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.
if a widget costs 10 blodgetts, and the government gives everyone 100 blodgetts to buy widgets, widgets will fly off the shelves and the price will rise because there are more blodgetts available to spend on widgets. too few widgets, too many blodgettes... inflation.
“it sold treasury bonds to raise the money. Now they literally just create the digits on a computer “
That’s silly. Whether the bond gets printed on a piece of paper or it is just a digital copy, makes no difference. Those bonds still have to be sold at a Treasury auction. Does any one who buys stocks today actually request the paper stock certificates? 99.99999% don’t.
Yes, as others have said, it dilutes the value, and even more. Because the money is of less value, prices for the cost that government pays for goods automatically goes up, sending consumer (ordinary people) prices even higher. Who can keep up with the government, when it comes to spending? So far, incomes have not kept pace because they can’t. A race to get ahead of the value lost? Impossible. At least for the middle and lower classes.
What’s worse is that the requests for money by the government on so many of the items are not spent as allocated, meaning the continual need to request more budgetary money for these things. When these moneys, budgeted for let’s say the military to purchase or build new equipment are not spent as such, but instead are awarded to contractors who support certain issues the government promotes, then this money supports the very people who want to eradicate the middle and lower classes and make those left their servants/slaves. Inflation brings in a new class of slaves who unwittingly vote for the very people who are enslaving them.
Unless there is a very quick turn around by a savvy leader who understands the destructive nature of inflation to the economy and to the lives of the very people, it will become harder and harder to change the course, which leads to chaos. In the Marxist agenda, this is the way forward and the deplorables are removed from society in one way or another. Use your imagination...or read about the Soviet Union.
Inflation is never desirable. Corrupted capitalism is neither desirable or beneficial morally to a people...and this is where inflation gets it’s start.
A good capitalist is morally grounded. Morally grounded capitalism will reign in inflation.
Macro Theory will teach you about national income accounting.
Money printed on paper is like a check drawn on the USA’s gold reserves. In and of itself, it has no value - the value is WRITTEN ON IT: “Pay to the order of _______.”
I used to know this gal who would joke: “You’ve got checks? You’ve got MONEY!” - it’s a joke, right? Because a check is just a piece of paper (so you present it to your bank and they give you a stack of checks! right?) until the bank you present it to ensures that there is actual money in the check-writer’s account. (Isn’t it confusing? One begins to wonder where the actual REAL MONEY is.)
Printing more money when there’s no gold in the treasury to back it up is like writing a whole bunch of bad checks.
I remember a relative of mine had some Confederate money. At one point the person he’d got the money from had had bushels of Confederate dollars. At one point, because the Confederacy had no more gold to back up the paper money, it would cost like $100 Confederate dollars for, like, a dozen eggs. Then the money became worthless and was just an item of interest.
To sum up: Paper money is like a check. When there’s no gold to back it up, it’s a bad check. Printing more money is like writing a whole bunch of bad checks.
How the newly-printed money gets into circulation, I’m not sure. You’d have to ask the Democrats. (They used to be the Confederacy so they are pretty much the bosses of worthless printed money.)
I’m one of those folks who would like a simple currency based on a gold standard. Also, the “federal reserve” bank needs to GO.
Several folks here have suggested Milton Friedman’s videos - that’s a great idea. You will learn a lot.
THINK: AUCTION. Goods that become scarce, especially food and energy related goods, demand a higher price from those that need them and they go to the highest 'bidder' for those goods. Prices will continue to rise until the 'bidders', i.e. consumers, are unwilling or unable to pay that price.
Either way, the money isn’t just given away, it’s borrowed and there’s some sort of note or bond securing it.
It’s obvious that neither increasing the money supply nor deficit spending alone causes inflation. Just look at the last four decades with big increases in both the money supply and deficit spending yet very low inflation.
Now if the government borrows money and gives it to consumers, as they did with the stimulus payments, they can stimulate a lot of demand and if the supply of goods isn’t there you get inflation.
The short answer to your question is you get the money by borrowing it, by your employer borrowing it and paying you, or by transfer payments from the government.
People are calling all price increases as “inflation”. That is wrong. Only price increases or the part of the increase, that are due to debasement of the currency is technically “inflation”.
