Aces High Bulletin Board
General Forums => The O' Club => Topic started by: Suave on May 14, 2007, 12:04:25 PM
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Why do prices and sallaries increase continually?
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Because our corporate and government masters have no interest in sharing the benefits of economic progress?
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Because banks (or everyone who lends money) receive more money than they were giving out as loans, and thus create more money through interest.
Since the cap on what all the money in the world can buy theoretically is limited by the ammount of goods/service produced a year, the numerical value vs it's actual value increases - hence inflation.
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Originally posted by Suave
Why do prices and sallaries increase continually?
short answer... would never be accurate enough to explain why.
There is not enough space on this server to show you all the causes and effects that affect inflation. Then again, if we devoted all server space to it, there may well be room enough.
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In the US it's because the federal government gave a monopoly for printing bank notes to the Federal Reserve bank and they can print off as much cash as they want to (about $50 billion a week).
This causes a greater supply of money and it follows that the money is worth less.
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Originally posted by Suave
Why do prices and sallaries increase continually?
It is deceptively simple: Employees demand better wages for their work. This increases operating costs for the employer. The employer must compensate for the increased costs by raising prices. The government must print more money to satisfy the increased demand for currency in circulation, thereby reducing the value of each unit of currency (one US Dollar in your case).
The next year the employees demand another raise since everything now cost more, and the vicious circle continues.
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Easy answer: Inflation happens because the dollar (as well as many other currencies) aren't literally worth anything but the paper they are printed on. In the old days, the paper money wasn't actually the currency, but a receipt to a valuable metal or object.
Same as it was back then, it is impractical to carry around several hundred pounds of valuable metal. So you carry around the receipts to several hundred pounds of valuable metal. Should the owner so choose, at any time he could take the receipts in and get the equivalent amount of metal back.
These first receipt issuers were soon to be bankers. The bankers started loaning out money. However, they realized that they could loan out more "Money" then the worth of gold that they had in their stockpile.
Problems came, but it wasn't ever really fixed.
Fast forward several thousand years, and you have the modern governments. THEY decide it's impractical to keep millions of pounds of valuable metal (gold, silver) in worth to back up the money, so they decide to get rid of it and switch to a FIAT system. This system is where the value of the money is determined by supply and demand.
Should the demand go up, the price goes up or visa-versa as seen in currency exchanges. Should the supply go up, the price goes down, as seen in inflation.
Oh, and in case you're wondering, to you, the common man, inflation really isn't a bad thing unless you keep your cash under your mattress, where it can't grow, but just devalue.
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Ya see...you put the nozzle on the valve. The air enters the tire building pressure, thus inflating the tire. Its all very simple. Don't know where ^these guys are going with all this other stuff.
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There is a common misconception that most money is "printed".
Today ,the vast majority of money is digital: credit entered into a computer out of thin air as loans are issued by the banks.
Here is an informative video on how the worlds money system works today.
http://www.youtube.com/watch?v=K91kvoW9lV8
Regards,
Sun
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Originally posted by Suave
Someone explain inflation to me
It is the process of increasing the air pressure in a tire, basketball, football or your prom date that was recently ordered. This is usualy accomplished with the aid of a device such as a pump or compressor.
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Originally posted by Suave
Someone explain inflation to me
(http://www.bachelorettepartydolls.com/images/1-fat-ass-doll.jpg)
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Why do prices and sallaries increase continually?[sic]
They don't.
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(quote)
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Originally posted by Suave
Why do prices and sallaries increase continually?
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It is deceptively simple: Employees demand better wages for their work. This increases operating costs for the employer. The employer must compensate for the increased costs by raising prices. The government must print more money to satisfy the increased demand for currency in circulation, thereby reducing the value of each unit of currency (one US Dollar in your case).
The next year the employees demand another raise since everything now cost more, and the vicious circle continues.
(unquote)
I like Viking's explanation and Nilsen's example.
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Lest Adam Smith spend too much time spinning in his grave, I'll give you an example of why we have inflation.
Walk into your local Best Buy store in 2007, and look at the consumer products on the shelf. These products did not exist in 1977. Walk into your local Sears store, and look in the home appliance section. Washers, dryers, kitchen ranges, lawn mowers, these products did exist in 1977.
In order to afford the additional consumer products that technology brings us, we must inflate the money supply.
Without inflation there is no growth...
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Suave, Odee had the best answer of them all.
