Purpose of Monetary Inflation

[Thremp]

[ QUOTE ]
Companies want/need the supply/demand to be in equilibrium since thats where they make the most money.

[/ QUOTE ]

This very wrong and very basic.

[Jcrew]

[ QUOTE ]
It's still a scam. It's just masked by the growth.

[/ QUOTE ]

Then with this logic, any type of government is a scam. Fiat currency is just a framework/infrastructure to make sure there is enough grease in the gears and inflation is an indirect tax to pay for that framework. Sometimes things are mismanaged and inflation goes awry, but it's more because of problems of the government/society itself then the system. Nobody forces anybody to keep your reserves in dollars. Just keep it in gold, land or whatever you think is best at preserving value if you think the currency is being overly debased.

[ QUOTE ]
Why is the money supply changing?

[/ QUOTE ]

It is designed to, to keep up with the underlying amount of goods and services.

[pvn]

[ QUOTE ]
[ QUOTE ]
It's still a scam. It's just masked by the growth.

[/ QUOTE ]

Then with this logic, any type of government is a scam.

[/ QUOTE ]

Yes!

[ QUOTE ]
Fiat currency is just a framework/infrastructure to make sure there is enough grease in the gears and inflation is an indirect tax to pay for that framework. Sometimes things are mismanaged and inflation goes awry, but it's more because of problems of the government/society itself then the system. Nobody forces anybody to keep your reserves in dollars. Just keep it in gold, land or whatever you think is best at preserving value if you think the currency is being overly debased.

[/ QUOTE ]

Have you tried paying your taxes with land? Or gold?

[ QUOTE ]
[ QUOTE ]
Why is the money supply changing?

[/ QUOTE ]

It is designed to, to keep up with the underlying amount of goods and services.

[/ QUOTE ]

Why does this amount of goods and services need to be kept up with?

[mattnxtc]

nah its correct. sure a company would love to have prices be higher than what equilibrium dictates but the reality is that it rarely turns out to be beneficial in most cases and companies will lose money from lack of sales or lost opportunity from potential sales

[pvn]

[ QUOTE ]
As I said before...consuming more is fine...but if we consume more then in the short term prices automatically have to rise to keep us in equilibrium.

[/ QUOTE ]

Wait, who is "us"?

I can see it now... the board room of International Widget Producers, Inc:

Suit1: "We're selling at record rates, people can't get enough of our widgets!"

Suit2: "We better raise prices so well sell less!!!"

[ QUOTE ]
I cant draw out a supply/demand graph so you might want to google that. The supply/demand graph needs to be in equilibrium. so in the short term (and this is a relative term) goes up business cannot produce enough fast to meet this equilibrium. So prices go up to match this.

[/ QUOTE ]

Whoa. This is so, so wrong. You might find particular edge cases where this is sort of true, in general, this is way, way off. Companies that "cannot produce enough" will be out-competed by those who can. Raising prices will only increase this effect.

[ QUOTE ]
When a dollar now buys yuo less than what you could before this is deemed inflation.

[/ QUOTE ]

OK. You're talking about "price inflation". The OP is talking about monetary expansion. The distinction is significant, even though the two are intertwined.

[ QUOTE ]
Companies want/need the supply/demand to be in equilibrium since thats where they make the most money. A market is rarely out of equilibrium long. So when a company sees demand is high they obviously raise the price and get back into equilibrium since they make the most money...

[/ QUOTE ]

You should present this groundbreaking information to WalMart. I'm sure they'd be fascinated to find they can make more money by raising prices on their most popular products.

[ QUOTE ]
I would suggest if you are interested in this taking a macroeconomics class and they will go over all of this

[/ QUOTE ]

That sounds like a great idea.

[pvn]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
seignoirage, the revenues gained from printing money, would still exist even if there were no inflation.

[/ QUOTE ]

Huh? It *causes* inflation. Actually, it would be more correct to say that seignoirage *is* inflation.

[ QUOTE ]
that is because as the economy grows and more goods and services are produced, the money supply must also increase to keep prices stable.

[/ QUOTE ]

Why do prices need to be kept stable? Do you really think this is the primary goal of seignoirage? Do you think this goal is being achieved?

[/ QUOTE ]

i think you're confused. inflation is defined by changes in the dollar price of some bundle of goods, not by changes in the money supply.

[/ QUOTE ]

The OP asked specifically about "monetary inflation" not "price inflation".

[ QUOTE ]
if the money supply never increased but the economy continued to grow there would be deflation because the same amount of currency would have to be used to buy more and more things.

[/ QUOTE ]

So?

[ QUOTE ]
why should prices be stable? they don't have to be perfectly stable, but wild fluctuations would be bad for business. earlier posts in this thread have argued why deflation is worse than inflation, so that is why the government tends to increase the money supply somewhat faster than the projected growth rate of the economy.

[/ QUOTE ]

I haven't seen any actual arguments for (price) deflation being worse than price inflation, just assertions. Why is it worse? And should I necessarily care? Taking all of my money and just giving it to "business" would be good for business, but bad for me.

[ QUOTE ]
have prices been stable? if you look at U.S. inflation rates over the past 10 years (link) you will see that the annual rate has typically been under 3%, although this year will probably be higher.

[/ QUOTE ]

So does that mean prices have been stable or not?

[mattnxtc]

[ QUOTE ]
Wait, who is "us"?

I can see it now... the board room of International Widget Producers, Inc:

Suit1: "We're selling at record rates, people can't get enough of our widgets!"

Suit2: "We better raise prices so well sell less!!!"

[/ QUOTE ]

This is so wrong it isnt even funny. Since you arent reading what i write ill leave you to figure out why this is wrong. Big hint...in the short term companies arent producing enough...go check my last few posts

[ QUOTE ]
Whoa. This is so, so wrong. You might find particular edge cases where this is sort of true, in general, this is way, way off. Companies that "cannot produce enough" will be out-competed by those who can. Raising prices will only increase this effect.

[/ QUOTE ]

Not even close. I am in an industry right now where wait time on orders for parts can be up to a year. Its b/c the demand is so big that the fab shops just dont have room....so what do they do? charge higher prices. The prices comes down once they can expand to handle it but for now you are so very wrong again.

[ QUOTE ]
You should present this groundbreaking information to WalMart. I'm sure they'd be fascinated to find they can make more money by raising prices on their most popular products.

[/ QUOTE ]

Im pretty sure that your sarcarsm is ur attempt to try to act like you know what your talkin about...you dont

[ QUOTE ]
That sounds like a great idea.

[/ QUOTE ]

maybe youll come back knowing something instead of acting like you have a clue

[tripper]

pvn knows what he's talking about.
You can learn more at:
Ludwig von Mises Institute

[Riddick]

matt and other thread-goers, what is your take on this quote:

[ QUOTE ]
these economists [Keynesians/Marshallians] have not fully absorbed the great monetary lesson of classical economics: that the supply of money essentially does not matter. Money performs its function by being a medium of exchange; any change in its supply, therefore, will simply adjust itself in the purchasing power of the money unit, that is in the amount of other goods that money will be able to buy.

[/ QUOTE ]

[Jcrew]

[ QUOTE ]
"
Have you tried paying your taxes with land? Or gold?

[/ QUOTE ]

Convert it just prior to payment. Or do you propose that the government accept payment in any form?

[ QUOTE ]

Why does this amount of goods and services need to be kept up with?

[/ QUOTE ]

Should we go back to the barter system?