Can inflation actually be fixed? Is there any hope? Or will prices just gradually keep increasing?
In: 45
Of course the ad right below this says, “tired of inflation? You need our smart savings tools…”
It’s an easy fix, but will never happen as inflation benefits those in power. It’s an easy way to reduce your effective wages.
Central banks run the world and you’re their bitch.
Just to explain WHY some inflation is good, since I don’t see it in other posts:
With 0% inflation, your money doesn’t lose value. You can put it under your mattress and it will be fine.
The point of inflation is to make you do *something* with your extra money. If inflation is 2% you can put your money in a HISA for say 1% and the bank will find some use for it. If inflation is 0%, your mattress becomes a reasonable low-risk investment.
High inflation is a problem because prices become unpredictable and long-term business plans become wildly unpredictable. How do you accurately price out something 3 years from now when costs are increasing 5-15%/year?
Low but positive inflation is the balance between pushing people to invest/spend, while still being predictable in the long-run.
Here’s where the middle/working class gets screwed:
Entry-level wages have not kept up with inflation. 10 years at 2% inflation is a 22% increase in cost-of-living. The starting wage for a given job may have gone up ~5-10% in that time. You’re starting at a lower inflation-adjusted wage than your predecessors. Inflation is hiding a massive pay cut.
Wealthy people don’t care about wage growth since their money comes from *not* working.
After reading the comments and your replies to the answers here I get the sense that you have a gut feeling about things and what you’re being told doesn’t make sense. I would say to you trust that instinct and keep digging further.
To clear things up in this thread, people are conflating many different terms and economic theories.
Inflation: The increase in money supply(increase in money supply means prices will go up).
Price increase: This can be due to the increase in money supply(inflation) or due to many other factors such as supply chain disruptions, shortages etc.
Deflation: The decrease in money supply.
Price decrease: The decrease in the price of goods which is normally the result of innovation, technology and production.
Consumer Price Index(CPI): a self referential measure of the increase of a basket of goods.
The idea that an inflation rate of 2%(people are really referring to CPI) is a belief commonly taught and repeated but this is based on faulty assumptions. Inflation(as in increase in money supply) causes malinvestment, short term borrowing/spending and causes bubbles to form.
Prices should actually be going down as innovation and productivity increases however due to inflation prices are going up, especially in assets.
TLDR People are conflating too many terms and the idea that slight inflation is good for the economy is not correct
Inflation in the 1980s peaked at 16.6% – far higher than today. So yes, it can go down as well as up.
Thomas Piketty, in [Capital in the 21st Century](https://www.amazon.com/Capital-Twenty-First-Century-Thomas-Piketty/dp/0674979850), doesn’t think inflation is inevitable; he thinks it’s a result of policy choices. But it’s a solid 800 pages, so you have to dive pretty deep to understand what he has to say about inflation!
You know how millennials love making fun of boomers when they talk about how things were cheaper back in the day? Now they know what it feels like.
Never has there ever been an ecological overshoot so extreme as the one that our species has set itself up for. Better believe the prices will go crazy as things start to breakdown. Prices will go crazy until everyone realizes how worthless money is, then it’ll be over anyway so no need to worry about it.
It can be fixed, we’re not willing to do it.
Inflation used to be very slow and either kept pace with incomes or people rioted.
Low interest rates incentivize borrowing and then spending. Easy access to money lead to higher spending and creates inflation. Governments are trying to accomplish the opposite by increasing interest rates. It’s more difficult to borrow and there’s an greater return on savings. If we’re incentivized to “hoard” money by saving, there’s less demand for goods. Inflation should come down as sellers to compete for our spending by lowering prices. Shit out there all still more expensive so time will tell if the plan works.
Latest Answers