Inflation

[diggy70]

I what to know what you all think of inflation? Is it the price oil and milk moving higher from traders or the money supply growing? I’m real trying to get a good hand on what going with our financial system. The Federal Reserve is pumping money in to the money markets, like money is going out of style. Also the fact there was a run on the bank (bear Stearns) and the fed had to bail them out. Why is our media so quiet on these issues? Is it just me or are the major cracks in our economy. Note I don’t buy the argument of deflation. As for the exception of the housing market! Well I guess thats why the fed if pumping all that cash in to the markets to save housing. But I really think there is going to be big problems coming soon to the US. What are u all doing? Buying t-bills, Buying fed short terms notes? maybe Stocks for growth or dividends? Seriously is any one worried about jobs, oil, and inflation. what about all the dept we have as a goverment and personaly!
Ps. this is not plagiarized, Sorry to ALL for my last posts didn’t know u had to quote internet sites won't happen again.

[Sefarst]

Inflation is not per se bad. A certain amount of inflation is necessary to sustain a growing economy with a growing population. Energy prices factor into it a great deal because every good we buy has to be transported and that requires oil. Oil prices increase, businesses pass on the increase to the consumer in the form of higher prices.

I'm not entirely sure what your question is. The Federal Reserve is pumping money into the market and lowering interest rates, increasing liquidity, for the purpose of stimulating consumption. More consumption leads to GDP growth and that prevents a Recession. Also, devaluing the dollar against other currencies makes our exports cheaper, meaning we sell more goods overseas.

We flirt with trouble in using this strategy, of course. Cutting interest rates deeply feeds bubbles. The current housing and stock bubbles are partly the result of deep cuts in the interest rates to pull us out of the 2001 recession. The current cuts in the interest rate could possibly feed another bubble that will hit us in the next 5 years. Dollar devaluation rattles confidence in government bonds. We sell bonds to investors in dollars to raise money for the government. If we start repaying those debts, however, with highly undervalued dollars, it will discourage future investment and make it more difficult for the government to raise money in the future.

And I don't understand what you mean by the argument of deflation? Do you believe deflation doesn't ever occur?

[balrog666]

Inflation is once and always a monetary phenomenon.


So blame the stinkin' Fed every time.


As for the media silence - while it's a simple issue, journalists are stupid.


;)

[Sefarst]

Inflation is once and always a monetary phenomenon.


So blame the stinkin' Fed every time.


As for the media silence - while it's a simple issue, journalists are stupid.


;)
I don't think there is a media silence, nor do I believe the journalists are stupid. Read the Wall Street Journal. There's an article about these sorts of subjects at least once per week, sometimes on the front page. We don't hear much about it on CNN and FOXNews perhaps simply because most Americans don't really understand economics or find it dry and boring until something happens and they are losing their jobs or can't afford the things they need. And, even in those situations, Americans tend to not favor long term economic solutions, but rather short term political solutions.

[a_unique_person]

Inflation is once and always a monetary phenomenon.


What about externalities? Supply problems?

[Chaos]

What about externalities? Supply problems?

[libertarian]
Aww, but that´s not inflation, that´s just prices rising across the board. Inflation is only ever caused by the government
[/liberatarian]

[Tippit]

Inflation is once and always a monetary phenomenon.


So blame the stinkin' Fed every time.


As for the media silence - while it's a simple issue, journalists are stupid.


;)

Inflation is the condition of too much money chasing too few goods. It can occur given increases in the supply of money, or decreases in the supply of goods.

Since it's cheap to create virtually endless amounts of fiat money as opposed to limiting the supply of goods, inflation is indeed usually a monetary phenomenon, caused by the very same bankers who claim to be fighting it.

[Francesca R]

Inflation is once and always a monetary phenomenon."always and everywhere" (Milton Friedman).

Since I have Bloomberg and Reuters market data services bombarding me with news all day every day, I can't say I have noticed a media silence either.

[Sefarst]

What about externalities? Supply problems?
I'm not sure what you mean by externalities causing inflation. Government responses to externalities like pollution can cause price increases as companies pass on the costs of government regulation to consumers, but generally that doesn't cause what we think of as inflation. Inflation is measured as an aggregate of the entire economy and an industry being forced to adopt new technology standards typically isn't going to affect the level of inflation.

The famous formula for thinking about all of this is:

(Money supply) X (velocity of money) = (price levels) X (income level)

or

M*V=P*Y

If we hold velocity of money constant (velocity of money is just the number of times a dollar changes hands in a given time period), then an increase in the money supply will cause an increase in both the price levels and the income levels. This is the justification for saying that inflation is always a monetary problem.

This formula also explains the phenomena of stagflation (stagnation in GDP and inflation occurring simultaneously, something originally thought to be impossible).

[Whack01]

Does this formula have a name for me to google? I took a principles of macro economics course in college and don't remember encountering it. I'd like to read up on it a bit. (the course I took was only sophomore level, they also offered a junior level macro economics course. I'm guessing that's why I haven't seen it)

[Sefarst]

Does this formula have a name for me to google? I took a principles of macro economics course in college and don't remember encountering it. I'd like to read up on it a bit. (the course I took was only sophomore level, they also offered a junior level macro economics course. I'm guessing that's why I haven't seen it)
It's called the Quantity Theory of Money. http://en.wikipedia.org/wiki/Quantity_theory_of_money

I don't think it's typically taught in intoductory courses to macroeconomics.

[diggy70]

Us dollar future:
http://en.wikipedia.org/wiki/Hyperinflation
http://en.wikipedia.org/wiki/Argentine_economic_crisis_(1999-2002)
Critical thinkers:research the derivatives market , hope it scares you all as it scared me on my research!

[Gravy]

Ps. this is not plagiarizedWe know.

[balrog666]

Inflation is the condition of too much money chasing too few goods. It can occur given increases in the supply of money, or decreases in the supply of goods.

Since it's cheap to create virtually endless amounts of fiat money as opposed to limiting the supply of goods, inflation is indeed usually a monetary phenomenon, caused by the very same bankers who claim to be fighting it.


An increase in the supply of money changes the price of everything.

A decrease in the supply of some goods generally doesn't change the price of others.

"always and everywhere" (Milton Friedman).

Since I have Bloomberg and Reuters market data services bombarding me with news all day every day, I can't say I have noticed a media silence either.


Poor paraphrase by me. ;)

Nor do I see any absence of a discussion of inflation in the news media. That was a facetious response to the OP.

What about externalities? Supply problems?


Which externalities? And what about them?

Supply problems with respect to what? Money, goods, moonbeams?