I understand why inflation currently happens. The price of gas goes up, so the cost of transporting goods goes up, so the cost of production goes up, etc etc. I can wrap my head around that. But how did it start? What was the first thing to go up in cost, creating this chain reaction? Could it have been avoided if the initial thing did not rise in cost?
In: Economics
In a non- fiat currency? When you introduce the materials. Mining, harvesting, or building shit increases wealth, because people make things from other things, and buying those things increases wealth. Those kinds of financial markets only grow with input. So if someone floods the market with a thing, or a thing is decreased (farming goes fallow or you can’t find any more oil, or shiny rocks, or your people die), your economy adjusts.
In fiat currency? When the controlling body adds more or removes some currency. You can input raw materials, but add currency, and your relative wealth can stay the same. Or remove currency when the material input slows, and keep it (close to) the same. Or reverse either one and try to hit a moving target of 2% growth, but currency manipulation is how you keep the spreadsheet moving.,
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