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Microsoft Corporation Message Board

  • hawcreek12 hawcreek12 Dec 31, 2012 5:48 PM Flag

    Note for non economic able posters, excess demand does not create inflation.

     

    The only thing that causes inflation is printing more money.

    Increased demand causes a spike in price for that item, that is not inflation. True inflation is a sustained increase in many items and is long term.

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    • "I made a post two weeks ago in which I explained that the popular view of inflation (wherein it is caused by money growth) depends critically on assumptions that do not hold in the real world. Money comes into existence when someone adds it to her portfolio of assets. This occurs either when she borrows money (which creates new cash from reserves) or sells securities to the Federal Reserve (which injects new cash into the system). Neither of these scenarios allows the central bank to increase the supply of money beyond demand, the story told by those in the money growth == inflation camp. Instead, inflation happens first. This then means that agents need more cash for transactions, leading them to borrow more or sell government securities to the Fed. Thus, the money growth accompanies inflation, but it does not cause it. The original post can be found here:"

      Forbes "what actually causes inflation"

      I know if "feels" good to hold the simple minded view but it is still wrong.

    • Absolutely. Some of these posters must not know how to use a dictionary:

      Economics . Inflation: a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency ( opposed to deflation ).

 
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