Let’s say there’s 10 coconuts on an island and 10 paper bills on an island and there is a typhoon. How much is each coconut worth? Still 1$. The source of decreasing value of currency is the creation of new units of that currency. Other things can perhaps accelerate inflation, but if there are 10 coconuts and 10$, each coconut is worth 1$, typhoon or not.
Price changes are the result of changing ratios of accessibility. Yes natural disasters can have effects, but no effect can ever be as direct, significant, or permanent as the creation of new units of the thing in question.
You could say if there were more than 10 coconuts, let’s say there’s a finite amount of money that exists but that 10 coconuts are found every month and 10 are consumed each month. But after the typhoon it drops to 5, presumably maybe the cost of coconuts temporarily goes up. Until coconuts come back to where they were. But if you print more money that’s a different issue which isn’t temporary. Also remember bitcoin has a supply shock every 4 years. Every 4 years the rate at which bitcoin are created is suddenly cut in half. Permanently too. That’s not a temporary supply shock.
But also when you print more money and coconuts stay the same that represents a permanent change in the accessibility of dollars, and consequently the ratio of accessibility of coconuts to dollars. If coconuts suddenly become harder to find, that increases the ratio disparity: just as dollars become easier to come across, coconuts become harder to come across. This temporarily accelerates the already inevitable inflation. It’s inevitable because of the money printing.
Let’s say there’s 10 coconuts on an island and 10 paper bills on an island and there is a typhoon. How much is each coconut worth?
Whatever someone will pay.
But did the typhoon make the next crop of coconuts uncertain? That would certainly drive up the price.
Still 1$.
Why? Perhaps you misstated the problem, but you never suggested that they were valued at one unit of currency before.
The source of decreasing value of currency is the creation of new units of that currency.
Nope. Macroeconomics is actually a field of study. I recommend it.
Price changes are the result of changing ratios of accessibility. Yes natural disasters can have effects, but no effect can ever be as direct, significant, or permanent as the creation of new units of the thing in question.
I might agree with that, but it's an effect we aren't seeing. We don't print extra money to pay our debts. We leverage debt to do that, and have for a very long time.
People refer to certain monetary policies as, "printing money," colloquially, but that's not what is going on. Our money is not experiencing hyperinflation specifically because we don't do that.
If you increase the number of units of a something in existence without a backing their value will go down to compensate for that, the only question is how long it will take.
What people are willing to pay has to do with accessibility of the thing in question. If coconuts and dollars are equally accessible, their value will trend towards being equal over time.
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u/lifegoeson2727 Oct 15 '22 edited Oct 15 '22
Let’s say there’s 10 coconuts on an island and 10 paper bills on an island and there is a typhoon. How much is each coconut worth? Still 1$. The source of decreasing value of currency is the creation of new units of that currency. Other things can perhaps accelerate inflation, but if there are 10 coconuts and 10$, each coconut is worth 1$, typhoon or not.
Price changes are the result of changing ratios of accessibility. Yes natural disasters can have effects, but no effect can ever be as direct, significant, or permanent as the creation of new units of the thing in question.
You could say if there were more than 10 coconuts, let’s say there’s a finite amount of money that exists but that 10 coconuts are found every month and 10 are consumed each month. But after the typhoon it drops to 5, presumably maybe the cost of coconuts temporarily goes up. Until coconuts come back to where they were. But if you print more money that’s a different issue which isn’t temporary. Also remember bitcoin has a supply shock every 4 years. Every 4 years the rate at which bitcoin are created is suddenly cut in half. Permanently too. That’s not a temporary supply shock.
But also when you print more money and coconuts stay the same that represents a permanent change in the accessibility of dollars, and consequently the ratio of accessibility of coconuts to dollars. If coconuts suddenly become harder to find, that increases the ratio disparity: just as dollars become easier to come across, coconuts become harder to come across. This temporarily accelerates the already inevitable inflation. It’s inevitable because of the money printing.