What're you paying for Gas?

[icepac]

If you track the price of gasoline since 1973 to now, you will figure out that it’s pricing did not keep up with inflation.

It could be far worse. 

Gas legal to sell in california will be in short supply because two refineries that make the california formulation are closing.

[CptTrips]

The overall principal is simple. The more dollars you add to a system with a fixed amount of goods the less each dollar is worth. The government prints those dollars and adds them to the system. Inflation.

Or the more you vary supply with fixed amount of dollars.  Or even just psychological sentiment to want to spend.  That's the expectations factor mentioned.


If people believe higher inflation is coming they will tend to want to spend now before the prices increase.  If you are needing a house and you expect the house prices to continue inflating, then the pressure is to hurry up and buy before it gets more expensive.  It becomes ironically self-re-enforcing.

Same with deflaltion.  If you expect housing t drop in price the incentive is to wait as long as possible because it is always getting cheaper.  Which means house have to get cheap to move.  Self-fulfilling.

The self-re-enforcing nature is why they are called spirals.  Once they get momentum it is the Devil to stop.

I believe we will soon get a object lesson in this behavior.

I'm just not sure which way it is going to go.

[AKIron]

So long as we agree that there is a direct connection between goods and monies wherein a change in one affects the value of the other the rest is minutia. With that out of the way I think you should agree that a government putting more money into the system than it receives (incurring debt) is reducing a dollars purchase power.

[CptTrips]

So long as we agree that there is a direct connection between goods and monies wherein a change in one affects the value of the other the rest is minutia.

I will agree there are things that affect things and other things can accelerate or retard that in various proportions under various conditions. 

That is what I believe and I'm taking a firm stance!

I'll let Gipity explain...

With that out of the way I think you should agree that a government putting more money into the system than it receives (incurring debt) is reducing a dollars purchase power.

Short answer: **the statement is incomplete and, as written, not necessarily true.**
A more precise answer requires separating **deficits**, **money creation**, and **inflation mechanics**.
---
## What the statement gets *partly* right
If a government **finances its deficit by creating new money** (directly or indirectly via the central bank), then—**all else equal**—that *does* tend to reduce the purchasing power of the currency over time.

This is the core insight behind the classic quantity theory idea:
> Too much money chasing too few goods → higher prices.

Historically, extreme cases (Weimar Germany, Zimbabwe, Venezuela) fit this pattern.
So the intuition is **directionally correct**, but the wording collapses several distinct mechanisms into one.
---

## Where the statement goes wrong
> “A government putting more money into the system than it receives (incurring debt)…”
This conflates **deficit spending** with **money creation**.

### Key distinction:
* **Deficit spending ≠ money printing**
* **Debt issuance ≠ automatic inflation**

### What actually happens in most modern economies
When the government runs a deficit:

1. It **issues bonds**
2. Those bonds are bought by:
   * Households
   * Pension funds
   * Banks
   * Foreign investors
3. Existing money is **reallocated**, not newly created

In that case:
* **No new net money** enters the system
* Purchasing power is **not mechanically reduced**

Inflation is not guaranteed.
---
## When deficits *do* reduce purchasing power
Deficits tend to be inflationary **only if one or more of the following are true**:

### 1. Monetization of debt
* Central bank creates new base money to buy government debt
* This expands the money supply directly

### 2. Economy is at or near capacity
* No spare labor or productive slack
* New spending competes for limited goods/services

### 3. Persistent deficits outpace real growth
* Money supply grows faster than output
* Prices adjust upward over time

### 4. Loss of confidence
* Currency holders expect future inflation
* Velocity of money increases (people spend faster)

---

## When deficits do *not* reduce purchasing power
Deficits can be **non-inflationary or even disinflationary** when:
* There is unused capacity (recessions)
* Spending funds productive investment (infrastructure, productivity)
* Deficits replace collapsed private demand
* Debt is financed by real savings
* Central bank maintains tight monetary policy

The U.S. ran large deficits:
* During WWII → **price controls + rationing prevented inflation**
* Post-2008 → **low inflation despite massive deficits**
* 2020–2021 → inflation only surged **after** supply constraints + stimulus overlapped

---
## A more accurate version of the statement
If the goal is correctness rather than rhetoric, this would be much closer:
> “Government deficits can reduce a dollar’s purchasing power **when they are financed by money creation or when total spending exceeds the economy’s productive capacity**, but deficits alone do not automatically cause inflation.”
---

## Bottom line
* ❌ **False as a blanket statement**
* ✅ **Conditionally true under specific monetary and real-economy conditions**
* 🔑 The decisive factor is **

Don't worry.

By this time next year, no one will be arguing about inflation.

[AKIron]

This time next year will be much the same as now. Prices won't increase but wages may as they have some catching up to do with recent surges in inflation. Only time will tell.

Assuming AI doesn't kill us all of course.

[CptTrips]

This time next year will be much the same as now. Prices won't increase but wages may as they have some catching up to do with recent surges in inflation. Only time will tell.

Assuming AI doesn't kill us all of course.

Well, my outlook is gloomier, but my avatar is the slang for a disease that kill 98% of the human population. What do you expect?
 

[Shuffler]

If you track the price of gasoline since 1973 to now, you will figure out that it’s pricing did not keep up with inflation.

It could be far worse. 

Gas legal to sell in california will be in short supply because two refineries that make the california formulation are closing.

I found it funny that two refineries that make california grade fuel that are not in the US.... one is in India. California imports quite a bit and will be importing more. California harps on pollution. India is a huge polluter and takes a lot of our plastics trash and just burns it in the fields. So you could say California is supporting heavy pollution. ROTFLMAO

[Captain Virgil Hilts]

Well Nobel Prize winner Milton Friedman agrees with me too. 

I guess you can't win them all.

Never seen him agree that we need a federal central bank, supposedly "private", but influenced by the government, controlling monetary policy.

Let the market correct itself, and let the market set the interest rates.

He loathed government influence in the market, as well as big government and the attending mass spending.

[Eagler]

I found it funny that two refineries that make california grade fuel that are not in the US.... one is in India. California imports quite a bit and will be importing more. California harps on pollution. India is a huge polluter and takes a lot of our plastics trash and just burns it in the fields. So you could say California is supporting heavy pollution. ROTFLMAO

Some are ok with others doing their polluting for them..as long as they can reap those benefits while saying how green they are...

Same bs with every battery in every EV and everything else that is rechargeable...

Eagler

Eagler

[AKIron]

I expect we'll see a surge in oil prices for a bit with the crackdown on sanctions currently underway. Probably won't last long.