Posted on 06/15/2022 5:22:33 AM PDT by RaceBannon
I still cant fully understand how the printing of money causes inflation. Economies are normally driven by supply and demand at the basic level. .
If I need something that everyone else needs, it tends that the people who make the product or supply the service will raise prices to make profit when fulfilling the sale side of this, the need of that product or service making more profit for the provider. .
Supply can affect price, also, the scarcity of the product means it costs more, generally, because new means to provide the initial raw materials or shipping of the completed product/service will rise without the profit going up or need to rise unless that profit is spent to create new shipping supply costs and not genuine profit. .
The government printing doesn't put money in my pocket nor does it put money in the pockets of the gas companies, the grocer, the manufacturer.
The general population does not receive money to spend nor do manufacturers get money to improve or increase production, nor does the act of transporting raw materials or finished product come from government. .
So, who gets the money that government prints? Things that government purchases, infrastructure, defense and international aid is where so much money goes, welfare, SS, and interest on bonds... .
Yet, if none of that printed money goes to providers of goods or services, how does printing money cause inflation of normal commodities? .
The only thing I can see connecting increase in prices is increase in shipping and transportation costs by national policy concerning oil exploration or development, such as Biden is doing by causing the intentional slowdown in oil and natural gas development. That causes gas to go up, shipping costs to rise, therefore production costs to rise which is passed on to the consumer. .
None of that last paragraph has anything to do with printing money. I need some help here.
The federal government collected revenues of $3.5 trillion in 2019—equal to about 16.3 percent of gross domestic product (GDP) (figure 2). Over the past 50 years, federal revenue has averaged 17.4 percent of GDP, ranging from 20.0 percent (in 2000) to 14.6 percent (most recently in 2009 and 2010)......’
In 2020, the total revenue of the U.S. government sum up to about 3.42 trillion U.S. dollars and consist of individual and corporate income taxes, payroll taxes and other taxes. Individual income taxes totaled up to 1.6 trillion U.S. dollars in 2020, whereas corporate income taxes totaled to 212 billion U.S. dollars.May 19, 2022
https://www.taxpolicycenter.org/briefing-book/what-are-sources-revenue-federal-government
The federal government collected revenues of $3.5 trillion in 2019—equal to about 16.3 percent of gross domestic product (GDP) (figure 2). Over the past 50 years, federal revenue has averaged 17.4 percent of GDP, ranging from 20.0 percent (in 2000) to 14.6 percent (most recently in 2009 and 2010)......’
In 2020, the total revenue of the U.S. government sum up to about 3.42 trillion U.S. dollars and consist of individual and corporate income taxes, payroll taxes and other taxes. Individual income taxes totaled up to 1.6 trillion U.S. dollars in 2020, whereas corporate income taxes totaled to 212 billion U.S. dollars.May 19, 2022
https://www.taxpolicycenter.org/briefing-book/what-are-sources-revenue-federal-government
There it is, that’s the answer I was looking for.
THIS!
>>Oh, well you see the Treasury just creates it out of thin air.
Not sure about that. The Treasury creates a promissory note. Investors BUY those notes. So there is a transfer of wealth. Not a creation out of thin air. I think the biggest buyer is Social Security. (Im not saying money isnt created out of thin air by other means BTW) Most money that is created out of thin air is when the Fed lends money it creates out of thin are to the banks.
how did government charity through those means cause inflation? how Did it affect production? did it affect demand? None of those payments are high enough to affect the buying power of the recipient, them checks are not that high and people who drive new cars are getting outside income because SS doesn’t pay that much
“More money chasing the same quantity of goods and service drive up their prices.” I don’t buy it. I go to the stores and buy what I need at the stated prices. I don’t bid up the price.
I way I have seen it is, there is a set amount of gold being represented by X dollars. If the government prints X more dollars, then one unit of gold is represented by 2x dollars. So to buy a jug of milk worth one unit of gold I have to give 2x dollars instead of 1x dollars as before.
In the end it might amount the the same thing, but I am not bidding to a higher price, I’m being force to pay more dollars.
When you say the government’s printing of money does not go into the hands of the public or producers, but it does do exactly that, just not directly.
When the Government prints money, where does it go ?? It gets deposited into banks, especially those large Wall Street Bank who are shareholders of the Federal Reserve.
What do the Banks do with all those deposits ??? Banks make money by loaning it out, now days they also make money by trading it on Wall Street thru stock purchases, bond purchases, etc.
