Uh, but the price will rise because of the higher demand. It's the fundamentals of demand and supply. I mean, if a hundred people would desperately want something that costs 10$ and there's only one item left, you think that nobody of them would buy it for 11$ or even 20$? — ssu

Ah... whatever the market will bear...

What someone would be willing to pay(what the product is worth) is irrelevant to the point. Completely. The cause of the price increase is what's in question.

The price increases because the seller wants to increase it. The price does not go up because more people want the product. The cause of the increase is the desire of the seller to maximize profit. The short supply helps create/foster the high demand. Neither causes the price increase. Only the seller's desire to increase profit does.

Yup. That article points to some of the results of all the deregulation over the last five or six decades...

The lack of antitrust laws...

Some of us think inflation happens when you print too much money, or simply create from nothing new debt to pay back the old debt. — ssu

Those of us who believe that would be mistaken. Recent history shows otherwise. The financial crash at the beginning of the Obama administration proves that. All sorts of money printed. No inflation to speak of. What more does one need to prove that printing money does not cause inflation, than a time when it was printed and no inflation resulted?

What someone would be willing to pay(what the product is worth) is irrelevant to the point. Completely. — creativesoul

I assume you've never had the time or interest to learn economics. Or business.

All sorts of money printed. No inflation to speak of. What more does one need to prove that printing money does not cause inflation, than a time when it was printed and no inflation resulted? — creativesoul

When you do get it, you don't.

And that the issue here: for governments to print money / take more debt in their currency works and will work. The inability to understand that the consequences made today will have an effect only years later will confuse people. They can easily blame somebody else and people will eagerly accept this.

Do you think the fed will be content with 5% inflation? That's a little high for most folks.

At least you are correct in that the last people usually left holding the bag are workers, — ssu

Don't forget the retirees on fixed income.

Inflation seems like nothing more than the power to pass along misfortune to the least fortunate groups.

Don't forget the retirees on fixed income. — jgill

But social security got a bump up recently didn't it?

Ah... so ad homs supplant argument, valid objection, or adequate explanation.

For whatever it's worth, your assumptions about me are as wrong as your attribution of cause concerning inflation.

Do you think the fed will be content with 5% inflation? That's a little high for most folks. — RogueAI

Yet you aren't on the barricades, are you? Is anybody else?

And with a 5% inflation, just look how quickly your money will lose value. Let's say that for the next five years you would have 5% inflation (which could be masqueraded by statistical gimmicks to look like 3% or 2%). Afterwards it won't take so much time to get where the money is half of it used to be. But who cares what things were priced a decade ago.

Only if it would be 5% per month people would panic and it would be an uproar. The idea is just to boil the frog so low that it doesn't jump out, you know.

Don't forget the retirees on fixed income. — jgill

They can vote for a populist or whatever, but unfortunately retirees aren't going to be on the barricades either. Older people will just suffer and take it. And I feel really bad when seeing retired people working as the cashier in a supermarket.

Ah... so ad homs supplant argument, valid objection, or adequate explanation.

For whatever it's worth, your assumptions about me are as wrong as your attribution of cause concerning inflation. — creativesoul

How about a mind experiment?

Assume every US citizen, child or adult, would be given 100 million dollars by the government. You really think that prices wouldn't go up? You think Ferraris and luxury homes would be selling then for the same price as before?

Let's do...

Add to the hypothetical one caveat... it's all done in secret. Sellers have no idea.

Do you really think that the addition of the money alone is the cause of inflation?

Printing money to provide stimulus in 2009 did not result in inflation(that's not the only counterexample either). Printing money in 2020 to provide stimulus purportedly did.

Here's a striking and the key difference... the stimulus in 09 overwhelmingly went to financial institutions and huge corporations, whereas the stimulus in 2020 overwhelmingly went to small businesses and individuals under 150k annual income.

It makes no financial sense to raise prices beyond the affordability of the consumer base. That would result in losses. In 09, people did not have money. So, even though all sorts of money was printed, there were no consumer cost increases to speak of. In 2020, lower wage earners were given stimulus money to offset losses in regular earnings. 'Regular' people were given money and tax advantages. Consumer costs went through the roof.

It's not a coincidence that inflation immediately followed the latter but there was none whatsoever following the former.

Whatever the market will bear. Or as ssu just put it... boil the frog on low... so it won't jump out of the pot.

