[ucaetano]

Inflation is good. Too much inflation is bad. Not because of inflation per se, but because of what inflation measures.

Inflation comes from a imbalance in supply and demand. If demand in an economy is growing in a healthy way, you'll have some inflation as investments in production will take time to result in increased production.

This increase in prices serve as signaling to determine where to invest in capacity.

Prices is how agents communicate in open markets, a slight inflation is a message that there is unmet demand.

But this is all basic economics...

[tensor_rank_0]

> Inflation is good.

inflation is good for net debtors and bad for savers.

> Inflation comes from a imbalance in supply and demand

price inflation is a necessary consequence of monetary inflation.

> This increase in prices serve as signaling to determine where to invest in capacity.

thats actually how malinvestment occurs. people see a lot of money flooding in, and think that is a demand for capital investment, but then when their customer base dries up they realize it was an artificial stream of money that shifted with the political winds.

> Prices is how agents communicate in open markets

this is true

> a slight inflation is a message that there is unmet demand.

a gradual increase in prices is a sign that more dollars are chasing the same amount of goods, ceteris paribus.

> But this is all basic economics...

not sure that condescension is warranted. basic economics distinguishes between price inflation as a result of monetary inflation and price increases due to other reasons.

[ucaetano]

Nice job missing the context:

Inflation is good not because of inflation itself, but because of what it signals: a growth in demand outpacing the growth in supply.

If supply is not outpacing demand, there are no investments in additional capacity.

> thats actually how malinvestment occurs.

No, that's how gains in productivity work. And that's how competition works. As demand increases, multiple agents will invest independently to supply that demand, leading to oversupply, leading to reduction in prices, leading to trimming out of inefficient capacity and a new equilibrium at a higher efficiency than before.

That's the economic cycle.

> price inflation is a necessary consequence of monetary inflation.

But not vice versa, you don't need monetary policy to have inflation, you don't even need a monetary system, or even "money" or currency. Inflation is just a continuous change in value between two goods due to a difference in supply/demand between the two. If there were only two commodities in the world, A and B, both with the same demand, but A is being produced at faster rates than B, there would be inflation.

> a gradual increase in prices is a sign that more dollars are chasing the same amount of goods, ceteris paribus.

Indeed, so there will be more dollars invested in supplying those goods.

> not sure that condescension is warranted.

That's not a condescension, it is basic economics.

[tensor_rank_0]

> nflation is good not because of inflation itself, but because of what it signals: a growth in demand outpacing the growth in supply.

price inflation is a signal of monetary inflation. you appear to be confusing price inflation with an increase in prices due to increased demand.

> If supply is not outpacing demand, there are no investments in additional capacity.

actually as long as marginal profit is positive there is an incentive to invest in capital goods.

> No, that's how gains in productivity work.

malinvestment is not productive, in fact it is destructive.

> But not vice versa, you don't need monetary policy to have inflation, you don't even need a monetary system, or even "money" or currency. Inflation is just a continuous change in value between two goods due to a difference in supply/demand between the two. If there were only two commodities in the world, A and B, both with the same demand, but A is being produced at faster rates than B, there would be inflation.

'monetary inflation' as defined in basic economics is an increase in the money supply. no one said you need monetary policy for the money supply to increase.

> even need a monetary system, or even "money" or currency.

thats very interesting, do you have a citation?

> As demand increases, multiple agents will invest independently to supply that demand, leading to oversupply, leading to reduction in prices, leading to trimming out of inefficient capacity and a new equilibrium at a higher efficiency than before.

thats how price signals work in a normal market. now consider what happens if a counterfeiter creates a bunch of fake dollars and spends them. people see the influx of cash, interpret it as effective demand, and invest in capital goods. then the counterfeiter gets caught and the money dries up, and all these businesses have excess capacity that shouldn't have been built in the first place. textbook malinvestment.

the same thing occurs when the government inflates the money supply, except the "counterfeiting" is legal and "we as society" accept this because the money is spent in "politically acceptable" purposes. it still causes malinvestment. which is something you can find in an intro to macro textbook.

> That's not a condescension, it is basic economics.

actually its quite condescending and it would help if you guys would educate yourselves on basic econ before presuming to lecture others on the subject. reading a basic macroeconomics textbook would do wonders for your perspective.

[ucaetano]

> price inflation is a signal of monetary inflation

No, you don't need monetary inflation to have inflation.

> malinvestment is not productive, in fact it is destructive.

Sure, but investment to supply additional capacity isn't malinvestment, by definition.

> no one said you need monetary policy for the money supply to increase.

> now consider what happens if a counterfeiter creates a bunch of fake dollars and spends them. people see the influx of cash, interpret it as effective demand, and invest in capital goods.

Oh, now I see, you're talking about the very particular case of inflation caused exclusively by bad monetary policy, and then extrapolating that to all inflation.

Inflation caused by bad monetary policy is indeed bad, but that's only one particular case of inflation.

Your argument is essentially "sulfuric acid is bad for society, because in some cases sulfuric acid can do a lot of damage if misused". Indeed, if misused it can do a lot of damage, but that applies to anything.

> reading a basic macroeconomics textbook would do wonders for your perspective.

Indeed, maybe you should give it a try!

[tensor_rank_0]

> Inflation caused by bad monetary policy is indeed bad, but that's only one particular case of inflation.

yes, the textbook case.

> Indeed, maybe you should give it a try!

indeed I have and thats how I know you're either ignorant or engaging in sophistry. good day.

[crdoconnor]

>inflation is good for net debtors and bad for savers.

With "savers" being a close approximation of "the rich" and debtors being another word for "the poor".

>price inflation is a necessary consequence of monetary inflation.

Counter-intuitively, it actually isn't a necessary consequence - not if velocity of the new money grinds to a halt after creation. Newly created has to be spent and respent and respent and so on for it to cause price inflation.

There are many ways that this can happen - e.g. if the money just ends up parked in a bank account or if the dampening effect of industrial slack offsets the creation of new money (i.e. a glut of inventory soaks up the excess cash).

>basic economics distinguishes between price inflation as a result of monetary inflation and price increases due to other reasons.

Economists actually get this wrong all the damn time. Monetarists (like Milton Friedman) attributed price inflation due to the 1970s oil shock to a so called excess expansion in the money supply that didn't happen.

Essentially, Saudi princes siphoning off more wealth via higher oil prices was blamed on money printing rather than cartelization, and it was decided that "debtors" should be the ones to take the financial hit for that by jacking up interest rates.

[tensor_rank_0]

> With "savers" being a close approximation of "the rich" and debtors being another word for "the poor".

thats false. many rich hold vast amounts of debt, which makes them benefit from inflation. also relevant is the discouraging effect of monetary inflation on savings. so poor people are incentivized to live paycheck to paycheck

> Counter-intuitively, it actually isn't a necessary consequence - not if velocity of the new money grinds to a halt after creation. Newly created has to be spent and respent and respent and so on for it to cause price inflation.

thats true, if the money is never spent. just like filling up your gas tank doesn't contribute to climate change if no one ever burns the fuel.

in the real world, people deposit that money in banks, who loan a multiple of their deposits out. so that money actually gets turned into debt and spent on a lot of stuff. thereby bidding up the price of stuff, which is price inflation as a result of monetary inflation.

> dampening effect of industrial slack offsets the creation of new money (i.e. a glut of inventory soaks up the excess cash).

that means that price inflation soaked up the decrease in prices that everyone in the market would have enjoyed. thats an example of how monetary inflation robs everyone except the first people to get the new money.

> Economists actually get this wrong all the damn time.

they still know that the difference exists, which is something that the parent comment apparently didn't realize.

[crdoconnor]

>thats false. many rich hold vast amounts of debt, which makes them benefit from inflation.

"rich" people in vast amounts of debt aren't rich, they're broke.

Rich people are owed money. They have money to spare so they lend it out for interest, see?

>poor people are incentivized to live paycheck to paycheck

people who live paycheck to paycheck, minus a few exceptions, do so because their cost of living equals their salary.

Your concern for the "poor savers" is touching albeit misguided.

[tensor_rank_0]

> "rich" people in vast amounts of debt aren't rich, they're broke.

not necessarily. if you have a lot of debt, but you hold the title to capital goods that produce income, then you can be very wealthy.

> Rich people are owed money. They have money to spare so they lend it out for interest, see?

indeed, there are rich lendors and rich debtors. that doesn't mean a person who owns factories who has issued a lot of bonds is broke. far from it.

> people who live paycheck to paycheck, minus a few exceptions, do so because their cost of living equals their salary.

cost of living for many people is variable. if you are incentivized to spend your money before it depreciates, that changes the calculus on many decisions, such as how much to spend on housing.

> Your concern for the "poor savers" is touching albeit misguided.

how is it misguided?

[skookumchuck]

> Inflation is good.

As I said. I bet you've heard that your whole life, too. It's good to question things you've heard your whole life.

> Inflation comes from a imbalance in supply and demand.

Inflation comes from the government issuing money at a faster rate than the economy grows. The reason it does that is to spend more money without raising taxes. This is sold to the citizens as being "good", and any deleterious effects are blamed on mumbo jumbo theories like "wage-price spirals" and "cost-push".

Keep in mind that there's no free lunch when it comes to economics, just like there's no free energy in physics. Any economic theory that creates something out of nothing is false - you don't need to understand it to know it is false. Just like when some crackpot comes to you with a perpetual motion machine, you know it's a fraud even if you don't examine his theory to find out where he went into the ditch.

[ucaetano]

> As I said. I bet you've heard that your whole life, too. It's good to question things you've heard your whole life.

Sure, and it is questioned. But this isn't just "something I've heard", but something me, and many others, have studied to exhaustion. It's basic economics. Like gravity. When was the last time you jumped out of a window just to question gravity?

> Inflation comes from the government issuing money at a faster rate than the economy grows.

Wrong. That can be one mechanism of inflation, but not the only one. There are many more sources of inflation. For example, the new world gold mines.

> Any economic theory that creates something out of nothing is false - you don't need to understand it to know it is false.

???