When the government sends out multiple rounds of COVID "Economic Impact Payments", that put unearned money in pockets. When they extend unemployment benefits, that puts unearned money in pockets. When the government and/or the Federal Reserve keeps interest rates artificially low, more people borrow, and the difference between a market rate and the discounted rate is basically free money in pockets.
So it's not really the printing of money that's the big issue. It's putting that money in circulation that's the issue. If the government just raised taxes on Peter to give it to Paul, that wouldn't drive inflation, but Peter would be pretty angry if taxes were raised enough to cover all of the new spending.
So instead of doing that, the government takes out loans (by selling treasury bonds) in the name of Peter and Paul to pay for the new spending. That also puts unearned money into circulation (free money in pockets).
Along with that piece of paper is a promissory not to pay it back with interest and often other countries purchased those notes. Had you not heard that China was the largest holder of US debt. When they monetized the deficit, they skipped the sale of the treasury notes and just printed more money.
I cant remember any commodity other than oil that we need dollars for.
the increase in dollars should make oil cheaper, right? Cuz if oil is sold in dollars, then there is cash to buy oil.
Yet it is supply that is affecting oil prices. Demand has not changed much at the start, but now demand is affected daily because of impending increase in oil costs.
as long as the dollar is the world oil reserve currency, the world needs dollars.
if they went off the dollar, the over abundance of dollars would reduce the value of the dollar and printing should stop because we arent trading it back and forth. It is unused.
yet, are we hearing how an overabundance of dollars now is causing anything?
How does the overprinting of dollars cause an oil well to be shut down?
To switch from a pipeline to a truck to ship oil which raises all prices of raw materials and finished product?
I can only blame much or our economic downturn on intentional policy related to green energy and international skullduggary, so, I have a mental block on how extra money that we cant see spent nor do we have access to can affect supply and demand.
the normal rules aren’t applying, I am locked in the traditional causes of wages and costs are not adding up to what we are seeing.
and I can see nothing but some intentional action by our government to shut us down through a series of seemingly unconnected events that all affect each other naturally due to a butterfly effect of economics and international subterfuge.
It goes to NGO and generally big business. Some does go directly to the people, see so-called “stimulus” checks. Out of thin air.
Congress writing spending bills creates money for 100% of that spending. Out of thin air. Some went to build the wall at the mexican border, just to pick an example.
Recently some went to buy air-freight to get baby formual from Australia to the US. The freight carrier got paid.
Those 10 seashells are created, but by the Fed, not you. You have to pay the Fed back those seashells eventually, with interest. In our case its the bank that got the new seashells, who lent it to you. And the bank has to pay the Fed back in seashells with interest. The bank does that by charging you a higher interest rate and you pay the bank back interest and principal. they Thats why the seashell are called a “Federal Reserve NOTE
If all debts were paid, there would be no money in circulation.
Quite intersting process...Its been said that this whole process should be dont without the repayment and interest obligation, hence the term “debt free money”
When government spends the money, it is on goods and services same as when you spend yours. When it prints money, it increases the supply and devalues the currency the same way that putting too many gem quality diamonds on the market would devalue diamonds, or printing too many fine art prints would devalue a “limited” edition. . Diamonds only have high value because the supply is tightly controlled by one company, Beers.
“When they monetized the deficit, they skipped the sale of the treasury notes and just printed more money.”
Really? Read the link I posted @26. That will give you an a good understanding. A lot of what you are saying simply isn’t true.
In standard English, “money” has several, quite different definitions.
1. the medium of exchange
2. income, and
3. wealth
To illustrate, when you are asked “how much money do you make?” this is an entirely different question than when the Federal Reserve (or, any nation’s central bank) is asked “how much money do you make?”
The Federal Reserve makes money in the sense of medium of exchange. It literally prints the paper currency part of the money. It’s like a legal counterfeiter of money. If James Bond has the 007 license to kill, the Federal Reserve has the even more powerful 006 license to print money.
For most of us mere serfs in this modern elitist-run world, we make money by producing goods and services that are valued by our customers. (This is “money” defined as income.) We peasants fight inflation when we make money, because we are increasing the availability of goods and services relative to the availability of the kind of money that the Federal Reserve makes.
