Inflation - why do we need it?

[Karl Pilkington]

What question? I didn't even see a single question mark in there.

More of a challenge than anything. I'm challenging you to show me where I was wrong, and justify your stance that I'm an idiot (though perhaps conversing with you is more than enough evidence of the latter).

So far I've seen one tiny error I have made, one that I thought was probably wrong even as I typed it no less, and had the rest of my posts validated as being correct.

I know its hard for you to accept this, but you won't ever know everything fd. Every now and then you will be wrong. Calling someone an idiot for being wrong is a sign of being an a-hole, and more than anything it reflects on your inability to deal with the adversity you faced for posting this thread in the first place.

 

[fairdinkum]

Your original premise was exactly as your first post read. You were asking some mind-numbingly stupid questions. Rather than just accept you didn't know what you were talking about, you've tried to deflect attention onto the only other person in the thread to get it wrong (me).

You are embarrassing yourself again.

Do you even know what a 'premise' is? Once again you are using words whose meanings you are not familiar with.

As for 'mind-numbingly stupid' questions, what does that say for this forum that nobody has even attempted to answer most of the questions in my original post, and what does it say for you when you gave the most ridiculous answer so far to the simpler questions?

It's a tactic I used to apply, back when I was an idiot.

Now you just use big words whose meanings you don't know, and put forward theories that even you admit to knowing are probably wrong.

But you've been claiming you knew these answers all along, so you aren't really learning anything with this thread, are you?

Where did I claim that I knew the answers? You aren't just making stuff again, are you, KP?

You're welcome to do the research yourself (even though you haven't done the research yourself).

Oh, I have, and I still can't find the answers to many of my questions. That led me to believe that most people are in the same boat - they simply don't understand where money 'comes from' - and this thread has suggested that I was right in this conclusion.

When you start working in the corporate world, as you no doubt will, you'll realise that people hate it when someone just flat out asks a question. They much prefer it when you have a theory yourself and seek to validate it instead.

If people like you are anywhere above s**t-kicking positions in the 'corporate world' then god help us all.

As for bosses preferring know-it-alls (who actually know incredibly little) to those who simply want to learn, I'll believe it when I see it.

 

[fairdinkum]

More of a challenge than anything. I'm challenging you to show me where I was wrong, and justify your stance that I'm an idiot (though perhaps conversing with you is more than enough evidence of the latter).

So now you don't even know the difference between a question and a 'challenge'. This is getting silly.

Calling someone an idiot for being wrong is a sign of being an a-hole, and more than anything it reflects on your inability to deal with the adversity you faced for posting this thread in the first place.

Adversity? You make me laugh.

 

[Karl Pilkington]

Hmmm, ok champ. Back on the ignore list you go. I wish you well in your future endeavours. I hope one day you will come to realise how much of an a-hole you behave like, and adjust accordingly.

 

[fairdinkum]

Hmmm, ok champ. Back on the ignore list you go. I wish you well in your future endeavours. I hope one day you will come to realise how much of an a-hole you behave like, and adjust accordingly.

The trusty 'ignore list'.

Take care, old foe.

 

[Kernel Sanders]

Except everyone loses their jobs.

And any mortgage you have becomes more expensive.

Companies that provide essential needs like say, food, will need to make more money now to repay their debts faster - because the value of the debt is ever-increasing, so they up their prices. A shitload of people are out of work to start with, and can't eat.

The government recieves much less in tax dollars, and can't provide assistance.

We starve to death.

Yeah, your logic is pretty s**t really.

Deflation and inflation aren't things we decide we need. They're products of a capitalist economy. It's like asking if we need wind. We probably don't NEED it but we sure as hell can't get rid of it.

A few points:

Didn't think about mortgages becoming more expensive.

Companies up their prices or margins to make up for declining sales. Well if they did this, they'd be having even less sales. At some point, if that loaf of bread got too expensive, I'd be ripping up the backyard lawn and plant wheat and raise cows and chooks instead.

 

[Karl Pilkington]

A few points:

Didn't think about mortgages becoming more expensive.

Companies up their prices or margins to make up for declining sales. Well if they did this, they'd be having even less sales.

Exactly, and pretty soon the large majority of our companies will fold. The only ones that will survive are those in 'essential' markets like medicine, food etc.

At some point, if that loaf of bread got too expensive, I'd be ripping up the backyard lawn and plant wheat and raise cows and chooks instead.

Possibly - but before it gets to that point society will have already shat itself. We wouldn't have enough tax dollars to sustain law enforcement, the health system, fire department, education etc. and our defence force would be all but defunct.

