Inflation is made difficult to understand because ignorance
benefits Governments and elites on the good side of the assets /
annual costs ratio where inflation actually starts to be a great
benefit.
It's not that complicated if you first scale back to a closed
system of say 100 villagers with a supply of 10,000 shells that
have been machined down to a form they consider currency.
Yes, the chief is allowed to create more currency, but
it takes time and resources and most are familiar with about how
long it would take and the resources available (think back to gold
days also). Therefore, it is IMPOSSIBLE for the aggregate
price level to rise because an upper bound is established by the
total amount of currency in the system. Increasing prices for goods
and services in high demand or short supply would necessarilly lead
to
substitution. There is no way around
this.....unless there is a
counterfeiter in the system. If someone figured
out to machine shell currency at 10x the normal rate, that person
would take this currency, unbeknownst to the other villagers, and
purchase goods and services with the currency. Furthermore, he/she
would be relatively price insensitive (relative to the sensitivity
of others who don't have the ability to counterfeit currency).
Sound familiar?
All the nonsense about various types of inflation is just
distraction. Cost pull / demand push type discussions are fine for
figuring out if just eggs are expensive, but If you have broad
based, aggregate inflation of the price level in the economy (which
includes all asset prices, which includes the equity markets,
unlike what CPI includes), it can only be because there is an
active counterfeiter in the system, counterfeiting at a level that
would make this mathmatically possible (because it overcomes the
substitution effect).
If this explanation is complicated, it's my fault and not
because it's actually complicated.
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Inflation is made difficult to
Big first half winner VITL bottomed out at the beginning ...
Posted by bthefnd on 23rd of Sep 2024 at 04:29 pm
Inflation is made difficult to understand because ignorance benefits Governments and elites on the good side of the assets / annual costs ratio where inflation actually starts to be a great benefit.
It's not that complicated if you first scale back to a closed system of say 100 villagers with a supply of 10,000 shells that have been machined down to a form they consider currency.
Yes, the chief is allowed to create more currency, but it takes time and resources and most are familiar with about how long it would take and the resources available (think back to gold days also). Therefore, it is IMPOSSIBLE for the aggregate price level to rise because an upper bound is established by the total amount of currency in the system. Increasing prices for goods and services in high demand or short supply would necessarilly lead to substitution. There is no way around this.....unless there is a counterfeiter in the system. If someone figured out to machine shell currency at 10x the normal rate, that person would take this currency, unbeknownst to the other villagers, and purchase goods and services with the currency. Furthermore, he/she would be relatively price insensitive (relative to the sensitivity of others who don't have the ability to counterfeit currency). Sound familiar?
All the nonsense about various types of inflation is just distraction. Cost pull / demand push type discussions are fine for figuring out if just eggs are expensive, but If you have broad based, aggregate inflation of the price level in the economy (which includes all asset prices, which includes the equity markets, unlike what CPI includes), it can only be because there is an active counterfeiter in the system, counterfeiting at a level that would make this mathmatically possible (because it overcomes the substitution effect).
If this explanation is complicated, it's my fault and not because it's actually complicated.