ELI5. If inflation is driven partly by surplus money in the system, will big losses in stocks and crypto reduce inflation by reducing the amount of money?

Question

I keep hearing about multi-trillion dollar losses in retirement funds, investment funds, and crypto markets. If all that value is evaporating, doesn’t it increase the value of currency and reduce inflation?

In: 45

Answer 1

It’s *deflation* that is driven by surplus money in the economy, as in “the currency is deflated to being almost worthless.”

Inflation, on the other hand, is the ever-rising cost of all goods and services that drive spenders and investors to “bear up” and hibernate with their money instead of spending it on hot dates or stock certificates. When big losses happen, wounded businesses raise prices on *their own* offerings to try and make up the difference, thus completing the self-devouring Oroboros that is Capital Economy.