If looters and criminals hadn't already relieved you of your home by that stage, you'd be speaking Indonesian pretty soon after.

 

[nokiacasio]

These conspiracy types (who usually support Ron Paul) believe that the cause of the US financial ills is the inflated money supply. They believe this fiat currency will lead to financial collapse.

I would have thought if there were a financial collapse and a return to stone-age living, you would prefer to hold rice or cans of baked beans rather than gold. You can't eat gold. Gold being valuable relies on an unspoken agreement you have with your fellow man that gold is valuable (which is similar to how fiat currency comes to be valuable). The value of rice however comes from a biological fact that you need it to live, and it is valuable assuming life is valuable. However, there are many properties of gold that make it good for currency, e.g. it's not perishable.

By this way this didnt exaclt answer my question of why the act of "printing more money" is inflationary.

Surely the simple act of printing money (and, say, leaving it in a warehouse at the mint) isnt inflationary.

Isnt it the act of more money being spent that is inflationary? So by "printing more money is inflationary", is what they mean "printing more money, distributing it to consumers and them spending it is inflationary"?

Yes, you need to spend it or invest it. How quickly money goes around in the economy is called the velocity of money, and it affects inflation. See http://en.wikipedia.org/wiki/Velocity_of_money if you're interested.

I am more than happy to admit that I do not know who is in charge of printing money in this country.

That would be the Reserve Bank.

 

[dylza]

We are now told on an almost daily basis that the desired level of inflation is 2-3%. Above that and interest rates go up, below that and they go down.

Can anyone out there tell me why we don't aim for 0% inflation? That is, the $100 I earn today and stash under the house is worth $100 (that is, all things being equal, can buy me as much muesli, postage stamps, underpants etc) in 20 years time. Why do we not aim for this?

Having done some reading on my trusty ol' friend Wikipedia, it seems that most people agree that the printing of more fiat money is the cause of inflation. So why don't we stop printing money - or, at least, greatly reduce the printing?

Actually - that brings me to another point. When the State prints more money (I assume this is the responsibility of the Reserve Bank?) who gets it? And how much do we print? Where can you find out?

What is the benefit of inflation?

You sure your not Wayne Swan in disguise?http://en.wikipedia.org/wiki/Wayne_Swan

 

[Jumpin' Jimmy]

You sure your not Wayne Swan in disguise?

More likely Wayne Schimmelbusched, Wayne Schlosched or Wayne Canary

 

[fairdinkum]

That would be the Reserve Bank.

Okay.

So how much do they print?

And how do they decide how much they are going to print on any given day?

And once the money is printed, who does it go to?

 

[That's deliberate]

Firstly - Fairdinkum - you ask a very good question re-Inflation..why do we need it?

Secondly - i can't believe that i read through 1000 posts of rubbish but i did and i am thankful for it because it taught me something - the general public have absolutely zero comprehension/ understanding of what is 'really' going on around them.

Fairdinkum feel free to PM me and i will be more then happy to share my expertise with you at length regarding the economy, politics, how to make your first million, finance and well being.

Inflation - in simple terms - to inflate - something that rises, an increase in something etc.

Fairdinkum - inflation is just a word that BS politicians, economists, academics use. nothing more nothing less.

Coincidently you will find that it comes in different forms so as to justify their BS argumments before and after the fact. You will here terms such as Asset inflation, interest rate inflation, exchange inflation bla bla bla.

The question you want answered is what causes inflation.

To answer this you have to understand how it is measured first and this is where all the fun begins...because depending on which side of politics you sit on and which economic theory you want to disprove or prove you could make an argument for whatever you like...It is like the BS champion data stats that are collected that supporters site in supporting their arguments for and against players.

furthermore every type of inflation mentioned above has its own measurement - yea i know it gets better

You see every country/economy measures inflation differently - why? i hear you asking - and why is it that the tools used to measure inflation are continually changing at the behest of the governing bodies-...hmmm i wonder why?..that's for another time...

It might have something to do with Government spending and policy...think about it....how many times do you hear the term we need to tackle inflation so we are going to raise interest rates, freeze wages bla bla bla bla bla bla...it is just a BS political term...

We invaded Iraq because we they had weapons of mass distruction right?

The short answer is the term inflation which is commonly used in political/economic arguments is a term designed to justify the decisions bad or indifferent made by governments.

Inflation means nothing - it is an illusion.

In Australia we commonly measure inflation by the use of the Consumer Price Index (CPI). It is a flawed measurement in so many ways that im not even going to bother getting into.

The CPI in simple terms is a measurement of the price of a select 'basket' of goods & services taken from one set period to another.

