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TrustTheProcess

Causes of Inflation

36 posts in this topic

Hi y'all,

 

So much conflicting and partial/politically-charged discourse on the causes of inflation.

Can someone help me better understand why inflation is getting worse and how Biden's policies may be contributing to it+ how he could do better?

I am def not sold on the republican solution of more tax cuts plus less social security, healthcare, infrastructure, education, and childcare.... Also, I understand that this is a global issue as well. Shit is too complicated to fully wrap my head around and it is not my domain of expertise. 

Edited by TrustTheProcess

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The main cause of inflation globally is the excessive quantitative easing and subsequent issuance of debt by major governments during the covid pandemic. Basically we temporarily shut down parts of society and paid people to not work.  Quantitative easing is where central banks buy government debt to artificially lower interest rates by sucking up excess supply of government bonds. It really only became a thing after 2008 as a way to manage the economy, also known as "modern monetary theory."

https://www.yardeni.com/pub/peacockfedecbassets.pdf

Combine this with the fact that supply chains were disrupted during the pandemic, and still are thanks to Xi's "covid zero" policy, and it means more money chasing less goods. Any form of shortages such as chip shortages or real estate shortages can drastically drive up prices since in many cases even slight shortages can create major spikes due to supply in-elasticity. The supply chain is quite fragile and even a slight disruption in certain inputs can cause production to cease.

More money chases fewer goods, basically.  If everyone got wage raises to $20/hour they'd all ratchet up their spending and you'd see inflation in everything. Most people live paycheck to paycheck and spend up to their incomes. I buck the trend here preferring to work less and live a more minimalist life. :)

 

Edited by sholomar

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Simple answer:  Excessive money into the economic system.  

Stimulus checks and interest rates on loans dropping making them more sexy.  It's both the Democrats and the Republicans fault.

Republicans:  Made our economy more vulnerable to the COVID panic by overleveraging the economy.  

Democrats:  Stimulus for the people was overcalculated.  Too much.  

Basically, everyone thought COVID was going to be 150% as bad as it was.  And trump moved our economy to a more high risk/high reward model.  

Edited by Heart of Space

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Coronavirus, the war in Ukraine, and corporate power and greed.

Governments, in wealthy countries at least, don't need to get in debt, there is money, they just need to tax the rich corporations that are making more and more money, and inequality is increasing and increasing, This has to be addressed as the main problem. Governments spending is not the problem, corruption aside which is mostly induced by corporations as well, the spending on necessary infrastructures and other kinds of services bring a better life for the people and even jobs, which also make the grounded economy work better.

The problem is the funding, and the solution is taxing wealthy corporations.

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The fractional reserve banking system. The way central banking works is bound to fail long-term. 

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It's mainly due to the exessive money printing since the last banking crisis. This would have happened no matter what. Corona and the war was just the trigger.

I don't agree with a lot of varoufakis political takes. But he has solid systemic understanding about this issue. Give it a look.

 

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9 hours ago, mr_engineer said:

The way central banking works is bound to fail long-term. 

That's incorrect.  

The centralized financial sect of the government (FED) is a move in the right direction.  The more central control and intelligent planning is the future.  

They have the ability to alter mass human behavior in the market.  More centralized control, not less, is the future.  

Edited by Heart of Space

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13 minutes ago, mr_engineer said:

@Heart of Space You're going to love this guy, in that case. 

Designing an economic system that is governed by a higher artificial intelligence is an idea that I've had.  

Humans are a resource in a system that can be programmed and used to maximal efficiency.  For example a low level inefficiency in our system is the part of our economy that plays to human addictions like cigarettes or porn.  

You could architect the perfect economic system with very little wasted action and maximize well being.  But that takes a highly intelligent centralized system of economic planning.  

Edited by Heart of Space

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@Heart of Space See?! How did I know you'd love him?! 

I know you people want to let go of free will and make everything synthetic and robotic and soulless and lifeless. I know you people hate having free will, cuz you don't know what to do with it. 

You deserve the system they're creating for you. Congratulations. 

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5 minutes ago, mr_engineer said:

@Heart of Space See?! How did I know you'd love him?! 

I know you people want to let go of free will and make everything synthetic and robotic and soulless and lifeless. I know you people hate having free will, cuz you don't know what to do with it. 

You deserve the system they're creating for you. Congratulations. 

Your opinion comes from a lack of understanding.  You sound scared.  

I don't necessarily agree with this guy.  I don't know the extent of his ideas.  

Edited by Heart of Space

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Just now, Heart of Space said:

Your opinion comes from a lack of understanding.  You sound scared.  

I don't necessarily agree with this guy.  I don't know the extent of his ideas.  

Yupp. That's what they told you to believe and you, like the robot that they want you to be, believed them. 

Show me the gap in my understanding. Prove me wrong. 

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4 minutes ago, mr_engineer said:

Yupp. That's what they told you to believe and you, like the robot that they want you to be, believed them. 

Told me?  I have an extremely high level and abstract understanding of economics.  

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Just now, Heart of Space said:

Told me?  I have an extremely high level and abstract understanding of economics.  

They told you to believe even that. 

I'm not outright telling you you're wrong. But, you are outright telling me that I'm wrong. So, prove that to me. 

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4 minutes ago, mr_engineer said:

They told you to believe even that. 

I'm not outright telling you you're wrong. But, you are outright telling me that I'm wrong. So, prove that to me. 

Lets say you want to buy a house and you need a mortgage from a bank.  

When are you more likely to pull out a mortgage loan.

A)  When rates are high, or

B)  When rates are low

??? 

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2 minutes ago, Heart of Space said:

Lets say you want to buy a house and you need a mortgage from a bank.  

When are you more likely to pull out a mortgage loan.

A)  When rates are high, or

B)  When rates are low

??? 

I don't believe in bad debt. 

If you care so much about controlling the population, why aren't you getting rid of that first?! Why don't you want to do something good for the people, if you believe they're too stupid and ignorant to know what's good for them?! 

Edited by mr_engineer

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4 minutes ago, mr_engineer said:

I don't believe in bad debt. 

If you care so much about controlling the population, why aren't you getting rid of that first?! 

You don't have the basic enough intelligence to have this conversation to begin with.  I'll try to help you out a little.

You control people's choice by creating financial incentive or disincentive.

For example, if you want people to choose to stop smoking, you tax cigarettes more.  

If you want people to buy more houses and cars, you lower the interest rates.  

And so on...

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Just now, Heart of Space said:

You don't have the basic enough intelligence to have this conversation to begin with.  I'll try to help you out a little.

You control people's choice by creating financial incentive or disincentive.

For example, if you want people to choose to stop smoking, you tax cigarettes more.  

If you want people to buy more houses and cars, you lower the interest rates.  

And so on...

Everybody isn't as soulless and pragmatic as you are. Everybody doesn't believe in living in an AI-controlled technocratic city that's purely capitalistic and business-centered. Some people care about organic living and freedom and community. 

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