Explain Inflation

[wiseones2cents]

Ok the more money you print? The less your money is worth. Correct? Now if your economy was dependant on trade, that would mater(because you would have less foreign buying power due to a weaker dollar and thus pay more), though in your country, a dollar is always a dollar. It shouldn't matter when buying things made in USA.

Now when you are getting your products from third world countries(which is not the case for most grocery goods) with weak currencies and being sold to you at ridiculously high profit margins? When the dollar goes down, should price increase(on imports) or should their profit margins decrease?

I can undestand if your trading with a country with a higher currency, but why would you even do that?

Also Canada's dollar seems to be rising rapidly and still we see a consitant rise in our products yearly. Why is that? Shouldn't it be dropping?

 

[FUCK THE POLICE]

Ok the more money you print? The less your money is worth. Correct?

Well, it would be more correct to say that inflation is tied to long term expectations of what the money supply will be. So, expectations of inflation can become in-built in the economy and make inflation hard to fight with restriction on the money supply. Also, short term increases in the money supply that are expected to be temporary will not necessarily cause a great deal of inflation, since the overall size of the money supply isn't expected to increase that much in the long term.

Also, there's not necessarily a linear relationship. When currencies hyperinflate, for instance, they aren't literally increasing the money supply by a trillion percent a day. People are simply losing faith in the currency. When people lose faith in a good, of course, they value it less, and so it can cause it to decrease in value (inflate) much higher than any actual increase in supply.

Also, most of the money supply is not literally in printed money.

Now if your economy was dependant on trade, that would mater(because you would have less foreign buying power due to a weaker dollar and thus pay more), though in your country, a dollar is always a dollar. It shouldn't matter when buying things made in USA.

No, that's not really correct at all. In fact, inflation is only of direct consequence in the nation itself. Higher rates of inflation can cause the currency to weaken internationally, but the two are not necessarily tied. You can devalue your currency by 50% while having domestic prices that remain relatively stable.

Now when you are getting your products from third world countries(which is not the case for most grocery goods) with weak currencies and being sold to you at ridiculously high profit margins? When the dollar goes down, should price increase(on imports) or should their profit margins decrease?

A weaker currency makes your imports cheaper abroad and their exports more expensive in your country. This doesn't lead to higher profit margins for them, it just makes it more difficult to compete.

I can undestand if your trading with a country with a higher currency, but why would you even do that?

What do you mean by "a higher currency"? A pound is worth more than a single dollar, a yen is worth significantly less. Yet that doesn't provide either nation with significant benefits or penalties alone. Of course, the markets simply adjust, and say how much of one currency is worth how much of another. Businesses is not stupid, it's not going to eat losses by treating a currency as if it's worth some declared value rather than the market value compared to their home countries currency. Now, changes in the value of the currency can cause profit or loss, but in the long term, again, the market ensures that no one has a definite advantage.

There is, of course, an exception with countries that maintain a fixed exchange rate rather than letting their currencies float. But, again, this is not simply done by fiat. They have to maintain capital controls and actively trade in foreign currency reserves in order to manipulate the money supply. This can give their exports some advantage, but it causes its own problems as well. There's a reason most countries float their currencies, it's not just because they're being nice.

Also Canada's dollar seems to be rising rapidly and still we see a consitant rise in our products yearly. Why is that? Shouldn't it be dropping?

Again, you have things reversed. Rising Canadian dollar = American products being more competitive in Canada.

 

[wiseones2cents]

Well, it would be more correct to say that inflation is tied to long term expectations of what the money supply will be. So, expectations of inflation can become in-built in the economy and make inflation hard to fight with restriction on the money supply. Also, short term increases in the money supply that are expected to be temporary will not necessarily cause a great deal of inflation, since the overall size of the money supply isn't expected to increase that much in the long term.

Also, there's not necessarily a linear relationship. When currencies hyperinflate, for instance, they aren't literally increasing the money supply by a trillion percent a day. People are simply losing faith in the currency. When people lose faith in a good, of course, they value it less, and so it can cause it to decrease in value (inflate) much higher than any actual increase in supply.

Also, most of the money supply is not literally in printed money.

Are you saying currency is affected by speculation just like gas prices? Man these crooks are good..........

People are loosing faith in the currency??LOL What people? As long as you can still purchase the stuff you need? Why would people lose confidence in a currency?You mean like in Italy where the money was so inflated that you couldn't buy some bread with 10,000,000,000 lire(obviously a little exagerated but you get my drift).

I understand how money supply works.