Printing money to provide stimulus in 2009 did not result in inflation(that's not the only counterexample either). Printing money in 2020 to provide stimulus purportedly did. — creativesoul

The money that was delivered to banks to prop up the banking system in 2009 was all paid back, so liquidity rose, but then dropped again.

The 2020 stimulus eclipsed TARP by a large margin and there is no clear path to reducing that liquidity. I mean, it's not the only reason inflation high, but it's definitely a significant factor.

I've never denied that printing money is a factor. I've basically set out how it is. I'm denying that printing money causes inflation. That line of thinking completely neglects the only cause of inflation and blames it on something else.

I'm denying that printing money causes inflation. — creativesoul

It would cause inflation all other things being equal. It would increase demand.

Supply shocks also cause inflation, obviously.

What are you identifying as the cause of inflation?

Corporate greed, not wages, is behind inflation. It’s time for price controls

Food prices, gas prices, car prices…we now know why prices have gone up so much. Trying to fit it all nearly into “we’re printing too much money” is really a joke. I guess you have to be a Nobel winning economist to see it in such terms, and be so silly.

The underlying economic problem is profit-price inflation. It’s caused by corporations raising their prices above their increasing costs.
Corporations are using those increasing costs – of materials, components and labor – as excuses to increase their prices even higher, resulting in bigger profits. This is why corporate profits are close to levels not seen in over half a century.
Corporations have the power to raise prices without losing customers because they face so little competition. Since the 1980s, two-thirds of all American industries have become more concentrated.

Inflation IS an increase in retail price/consumer cost. The cause of inflation is the desire to maximize/increase profit. I personally like for the demand to be higher than I can meet. I do not raise my prices. I have people waiting in line. I could raise the prices. I don't. Does that make me a bad business owner? Some may say so. I'm content and satisfied with what I can make at the prices I have.

The point is that if supply shortages caused prices to go up, then it would happen in every case. I'm prima facie evidence to the contrary, and I'm not the only one.

Supply shortages can be used by those who want to maximize profit as a 'reason' to increase consumer cost. It does not have to be that way. An increase in demand does not cause a price increase.

Do you really think that the addition of the money alone is the cause of inflation? — creativesoul

No.

Prices can go up (or down) for other reasons than money printing. And that's unfortunately the problem here. People have different definitions. The real problem is when I look at my childrens school books is that when explaining inflation, central banks and government spending aren't discussed at all. The "at all" is the main problem here. It would be better if there would be a sidenote that inflation can happen because of government printing money to finance it's expenditure. And that at worst this can lead to a collapse in the faith of the value, which creates a hyperinflation.

Let's do...

Add to the hypothetical one caveat... it's all done in secret. Sellers have no idea. — creativesoul

That doesn't make sense. Every American gets the 100 million. Some Americans are those "sellers" you refer to. Who are these mystical "sellers" you refer to?

Or you think people when they get 100 million wouldn't use that money?

Ferrari sold a bit over 3000 cars into America last year and produced 13000 cars in total in 2022. Now, when there are now 340 million people in the US with over 100 million dollars, you think there wouldn't be let's say 20 000 of them (a meager 0,0059%) who would like buy a Ferrari? Only that amount of new customers (up 20 000 from 3 000), would not only lead simply to "supply shortages", but the price going up.

Similarly with real estate. If there are many people wanting to buy a real estate, then they are in competition with each other. Hence somebody can pay more than the asking price. Thus in the end there would be hundreds millions of multimillionaires trying desperately get something with their money.

Not perhaps like in, Zimbabwe, but still:

Printing money to provide stimulus in 2009 did not result in inflation(that's not the only counterexample either). Printing money in 2020 to provide stimulus purportedly did. — creativesoul

Purportedly? At least that's better.

If the banks sit on the money nothing happens... except that the speculative bubble is held up and isn't let burst. Basically the monetary policy stops the correction that the market would do on it's own. What happened was called asset inflation.

If you give it to people, inflation will happen sooner or later. Just as the example of giving 100 million dollars to everybody shows.

If you give it to people, inflation will happen sooner or later. Just as the example of giving 100 million dollars to everybody shows. — ssu

Except that’s not what’s happening. The article on food shows why.

It works in some cases, like housing and stocks. Those assets inflate, sure. You can see why. When attempting to explain the rise in food or gas, it just completely fails.

What’s irritating is that this story is so very convenient for corporate America.

That doesn't make sense. — ssu

Exactly. It was a fantastical hypothetical. It's not going to happen either way. However, for the sake of mind experiments I was simply pointing out that if - in this impossible scenario - no sellers knew how much money the buyers had, then there would be no increase in consumer cost.