When Banks loan money that is deposited from the Federal Reserve they do so at much lower rates than they would normally do because they have so much of it to loan.
Lower Interest rates encourage borrowing by Consumers, Businesses, etc....
Consumers get lower car loan rates, home mortgage rates, etc. which increase their consumption, more cars and houses get sold, the price of each starts to rise which is the definition of inflation, print enough money and you get what we are experiencing right now, keep printing even more money and you get Weimar Republic style hyperinflation.
Here’s a short article about the explosion of the money supply it the USA over time.
https://levels.io/inflation-chart/
Fiat money. The US government, through deficit spending, prints money up out of nothing and that results in more money chasing the same amount of goods and services and that drives up prices as consumers attempt to use their funny money to purchase the goods over other competing consumers.
long on my wish list...(sigh)...
That you, Joe?
if that was true, then production would go up to supply the demand
that is not what is happening
What if the minimum denomination of currency was $1 trillion? How much would a soft drink cost? Money only has a value because we believe it does. If everyone makes $14 trillion an hour, then the money is practically worthless.
In the German Weirmark Republic, that was how it was. The government was printing money so fast that the value of the money was practically nothing. There is a story about a woman taking a basket of printed money to buy bread at the market when a disturbance caught her attention. She put the basket down to see it and when she came back, the money was piled up on the ground and someone stole her basket.
“The government printing doesn’t put money in my pocket nor does it put money in the pockets of the gas companies, the grocer, the manufacturer.
The general population does not receive money to spend nor do manufacturers get money to improve or increase production, nor does the act of transporting raw materials or finished product come from government. “
It did and it does.
“So, who gets the money that government prints? Things that government purchases, infrastructure, defense and international aid is where so much money goes, welfare, SS, and interest on bonds... .
Yet, if none of that printed money goes to providers of goods or services, how does printing money cause inflation of normal commodities? “
Confused thinking. Have another cup of coffee.
The more money they add to the money supply makes each dollar worth less. Restricting crude oil production raises gas prices. Burnt down refineries and food plants causes shortages and causes price hikes. The government taking land out of farm production causes shortages and high prices.
The government policies are designed to destroy the economy not to help we the people.
Your on an island.
On that island are ten seashells.
A man on the island sells coconuts for 1 seashell per coconut.
Being the morally onerous islander that you are, you cleverly create 10 more seashells.
You go to coconut man in the morning, but today, he’s asking for 2 seashells.
His comment, “You’re quite the sculptor, you should go into business for yourself, but stay away from seashells.”
Same principle.
If the dollars are removed from the economy by taxation then inflation will not result.
I think that if the dollars are removed for the demand of any kind of bubble, then inflation will not result.
I believe that is a secret the RINOs discovered long ago. They can print money into a housing bubble, or a dot-com bubble or whatever - and no inflation. They pop the bubble and “Poof!” all that “wealth” has magically disappeared.
If the government causes inflation, everyone with cash is robbed. If a bubble prevents inflation, then only those with wealth in the bubble are robbed and there is no inflation.
if that was true then there would be demand for goods and services...an economic boom, not a slow down.
Is that called a bull market of sorts?
If we all had this cash that was printed, the inflation we would see would cause an economic bubble, not a shortfall with reduced supply of goods for the reasons we see.
If people had money and were entrepreneurs, they would create trucking companies, new businesses ... is that what we see?
The simple printing of money that me and you have no access to as consumers does not seem to affect any of this, this is why I am confused
Economics of Money and Banking
https://www.coursera.org/learn/money-banking?
The Treasury Department’s Bureau of Engraving doesn’t actually print a lot of new banknotes. The largest banknote is the $100, so it would take a lot of paper to print a billion, much less a trillion dollars. Most money exists as accounting entries on the books of financial institutions, e.g. balances in checking and savings accounts.
Money is created by the Federal Reserve and the financial system, which is much more complicated than you’d imagine.
However, the simple explanation is that when the Federal government deficit spends it does so by issuing Treasury notes and bonds. These become reserve assets in the banking system. The increase in reserve assets allows the banks to loan more money to other borrowers. If the supply of money grows faster than the supply of goods and services, inflation results.
“Only government creates inflation.”
A big problem is many tag all demand supply prices increases as “inflation”. That is incorrect. Right now have prices going higher due to both inflation AND non inflation related demand supply imbalances. For example, if bird flue wipes out 100 million chickens and chicken and egg prices double, THAT IS NOT INFLATION.
What Is Inflation?
Inflation is the decline of purchasing power of a given currency over time.
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