No, that's not really correct at all. In fact, inflation is only of direct consequence in the nation itself. Higher rates of inflation can cause the currency to weaken internationally, but the two are not necessarily tied. You can devalue your currency by 50% while having domestic prices that remain relatively stable.

Only if that nation relies heavily on imports, it should be a problem. other then that. Inflation shouldn't really mater or exist in domestically produced items.

A weaker currency makes your imports cheaper abroad and their exports more expensive in your country. This doesn't lead to higher profit margins for them, it just makes it more difficult to compete.

Wrong. If I'm making a stove and charging labour $20 an hour and selling it for $1000 and I outsource it to a third world country and charge $20 a month labour and sell it for $1000. I am making a HUGE profit margin.

What do you mean by "a higher currency"? A pound is worth more than a single dollar, a yen is worth significantly less. Yet that doesn't provide either nation with significant benefits or penalties alone. Of course, the markets simply adjust, and say how much of one currency is worth how much of another. Businesses is not stupid, it's not going to eat losses by treating a currency as if it's worth some declared value rather than the market value compared to their home countries currency. Now, changes in the value of the currency can cause profit or loss, but in the long term, again, the market ensures that no one has a definite advantage.

Basically saying why would I buy lets say rice from UK and pay more, then buying it from a third world country and paying less? The UK will NOT be able to compete in this global market.

There is, of course, an exception with countries that maintain a fixed exchange rate rather than letting their currencies float. But, again, this is not simply done by fiat. They have to maintain capital controls and actively trade in foreign currency reserves in order to manipulate the money supply. This can give their exports some advantage, but it causes its own problems as well. There's a reason most countries float their currencies, it's not just because they're being nice.

I am aware of this SCAM and how they manipulate currency to acheive higher profits. Why is it even legal? Well because the rich benefit. And the rest do not understand the theivery or they would be protesting in the streets.

Again, you have things reversed. Rising Canadian dollar = American products being more competitive in Canada.

Wrong. Rising Canadian dollar means more purchasing power in regards to buying foreign goods(imports). We have not seen any decline in the cost of imports to the average Canadian and the prices continue to rise. Who is making money at the expense of Canadian consumers and tax payers? The importers.

 

[SmarterthanYou]

and people have to wonder why 'end the fed' is considered radical and extreme. it would solve alot of this crap.

 

[FUCK THE POLICE]

and people have to wonder why 'end the fed' is considered radical and extreme. it would solve alot of this crap.

No it wouldn't.

 

[SmarterthanYou]

No it wouldn't.

you don't think that eliminating the agency that regulates short term interest rates, which then values or devalues US currency, would get rid of inflation? pray tell , what would?

 

[FUCK THE POLICE]

Are you saying currency is affected by speculation just like gas prices? Man these crooks are good..........

Are you offended by the fact that the market looks ahead and tries to use reason to predict the money supply rather than just linearly tracking the money supply? Should we modify the laws of economics to suit your fancy?

People are loosing faith in the currency??LOL What people? As long as you can still purchase the stuff you need? Why would people lose confidence in a currency?You mean like in Italy where the money was so inflated that you couldn't buy some bread with 10,000,000,000 lire(obviously a little exagerated but you get my drift).

People are not losing faith in the currency at the current time. People lose faith in the currency during hyperinflation. The money starts becoming virtually worthless, so they turn to bartering and such. This accelerates the prices. My point was simply to indicate another way in which inflation/deflation doesn't simply track the money supply.

Only if that nation relies heavily on imports, it should be a problem. other then that. Inflation shouldn't really mater or exist in domestically produced items.

This is just incredibly stupid. When the value of money goes down, it goes down. If there is more money running around, why on Earth would you expect domestic businesses to keep accepting the same amount of it for their goods?

Wrong. If I'm making a stove and charging labour $20 an hour and selling it for $1000 and I outsource it to a third world country and charge $20 a month labour and sell it for $1000. I am making a HUGE profit margin.

Because labor costs are lower. Not because of the exchange rates.

Basically saying why would I buy lets say rice from UK and pay more, then buying it from a third world country and paying less? The UK will NOT be able to compete in this global market.

You aren't going to pay less. That's not how the exchange rates work. The UK is not inherently disadvantaged because the individual pound is worth more than the individual dollar. OK, let me make an argument just to exaggerate the stupidity of the argument you seem to believe: if that were how things work, why couldn't the UK, say, take the 2 pound note, and rename that "the one pound note", and start arbitrarily pricing everything relative to it? The actual value of the currency actually wouldn't have changed at all, but now "the pound" would be displayed as worth less than the dollar.