But, when the Federal Reserve makes money, it does the opposite. It increases the availability of medium of exchange relative to the availability of goods and services. So, what the Federal Reserve does is inflationary (at least when it increases the availability of medium of exchange relative to the availability of goods and services).
Now, what about government spending. In Democrat land, the government is like a Fairy Godmother (except there is no God and “mother” is merely the first part of a two-part word, the second part begins with the letter “f”). In Democrat land, the government waves a magic wand, and presto! changes pumpkins into motor carriages, all-electric of course, as well as, food stamps, housing subsidies, college loans, etc. etc.
While many people believe in government as Fairy Godmother, other people - called Republicans - don’t believe. They think (because their heads are full of racism, colonialism, homo and transphobia) that when the government spreads around money, it actually gets that money from people who work (through taxes) or from the Federal Reserve (through the printing of new money). The first way (taxes) is neutral with respect to inflation, and the second way (deficit spending financed by the printing of new money) is inflationary.
To be sure, there is a third way to finance government spending, borrowing. But, borrowing depends on the credibility that the government will repay the money it borrows with money of equal purchasing power. When the government loses that credibility, because it is running an unsustainable deficit, then lenders will demand a higher interest rate, which will worsen the deficit and lead to an inflationary spiral.
This inflationary spiral will get worse and worse, leading to a hyper-inflation, or else the Federal Reserve will have to cause a recession by jacking up interest rates even higher than the inflation rate, which will precipitate a recession.
This way of thinking is way too complicated for Democrats like Joe Biden and Janet Reno, and maybe even for a lot of people. They are free to pursue virtue and do-gooding because math and real science are too complicated for them. So, every now and then, the God that doesn’t exist has them learn through experience the lessons they should have learned from the wisdom of the past.
If you think it’s dangerous that a fool like Joe Biden is be president of the United States, think of how dangerous it would be for Joe Biden to be a brain surgeon, or to run a nuclear power plant, or to operate heavy equipment at a construction site? Government might seem to be a place where people can be fools. But, when we have fools running government, we will suffer. Then, with new elections, we have an opportunity to elect people who aren’t fools.
Abraham Lincoln put it this way: He said you can fool some of the people all the of the time. Those are the Democrats. And, you can fool all of the people some of the time. That’s when we elect the Democrats. But, you can’t fool all of the people all of the time. So, democratic government isn’t perfect. We sometimes make mistakes. But, with new elections, we will correct those mistakes.
You must not confuse the stock market with the economy.
A bull market is when over time, investors be they individuals or institutions are consistently buying securities.
Conversely, a bear market is when over time invastors are selling or not buying securities.
I can’t state precisely under what guise nor in what amounts the government inserted money into the economy. I know that the government borrows money by selling treasury bonds. This is creating money. During Covid I personally received several cash payments that was in actuality money created out of thin air. “We” not only had access to the money but actually received it on several occassions via government checks
Deficit spending is when the government spends more that it receives in tax revenue. There is the current deficit, this fiscal year, and the long term deficit which is made up from all the various previous current deficits. Deficits are an injection of money into the economy.
Regarding a boom. In my view at present there was a boom in many areas and a static economy in others. As a result of the Biden policies, there is a retardation that some are referring to as the early stages of a recession. Additionally, Covid as a world phenomena, caused all sorts of disruption and extrordinary measures.
Enough....... maybe too much
There is a lot of “petrodollar” noise is nonsense. Oil is 1% of all dollars traded. ONE PERCENT.
“The Federal Reserve makes money in the sense of medium of exchange. It literally prints the paper currency part of the money. “
Actual currency (paper bills and coins) is a tiny fraction of the money supply. Mostly insignificant.
Buying a house or land does not decrease the amount of money in circulation. It decreases the buyer’s bank balance and increases the seller’s bank balance (and the balance of the real estate agents, etc.)
The money supply can be decreased by reducing banking system reserves or by reducing the ratio of loans to reserves.
The only “commercial” transaction that destroys money is (I think) bankruptcy. The amount of money lost by the lender is, in effect, destroyed.
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