Inflation??

[psychomonkeyparade]

hey why is there inflation? it just ruins the economy. seems to me if we increased the value of the dollar,everyone would be richer, thus the economy would do well. someone help me out here,

[MortifiedPenguins]

you can't increase the value of the dollar unless you stop printing the dollar. inflation just comes with global economics which i don't feel like getting into right now.

[bombkangaroo]

Inflation occurs for various reasons, the two most notable being people just jacking up their prices because they can, and the increasing scarcity of natural resources.

The first reason is just that. People have a certain amount of disposable income,, and since most are able to save, the companies who sell things decide that they can afford to pay more for the same products. Then they up the price, and the unions ask for higher pay, and a cycle of inreased living costs is born.

The second one is a supply and demand mechanic.
If Supply > Demand, then prices go down. If Supply < Demand, then prices go up.
Since natural resources like oil and such or constantly being depleted, and the demand for them is always either increasing or remaining the same, then the prices rise.

You can't just raise the value of a currency, since that is defined by the prices people pay for the goods they buy, and the international demand fo that country's currency.(again, it's something of a supply and demand mechanic in operation there.)

[cepticmind]

At 7/17/05 11:25 AM, bombkangaroo wrote:
meow

so to get inflation down supply has to be above demand?

[Jimsween]

There is inflation because the value of the dollar is not controlled, it's not backed by anything so there is no absolute value.

[MortifiedPenguins]

At 7/18/05 02:56 AM, Jimsween wrote: There is inflation because the value of the dollar is not controlled, it's not backed by anything so there is no absolute value.

thank you jimsween. remember your money and our money is no longer contolled by the gold.

[capn-g]

At 7/17/05 11:18 AM, PsychoMonkeyParade wrote: hey why is there inflation? it just ruins the economy. seems to me if we increased the value of the dollar,everyone would be richer, thus the economy would do well. someone help me out here,

Inverse economics. If you simply increase the value of the dollar then it conversely becomes worth LESS. To better explain, 1 millionaire is rich, 1 million people with $1 each are not. I'd try and explain it better but I'm very tired......... @_@

[Jose]

At 7/17/05 08:50 PM, cepticmind wrote:

At 7/17/05 11:25 AM, bombkangaroo wrote:
meow

so to get inflation down supply has to be above demand?

There will always be inflation because the dollar isn't controlled. The only thing you can do is try to beat it with a higher intrest rate whilst you are saving it.

[lapis]

You can't increase the value of your currency. You can print more or less, but it won't make your country richer or poorer. In 2005 the Turkish government replaced the old Lira (exchange rate: 1 dollar = 1,650,000 Lira) with the new Lira, which is the same except with 6 zeroes less. People now earn a million times less money, but it doesn't matter because shopkeepers also ask a million times less, and foreigners buying Liras will pay a million times as much for your Liras.

Inflation exists because shopkeepers will ask more for their wares, so labourers will ask for a higher paycheck in order to buy the same amount of goods. Then employers will make their products more expensive to pay for the increased labour costs, and then the shopkeepers will ask more for thier wares to compensate the higher purchasing expenses. Etc. Your savings will devaluate because there will be money in the land, but that's okay as long as you deposit it at a bank, which pays dividend. Or you can invest the money in stocks. It goes wrong when inflation is a lot higher than what the bank pays. This is good for people who owe other people money, but not for people with savings. Otherwise inflation doesn't really hurt the economy, except you have to keep printing new dollars.

[SuperRico]

inflation happens when a man and woman love each other........

no no seriously there is a reason but i forget waht it is

[Camarohusky]

Raise the value of the dollars and the value of good may drop but it will be proportionally the same. I mean if a compnay has ten customers a day who cna spend $100 on their products they will sell theri products for $100 dollars. If the customers somehow only now have $10 the store will lower the price to keep the customers all the while having the less money retain the same value as the larger amount.

And to whomever said the Americans have savings, you're wrong. The average American has a saving equal to -4% of their income. If you don't know what that means, Americans have an average savings of a 4% debt.

[Ravens-Grin]

Another thing about inflation is that it also affects loans, whether it be for a car, a house, or to pay off that god awful hooker that gave you AIDs. Enough of the hooker... So let's say that a person gets a 6% loan for a brand new Toyota. It's horrible deal, but bear with me. So this person pays his car loan every month at a fixed rate of let's say $300 a month. Gradually though, inflation at a low 2% rate will cause the price of goods, services, and even the pay of the person will increase around the rate inflation (BUT NOT EXACTLY, and sometimes not even close!) In the last couple months of his car loan, the person pays less per month when everything is adjusted for inflation because his pay is inflation-coorelated while his car loan is a fixed rate.

With me saying this you might jump the gun and think inflation can be a great thing because you get to pay less later on. This is only partly the truth. If there is rampant inflation, then banks will have to close and file for bankruptcy. They just can't reap any profits from the loans, or they would have to charge extravagent interest rates, which scares the customers away. Banks are more into deflation then inflation. They want to have more money in the end then when they initiated the loan.