The actual value of the core unit of denomination is not relevant. It's arbitrary, and does not determine the true value. You don't trade the 1 pound for 1 dollar. You trade 1 pound for 2 and something dollars. I am not losing or gaining anything at all in this transaction.

I am aware of this SCAM and how they manipulate currency to acheive higher profits. Why is it even legal? Well because the rich benefit. And the rest do not understand the theivery or they would be protesting in the streets.

If it is so great, why don't we do it? Again, it's not even necessarily economically beneficial. You're just an economic imbecile, and you can't understand these things.

Wrong. Rising Canadian dollar means more purchasing power in regards to buying foreign goods(imports). We have not seen any decline in the cost of imports to the average Canadian and the prices continue to rise. Who is making money at the expense of Canadian consumers and tax payers? The importers.

Prices are sticky and do not necessarily immediately change.

 

[wiseones2cents]

Are you offended by the fact that the market looks ahead and tries to use reason to predict the money supply rather than just linearly tracking the money supply? Should we modify the laws of economics to suit your fancy?

Their "reasoning" seems to always be in their favour. If their forecasts are accurate, they were correct to raise prices. If not? Oh well thanks for the surplus in profits!

People are not losing faith in the currency at the current time. People lose faith in the currency during hyperinflation. The money starts becoming virtually worthless, so they turn to bartering and such. This accelerates the prices. My point was simply to indicate another way in which inflation/deflation doesn't simply track the money supply.

Someone told me the money is only worth as much as people want to believe it is worth. Actual worth? ZERO! Let me know when you get payed in barter!

Inflation is in today's day and age? An imaginary hidden tax. Inflation exists because the rich want it to exist. Who other then the rich have a need for inflation?

This is just incredibly stupid. When the value of money goes down, it goes down. If there is more money running around, why on Earth would you expect domestic businesses to keep accepting the same amount of it for their goods?

Is it incredibily stupid? Think about it. If the value goes down, your domestic prices wouldn't be affected unless they are imported goods. A bag of domestically grown potatoes would still be $10 to a citizen of that country. Regardless of the value of the currency. Regardless if there were more $10 bills going around!

Now why wouldn't domestic business owners accept the same $10 for the bag of potatoes? $10 is still worth $10 in the country. Nothing has changed.

The problem is when FOREIGN business owners(and creditors)are added to the equation.That want to spend(hoard) that money abroad. They wont do business if the money is worth nothing abroad and they are welcome to leave.

Because labor costs are lower. Not because of the exchange rates.

Part of the reason labour costs are lower is because China is pegging their currency to the US dollar. Yes a lower currency.

You aren't going to pay less. That's not how the exchange rates work. The UK is not inherently disadvantaged because the individual pound is worth more than the individual dollar. OK, let me make an argument just to exaggerate the stupidity of the argument you seem to believe: if that were how things work, why couldn't the UK, say, take the 2 pound note, and rename that "the one pound note", and start arbitrarily pricing everything relative to it? The actual value of the currency actually wouldn't have changed at all, but now "the pound" would be displayed as worth less than the dollar.

The actual value of the core unit of denomination is not relevant. It's arbitrary, and does not determine the true value. You don't trade the 1 pound for 1 dollar. You trade 1 pound for 2 and something dollars. I am not losing or gaining anything at all in this transaction.

I'm talking about lets say the USA buying rice. Why would it buy rice from Britain and pay top dollar when it can by rice from Vietnam for dirt cheap?

If it is so great, why don't we do it? Again, it's not even necessarily economically beneficial. You're just an economic imbecile, and you can't understand these things.

Do what again??Can you even follow an argument? Sounds like your the imbecile! An American Jew with British roots imbecile. And a stinkin free mason!

Prices are sticky and do not necessarily immediately change.

Of course. When the price of oil comes down they are slow to bring it down but when the price of a barrel of oil goes up, there is no hesitation to raise prices! Its deceitful!

Our economic system is full of deceit.

 

[wiseones2cents]

you don't think that eliminating the agency that regulates short term interest rates, which then values or devalues US currency, would get rid of inflation? pray tell , what would?

The fact of the mater is that America never freed itself from British creditors. America is controlled by foreign creditors(mainly European). America will never have true sovereignty unless they free themselves from the Federal reserve(Foreign creditors) and obtain the power to make their own money(Interest free)!

 

[SmarterthanYou]

The fact of the mater is that America never freed itself from British creditors. America is controlled by foreign creditors(mainly European). America will never have true sovereignty unless they free themselves from the Federal reserve(Foreign creditors) and obtain the power to make their own money(Interest free)!

spot on.