In any case, no matter how wealthy Fred is, if Fred spends an extra $1000 on X then he has $1000 less to spend on something else. How is that supposed to result in inflation? Spending money doesn't magically put more money in one's pocket (despite wishing it did!), it means you've got less money.
Inflation means, afaik, only that the same amount of money has lesser purchasing power than it previously had.
This is an effect that can have various causes. One of them is that the government or Central Banks printed more money. Another way this could happen is if there was an influx of income in your region. This effect is less visible in today's economy with cheap and easy shipping of products, but can still be observed in objects that are pretty much impossible to ship. The only example that comes to my mind right now is housing.
> Inflation means, afaik, only that the same amount of money has lesser purchasing power than it previously had.
That's a tautological definition.
Money's value is determined by supply and demand, just like everything else. If there's more money representing the same amount of goods, the money gets devalued and you have inflation.
To understand inflation one must understand how money is created and destroyed, i.e. what determines the supply of money. Spending money faster does not create more supply, and McDonald's raising their prices is not inflationary because they did not create more money.
Money is created by printing it, or by the creation of debt. Money is destroyed by burning it or by paying down debt.
Well, Wikipedia seems to agree with that tautological definition.
While McDonald's alone increasing their price wouldn't be inflation, it could become that if a significant part of the businesses in that location increased theirs as well.
It's just really hard to find examples of this today. It's mostly limited to holiday hotzones, rent and similar.
Money is created many different ways. Banks could loan out a lot of money for instance, if some promising new opportunity is discovered. M2 money consists of many more things than just government-issued money from the mint.
Secondly, inflation is defined as a RISE IN PRICES and not the printing of money. Even Milton Friedman said that inflation is a monetary phenomenon. His claim be totally tautological if the definition was as you think it is.
Most of those investopedia inflation theories were debunked by George Reisman in the book "Capitalism". There's an awful lot of garbage circulating around as to what inflation is and what causes it.
The most ridiculous was Gerald Ford's WIP (Whip Inflation Now) campaign in the 70's:
Now, banks do create money when they make loans. But this is not inflationary as the loans are made against collateral, i.e. it is matched against value. And when the loan is repaid, the money is destroyed.
When banks make loans that have no collateral and are not paid back, it is inflationary. Guess who does that? The government! Most of what the government says about inflation is propaganda, because (like Gerald Ford) they want to blame anything and everything but government policy.
It's as much propaganda as people blaming "the speculators" for increasing housing prices.
Your comments indicated you thought inflation is printing money. So now you claim to know better than those who know the actual definition, what leads to inflation?
I don't agree with the theory that spending the money faster is the same thing as having more money, which is why I discount the velocity of money theory of inflation.