Who dictates what is in that basket of goods, how often is it changed, and why do they change these items ....think about it and get back to me or otherwise just PM and we can get into further discussion.

What does a 3.5% or 10% inflation rate mean really?....absolutely nothing other then an opportunity for Governments to make policy decisions and justify expenditure/taxes on all levels from migration to interest rates to defence spending in whatever way they please.

As for the rest of you get you heads out of your ass, wake up to yourselves and stop quoting BS academic transcripts you read in High School and actually understand what is going on around you.

Thus endeth the lesson

 

[Karl Pilkington]

Hmm that last post had a lot of words, but didn't really say anything. Care to elaborate bit TD?

 

[Scallop Industry Thug]

hahahah another one of those "OMG u r all stupid. i know all the answers but i am 2 smart to waste my time telling you dum ***** posts

 

[Karl Pilkington]

why? i hear you asking - and why is it that the tools used to measure inflation are continually changing at the behest of the governing bodies-...hmmm i wonder why?..that's for another time...

LOL I wish I could write stuff like this - comedy gold.

 

[That's deliberate]

Hmm that last post had a lot of words, but didn't really say anything. Care to elaborate bit TD?

What part of it didn't you understand.?

What it is, how it is measured or the consequences of it..

or is it a bit much for you to understand?

 

[That's deliberate]

LOL I wish I could write stuff like this - comedy gold.

oh well...some people wish for things others just go and get them....not hard to figure out which basket you sit in...

Chin up

 

[Karl Pilkington]

What part of it didn't you understand.?

What it is, how it is measured or the consequences of it..

or is it a bit much for you to understand?

No it's just the astounding lack of detail in your post coupled with your numerous and hilarious spelling mistakes and grammatical errors.

I was just really hoping for another long-winded post of nothing I could make fun of.

 

[Scallop Industry Thug]

Thanks FD, you told us 2 things.

1) We are dumb

2) you are too smart to bother explaining the right answers

Other than that, your posts have been utter write-offs

 

[fairdinkum]

Thanks FD, you told us 2 things.

1) We are dumb

2) you are too smart to bother explaining the right answers

Other than that, your posts have been utter write-offs

You talkin to me or to TD?

 

[Scallop Industry Thug]

Sorry I meant TD

 

[Aquamarinejewel]

Guys, can we please get this thread back on topic.

 

[sblack]

Well, as usual, you are wrong.

I am more than happy to admit that I do not know who is in charge of printing money in this country. I am also more than happy to admit that I am slightly confused that the Reserve Bank would cut the interest rate when inflation is well above the target band. I have never claimed to know anything I don't.

Pre-emptive Monetary Policy (McPharlain like). Add to that the 6-12 month lag that Monetary Policy has...meaning the rate rises at the beginning of the year will now be starting to effect the economy. These probably indicated the economy was slowing too much...probably poor Economic Growth figures, and therefore to avoid a potential recession, Monetary policy was loosened slighty to allow for increased growth, while still controlling Inflation

Alternatively you can read Glen Stevens statement http://rba.gov.au/MediaReleases/2008/mr_08_14.html detailing the factors affecting the RBA's decision

 

[fairdinkum]

Pre-emptive Monetary Policy (McPharlain like). Add to that the 6-12 month lag that Monetary Policy has...meaning the rate rises at the beginning of the year will now be starting to effect the economy. These probably indicated the economy was slowing too much...probably poor Economic Growth figures, and therefore to avoid a potential recession, Monetary policy was loosened slighty to allow for increased growth, while still controlling Inflation

Alternatively you can read Glen Stevens statement http://rba.gov.au/MediaReleases/2008/mr_08_14.html detailing the factors affecting the RBA's decision

Thankyou for your input sb4b.

However, you are only answering the surface of my questions. Yes, the recent rate cut was to stimulate growth in a lagging economy. I get the basics.

But what still hasn't been answered are the more fundamental questions I posed in the OP, along the lines of who controls the money in circulation in this country, and how do they do it.

 

[The KEY]

Are you talking funds transfer or cash (that you'd get from an ATM)? The supply of cash is self regulating. The Reserve Bank prints the cash notes and coins via the national mint. Regular banks CBA, NAB ANZ etc then simply purchase the 'cash' from the reserve bank via an electronic funds transfer, then a security company will deliver the cash and coins to the bank branches.

This has a benefit for the regular banks too, as they are not over supplied with 'cash' at anyone particluar time.

It's a supply/demand thing. You demand cash from your ATM, the bank needs to have that cash available, when they run low they transfer funds (held in mortages, term deposits and saving accounts) to the RBA, and they inturn supply the banks with their cash needs which allows you to withdraw from the ATM.