Economics Questions

Re: Real Inflation

Joe — Tue, 14 Dec 2010 05:03:13 GMT

inflation, especially at its hyper levels can cause all kinds of other problems too. You become more and more focused on the short term. As soon as you get your hands on money, you want to get rid of it immediately like a hot potato, just so that you can get your hands on as much 'stuff' as possible. There is no saving, waiting to invest in the right opportunity, passing on an offer in order to get a better deal from someone else. Its buy something, anything as quick as you can, preferably necessities, and worry about bartering with your stockpile of stuff you don't really like later.

Re: Real Inflation

Smiling Dave — Mon, 13 Dec 2010 06:20:16 GMT

YW bro

Re: Real Inflation

Luiz Mario Brotherhood — Mon, 13 Dec 2010 06:09:16 GMT

Azure and Smiling Dave, thank you. :)

Re: Real Inflation

Bill — Mon, 13 Dec 2010 05:58:54 GMT

Use that borrowed money to buy real estate or commodities. Don't blow it on crap.

Re: Real Inflation

Bill — Mon, 13 Dec 2010 05:50:11 GMT

If you're one of the lucky ones that can borrow now at today's low interest, do it you'll be payin it back with Zimbabwe dollars 30 years from now.

Re: Real Inflation

Smiling Dave — Mon, 13 Dec 2010 05:02:02 GMT

Luiz Mario Brotherhood:

boohickey11, how can inflation decrease the absolute standard of living of a society? I though it promoted a relative distribution of wealth (those with first contact with the new money are richer now because they have more money and the level of prices is the same; and the ones last to have contact with the new money would lose, because they would see prices going up with the same amount of money in hands), but, in absolute terms, the standard of living would remain the same.

That's a really good question. So Zimbabwe and Aregentina and the Weimar Republic all have nothing to whine about. Their standard of living is the same as it ever was.

Your analysis of what happens with the new money is right. It goes to the lucky ones first etc.

But there is another aspect you don't mention. The ones who get it first get it without having produced anything. Normally you have money because you produced something, got paid for it, and now you have money to spend. So that you don't consume unless you have also produced. Or if you borrowed the money, you will eventually produce enough to pay back for your consumption.

Those lucky guys who get the free printed money, however, consume without producing anything in return, not before and not after. They bleed the country of its resources, lowering the standard of living.

Re: Real Inflation

Azure — Mon, 13 Dec 2010 02:40:01 GMT

boohickey11, how can inflation decrease the absolute standard of living of a society? I though it promoted a relative distribution of wealth (those with first contact with the new money are richer now because they have more money and the level of prices is the same; and the ones last to have contact with the new money would lose, because they would see prices going up with the same amount of money in hands), but, in absolute terms, the standard of living would remain the same.

In the same way taxes do: It diverts resources from more to necessarily less productive endeavors. This is because, in the initial transaction, something is received for nothing. When the state prints money and uses it to buy bombs, resources are pushed away from things that make the world better and toward mass murder.

Re: Real Inflation

Bill — Mon, 13 Dec 2010 02:04:23 GMT

Inflation helps the debtor most. He gets to pay back his loan with devalued money. Despite all the crap you hear from Bernacke that's whats really on his mind

Re: Real Inflation

Luiz Mario Brotherhood — Mon, 13 Dec 2010 01:27:28 GMT

boohickey11, how can inflation decrease the absolute standard of living of a society? I though it promoted a relative distribution of wealth (those with first contact with the new money are richer now because they have more money and the level of prices is the same; and the ones last to have contact with the new money would lose, because they would see prices going up with the same amount of money in hands), but, in absolute terms, the standard of living would remain the same.

Re: Real Inflation

Bill — Mon, 13 Dec 2010 00:33:15 GMT

boohickey11 wrote the following post at Sun, Dec 12 2010 4:39 PM: Our standard of living has decreased compared to what it would have been without inflation. The standard of living has increased in spite of inflation, not because of it. Quote You're right Boo. I'm not trying to make a case for inflation. Since the animal rights guys put a stop to the glue factories you can get a good horse for a couple hundred bucks. The average guy can buy 4 or 5 horses a week on his salary. Without inflation since 1913 he'd be able to buy a whole herd.

Re: Real Inflation

Agamentus — Sun, 12 Dec 2010 23:45:12 GMT

That feels like a very hypothetical question with numerous variables. I hope that future advances in productivity do out-pace inflation so that standard of living improves. Assuming that the sky doesn't fall, Mars doesn't attack, developing and matured economies don't suddenly collapse, and government is brought to heel here in the U.S., I think we'll be ok.

Re: Real Inflation

boohickey11 — Sun, 12 Dec 2010 23:39:38 GMT

Our standard of living has decreased compared to what it would have been without inflation. The standard of living has increased in spite of inflation, not because of it.

Real Inflation

Bill — Sun, 12 Dec 2010 23:22:40 GMT

I've heard it quoted that the dollar today is worth about 4 cents compared to the dollar in 1913 when the Fed was created. When looked at in those terms one would expect that our standard of living has decreased by about 25 times over the past 100 years or so.

The simple fact is it hasn't. Due primarily to technological advances the average salary today buys more clothing, more boots, hammers, and horses than it did in 1913.

My question is this. Do you think future advances will out pace future inflation and provide us with a higher standard of living. That's the point isn't it? The rest is just a bunch of numbers.