You almost have to get up early in the morning, and watch shows like marketwatch, and moneyline, to even begin to get a grasp on all the factors that effect our economy. A rise in the price of Diesel fuel, for instance, drives freight rates up, thereby affecting the price on the shelf; wages, too. Or speculation on real estate. Deregulation of businesses' such as utility companies, Thereby raising the rates for electricity, water, etc., Thus making a rise in the cost of living. There's many things to consider.
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In the US it's because the federal government gave a monopoly for printing bank notes to the Federal Reserve bank and they can print off as much cash as they want to (about $50 billion a week).
This causes a greater supply of money and it follows that the money is worth less.
:huh
The Dollar is based on a Global Valuation. If the above were even remotely close to being accurate there would be little cause to invest in the Dollar, and would render it worthless. Nations buy up the American Dollar as Investments, based on a tangible value. That value is based on it's worth in trade, backed by the net worth of the United States Assets be it Hard Gold or Credit worthiness. The Dollar is held as Worth a Specific Trade Amount adjusted daily against it's buying power and vast wealth of the United States, which happens to be far outside what a massive majority of the population can comprehend.
Simply "printing more" is a 3rd grade rendition of "where money comes from" and has no basis in anything close to reality. What value is there to you lending your neighbor $50.00 with an interest rate of 20% if all he has to do is simply Print the money to pay you back? He has to perform some measure of productive work to earn that original loan and interest in order to make that loan worth lending in the first place. There has to be a tangible value. His car, as collateral, is Worthless to you if all he has to do is Print his payment.
An example of the lack of recognition of "value" is the current understanding of the national debt. Soundbites like "Gee it's Huge" are correct if one balances it against their own material worth. If you consider the National Debt compared to an individuals Debt to Wealth ratio, it would be somewhat close to you earning 100K Per Year, owning your 500K Home Outright, and carrying a Massive $450.00 dollar Credit Card Debt. Run, Bankruptcy is a sure thing!
Inflation occurs because we are Not subjected to a finite wealth as some people would have you believe. There is not Pie that is divided up and if one person Gains, another must Lose. American Wealth is Infinite in potential, and the value of the dollar is based exclusively on the Daily Change of What's out there VS What can be purchased. If the Wealth slows and the products Must be sold, the cost will go down, and inflation reverses (DeFlation). If demand outpaces availability then costs are driven up and inflation occurs. The Feds will attempt to stifle "unfair" inflation by tightening up the availability of funds to loan out, in conditions where massive economic expansion ramps up the buying power outside a gradual sustainable climb. They do this by increasing the interest rate, increasing the Cost to borrow money, reducing it's desire and keeping it off the market.
I don't understand the Monopoly of printing money. Are you suggesting that Inflation wouldn't occur if Kinko's could enter the money printing business? Where is the Value in the dollar? Are you thinking that just because it's Printed it has an intrinsic Value? In fact, the Feds do NOT have a monopoly on printing money. Have you considered buying Canadian Dollars? Japanese Yen? Gold? Silver? Formica Futures? Land? You do know you have the freedom Not to use some bill with the face of a current King or Dictator exclusively, don't you? You are free to purchase and invest any way you like. The Common Currency of the US is Dollar Bills. You are free to stock up on Gold, and exchange Daily. One day you might get $300.00 Dollars for your ounce, the next you might get $310.00. You might trade your 1 Dollar for a Canadian Dollar, and the next day get $1.13 in exchange, you might very well get .38c, but what does the Fed Printing have to do with what the Canadian Dollar or Japanese Yen are worth? Those Also are valued based on their nations worth.
So, printing is the key eh? Care to take another stab at it?
Most people consider the Dollar itself as the thing with value, it's not. The Value is what the Dollar can Accomplish backed by it's Worth.
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You mean people get raises at their jobs?!?
I never got one :cry
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Originally posted by Meatwad
You mean people get raises at their jobs?!?
DoH! The "J" word.........and so early in the morning.
:noid
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Originally posted by FrodeMk3
You almost have to get up early in the morning, and watch shows like marketwatch, and moneyline, to even begin to get a grasp on all the factors that effect our economy. A rise in the price of Diesel fuel, for instance, drives freight rates up, thereby affecting the price on the shelf; wages, too. Or speculation on real estate. Deregulation of businesses' such as utility companies, Thereby raising the rates for electricity, water, etc., Thus making a rise in the cost of living. There's many things to consider.
^^ this guy has it right