is enacted. That has been shown over the past few decades.
Again, it is your misinterpretation of what Friedman was saying that is causing your confusion. He firmly believed (rightfully so) that monetary policy (done "correctly") could effectively limit inflation. Hence his comments on inflation ALWAYS being monetary. He seemed to believe that there would never be a time that monetary policy was constant. That monetary policy had to continually be adjusted to combat inflation. This is why he believed that monetary policy would always be the primary factor.
Because he knew that if properly balanced, monetary policy could mitigate inflation. If out of balance it would exagerate the inflationary/deflationary environment.
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Superfreak it is clear I know demonstrably more on what Friedman believes than you and demonstrably more on quantity theory of money than you. If you want to agree with shitty Cost Push nonsense go ahead but again don’t attribute it to someone who consistently fought against the idea.
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The Almighty
I have not stated once that Friedman believed in cost-push you twit. He was a monetarist. He believed firmly in his position that monetary policy would remain fluid and thus always be the primary factor in inflation/deflation. You may think you know more on Friedman, to be honest, I could care less. Because when it comes to economics on the whole you clearly have more to learn.
As I stated before, rising oil prices is indeed inflationary. Rising grain prices is inflationary. The Feds response on their monetary policy can exacerbate those inflationary pressures. Which is exactly what happened as the Fed tried to drastically cut rates to curb the housing crisis. What happened.... oil and grain prices spiked. It exagerated the price increases in those areas.
Annie
Not So Junior Member
Thanks to bio-fuels the inflationary aspects of both oil and grain are now intertwined. Considering the falling dollar and US real estate, not to mention heating and air conditioning, coupled with food costs, exacerbated by oil and bio-fuels, we're caught.