Ferrari is not bound by physics to raise their prices, even in your scenario. They could increase production.

Except that's not a counterargument. That big retailers exploit their financial control over suppliers to hobble smaller competitors is a different phenomenon.

As I've said, prices can go up and down for many reasons that aren't related to inflation. And you can allways find new reasons to argue just why prices are up.

Yet do you think that still it's a post-covid demand. Will it be that next year?

Or the Ukraine war?

Yes, a war can cause prices to rise because of shortages. But once the war is over (or other supply chains are formed), the prices stabilize. And the best example of this we had in the spike in energy prices just last winter here in Europe. Now, suddenly, the price spike because of Russian energy going away from the market has been dealt with.

no sellers knew how much money the buyers had, then there would be no increase in consumer cost. — creativesoul

I think you didn't read my answer to the end.

OK, let's say there would be a really stupid Ferrari dealer that didn't know (because he's Italian) that Americans just got 100 million every one. And let's say the manufacturer wouldn't know this somehow either. Well, likely then he would sell all his cars very quickly. And then the next one's will form a huge waiting line, because of the sudden incredible demand for Ferraris.

But think about the last guys coming to the store when he would have only one to go (for simplicity we assume he's selling also used Ferraris). Likely someone wanting a Ferrari would try to give him more than the asking price. Because why not? If you spend 50 000 or heck 80 000 more to the asking price on a Ferrari when he has 100 million. It's still peanuts.

And that's the basic problem with your idea. You assume this mythical greedy "seller" is the problem. No, the problem is also when there too many buyers for one item. The buyers are then in competition with each other. And this isn't something hypothetical: you can have items, goods, real estate going for higher than the asking price without no intention of the seller to have an auction. And yes, if people are selling something at 100$ and someone will give 150$, they will take that 150$.

This is simple supply and demand.

Likely someone wanting a Ferrari would try to give him more than the asking price. Because why not? — ssu

Sure, that's exactly what was happening in the housing market, and perhaps still is.

There are greedy sellers... that's not a fiction.

Inflation IS an increase in retail price/consumer cost. — creativesoul

The CPI, yes.

The cause of inflation is the desire to maximize/increase profit. I personally like for the demand to be higher than I can meet. I do not raise my prices. I have people waiting in line. I could raise the prices. I don't. Does that make me a bad business owner? Some may say so. I'm content and satisfied with what I can make at the prices I have. — creativesoul

A social overhaul would be necessary for that to be meaningful to anyone. In other words, you're stepping out of your time in history to make that observation. It gets lonely analyzing the earth from a vantage point on the moon, so it's a rare insight.

You're touching on one of the reasons I'm so interested in the present situation (other that I'm trading forex and I use fundamentals to pick entries). One of the threats hanging over us now is stagflation. The last episode of severe stagflation ushered in the present neoliberal age. So I wonder if a second episode of it would change our priorities again, and if so, about when would that happen, and what would it look like?

Mark Blyth suggested that any economic crisis will be explained in terms of its solution. There could be multiple solutions, and so potentially different economic theories depending on which path the society takes.

Sure, that's exactly what was happening in the housing market, and perhaps still is. — creativesoul

With rising interest rates, it's going to end (if it's still going on).

There are greedy sellers... that's not a fiction. — creativesoul

I can agree with that. But the aren't only greedy sellers.

A social overhaul would be necessary for that to be meaningful to anyone. In other words, you're stepping out of your time in history to make that observation. It gets lonely analyzing the earth from a vantage point on the moon, so it's a rare insight. — frank

Yeah, I've been accused of looking at things differently than most people. I could always increase production as well and keep the same margin. I'm certainly at far less than capacity. However, I want to keep the scarcity and work less.

The neoliberal era has resulted in the tremendous wealth gap and discontent of the average blue collar, retail worker, and many public service providers. Typically non college educated, but plenty of college educated folk have paid for education that basically provided nothing in terms of ROI.

The interest of shareholders is in direct conflict with the interest of employees, assuming there are any American employees in the business chain efforts. When corporations stopped making employees a priority things began to go downhill for workers.

For whatever it's worth, I like the little short guy economist who worked in the Clinton administration as Secretary of Labor for the first two years(if I remember correctly)... Cannot remember his name at the moment...

Oh yeah... Robert Reich

You're ahead of your time. :grin: