- Oct 31, 2012
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Crepitus tried to start a thread on this and blamed corporations, which is the only think the Left knows to do. However, the politically deranged partisan hacks are either incapable of understanding the truth, or they purposefully suppress it in order to continue business as usual for their own political wants. However, without a link and any factual backing whatsoever, the thread was closed. LOL.
Surprise, surprise.
But it is not really that hard to understand at all. Inflation is causing prices to rise, so what causes inflation?
hbr.org
At its root, inflation is driven by too much demand relative to supply. More precisely, as former Fed chair Ben Bernanke writes in his macroeconomics textbook with Andrew Abel: “Inflation occurs when the aggregate quantity of goods demanded at any particular price level is rising more quickly than the aggregate quantity of goods supplied at that price level.”
But what causes demand to outpace supply? That can happen for a few different reasons, and to understand them it helps to consider the three pillars of macroeconomics that David Moss describes in his book A Concise Guide to Macroeconomics: What Managers, Executives, and Students Need to Know. Moss structures the book based on output (how much an economy produces), money (how much currency people have or can easily get their hands on), and expectations (what people think will happen next). All three have a role in inflation.
1. Supply shocks: Inflation often happens because of supply shocks — major disruptions to an important economic input, like energy. For example, if a lot of oil fields stop producing oil because of a war, the price of energy increases. Since energy is a critical input into almost every other good, prices of other things rise, too. This is often called “cost-push inflation.”
I would add that when there is a global war on fossil fuels, this also mandates that the reduction of fossil fuels creates a disruption. When governments around the world begin to curb the fossil fuels industry from obtaining their fossil fuels, the only possible end result will be higher prices for everything. But this article is too PC to bring this topic up. Barak Obama basically admitted to this long ago
2. Money supply: Then there’s the demand side of the equation. An increase in the money supply will tend to cause inflation, as Moss explains. “With more cash in their pockets and bank accounts, consumers often find new reasons to buy things,” he writes in the book. “But unless the supply of goods and services has increased in the meantime, the consumers’ mounting demand for products will simply bid up prices, thus stoking inflation. Economists sometimes say that inflation rises when ‘too much money is chasing too few goods.’” This is sometimes referred to as “demand-pull inflation.”
I would add that with government printing money more than ever before, the only possible result can be increased inflation. Again, the article is too PC to point this fact out as well.
3. Unemployment and inflation. Recall that the root of inflation is too much demand relative to supply. Another way of thinking about the same idea is to ask how much “slack” there is in the economy at any point in time. An economy produces stuff using people’s time and ingenuity, machines and other infrastructure, and natural resources. But for various reasons, economies sometimes don’t produce as much as they could: There are lots of workers without jobs, factories that aren’t producing anything, etc. In the wake of the 2008 financial crisis, this high unemployment happened in many countries. There was a lot of “slack” in the economy, meaning lots of economic resources weren’t being put to use.
Again, the article is too PC to bring up the fact that the worldwide Covid shutdowns did this precise thing. The fact that there is a worldwide war on fossil fuels and a worldwide economic shutdown is why there is a worldwide inflation problem. However, the insane spending in the US has made things far worse in the US.
Surprise, surprise.
But it is not really that hard to understand at all. Inflation is causing prices to rise, so what causes inflation?
What Causes Inflation?
What causes inflation? There is no one answer, but like so much of macroeconomics it comes down to a mix of output, money, and expectations. Supply shocks can lower an economy’s potential output, driving up prices. An increase in the money supply can stoke demand, driving up prices. And the...
hbr.org
At its root, inflation is driven by too much demand relative to supply. More precisely, as former Fed chair Ben Bernanke writes in his macroeconomics textbook with Andrew Abel: “Inflation occurs when the aggregate quantity of goods demanded at any particular price level is rising more quickly than the aggregate quantity of goods supplied at that price level.”
But what causes demand to outpace supply? That can happen for a few different reasons, and to understand them it helps to consider the three pillars of macroeconomics that David Moss describes in his book A Concise Guide to Macroeconomics: What Managers, Executives, and Students Need to Know. Moss structures the book based on output (how much an economy produces), money (how much currency people have or can easily get their hands on), and expectations (what people think will happen next). All three have a role in inflation.
1. Supply shocks: Inflation often happens because of supply shocks — major disruptions to an important economic input, like energy. For example, if a lot of oil fields stop producing oil because of a war, the price of energy increases. Since energy is a critical input into almost every other good, prices of other things rise, too. This is often called “cost-push inflation.”
I would add that when there is a global war on fossil fuels, this also mandates that the reduction of fossil fuels creates a disruption. When governments around the world begin to curb the fossil fuels industry from obtaining their fossil fuels, the only possible end result will be higher prices for everything. But this article is too PC to bring this topic up. Barak Obama basically admitted to this long ago
2. Money supply: Then there’s the demand side of the equation. An increase in the money supply will tend to cause inflation, as Moss explains. “With more cash in their pockets and bank accounts, consumers often find new reasons to buy things,” he writes in the book. “But unless the supply of goods and services has increased in the meantime, the consumers’ mounting demand for products will simply bid up prices, thus stoking inflation. Economists sometimes say that inflation rises when ‘too much money is chasing too few goods.’” This is sometimes referred to as “demand-pull inflation.”
I would add that with government printing money more than ever before, the only possible result can be increased inflation. Again, the article is too PC to point this fact out as well.
3. Unemployment and inflation. Recall that the root of inflation is too much demand relative to supply. Another way of thinking about the same idea is to ask how much “slack” there is in the economy at any point in time. An economy produces stuff using people’s time and ingenuity, machines and other infrastructure, and natural resources. But for various reasons, economies sometimes don’t produce as much as they could: There are lots of workers without jobs, factories that aren’t producing anything, etc. In the wake of the 2008 financial crisis, this high unemployment happened in many countries. There was a lot of “slack” in the economy, meaning lots of economic resources weren’t being put to use.
Again, the article is too PC to bring up the fact that the worldwide Covid shutdowns did this precise thing. The fact that there is a worldwide war on fossil fuels and a worldwide economic shutdown is why there is a worldwide inflation problem. However, the insane spending in the US has made things far worse in the US.
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