• hexi [they/them]@hexbear.net
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    1 year ago

    Ah yes econ101, taking a complex and interconnected system that we don’t fully understand, boiling it down to its simplest and most incorrect model.

    Your issue with economics is that it says the ratio of currency to goods affects prices?

    If prices didn’t have to go up, then increasing the money ey supply would somehow magically increase wealth because you could just use the printed money to get more goods.

    Obviously printing more money doesn’t make more goods pop into

    existence, so something else has to happen. That other thing is called inflation.

    If prices didn’t go up, there would be shortages because some people would be walking around with more to spend. Then next the businesses would find they controlled a smaller % of currency, reducing their own buying power as other increased their prices.

    This is a global issue, the fed pumping money shouldn’t have had a big an effect.

    The Fed is the sole controller of the US money supply, and the US is the largest economy and the USD is held as a reserve currency for global trade.

    My best guess would be a mix of covid money from many countries going to the rich increasing the wealth gap, gas and oil companies hiking prices because of Russia even though a lot of them have no link to Russian oil or gas and causing a knock on effect. You’ve also got a number of bubbles around the world such as housing and car loans, these are definitely caused by greed.

    Greedy that always existed, but was enabled through recent events.

    I agree with the Russian oil supplies being embargoed allowing greedy energy companies to charge more, but that is just one factor.

    Money has no inherent value, it’s value comes from being accepted and how rare it is.

    A simple formula is, if you doubled the money supply, each dollar would have half the spending power it did before.

    Since money is just a paper that says you get to trade it for other things, the more circulating the higher prices will be.

    • spiderplant@lemm.ee
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      1 year ago

      My issue was with using econ101 as part of an argument, I’m sure you’ve heard of the saying about economics is that you spend most of the course learning why econ101 doesn’t actually work when applied to most real world scenarios.

      • hexi [they/them]@hexbear.net
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        1 year ago

        Anyone with an economics background would agree that the money supply increasing will cause inflation if there isn’t a corresponding increase in the supply of goods/services.

        How else could it work? People print money and somehow just buy more stuff consequence-free?

        • Melonius [he/him]@hexbear.net
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          1 year ago

          Money supply is a specific term and it will not always result in inflation. You’ve acknowledged that several times but still repeat it. It will depend how that increase in money supply is used, if at all.

          If I got a trillion dollars printed and did nothing with it, no change in inflation. If I deposit it at banks, there would probably be some knock on effects on interest rates that make their way to the broader system.

          If I go on a coordinated buying spree of oranges with the explicit goal of owning every last orange and orange producing land possible, inflation in oranges and substitute goods of oranges will occur. Easy conclusion.

          You can argue that: When the capital owners get free money in bailouts, while workers get crumbs, there is an obvious disparity. Capitalists see less value in currency and will want more of it in exchange for their contributions (leeching) to society. So they raise prices because selling an orange for $1 doesn’t feel as good as before.

          If workers got more money while capitalists got nothing, that disparity is reversed. Capitalists want to compete for a supply of cash that they didn’t have access to before. Prices will rise in inelastic markets because the opportunity to exploit presents itself, but in competitive markets there is a real drive to entice more purchasing. That’s not to say that prices will go down (they can!) But raising your prices on food because everyone got $1000 could mean missed sales if the price raise isn’t coordinated across the industry.

          You saying that inflation is driven by money supply is not the direct reason for prices rising.

            • Melonius [he/him]@hexbear.net
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              1 year ago

              The rich are spending the money

              If a rich person gets money, what evidence do you have that they would spend it or invest it? It is not a factual assumption and depends on many factors, and not just in a pedantic way. If market conditions are sour, a rich person would avoid investing it for fear of losing it.

              Capitalists are middle men who sell our labor + a product back to us at a higher price. If they don’t need cash right now, they will raise prices and sell fewer units at a higher rate to maximize the margin (on durable goods). If they do want cash, they will lower prices and trade margins for volume. Take oil as an example - if you can sell a barrel now for X or tomorrow for more, you would price the oil higher as long as opportunity cost < selling it lower now. How does other people having more money affect this?

              Consider your labor and pretend you are fairly compensated right now. If the money supply increases, do you demand, or at least deserve, higher wages? If so, why?

                • Melonius [he/him]@hexbear.net
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                  1 year ago

                  Since the financial crisis banks have taken deposits and reinvested them at the Fed or other banks. Purchases of stock do not necessarily raise prices either. Prices can fall on heavy volume and rise in light volume.

                  That’s a paycut in purchasing power.

                  Only if prices rise. Consider that this island only sells widgets in this currency. Will they raise prices because the money supply has increased? They were “maximizing” profit before, but now the money supply is different and the employee on the island still makes 20 coins. Will selling widgets at a new price point get them more money?