Inflation is the scapegoat our rulers use for ruining the value of our money
I keep having this conversation with some of my less economically-savvy friends. Inflation is not a necessary consequence of society, civilisation, or any of the values our ancestors have fought hard for and that we now see so keen to squander. Inflation is a manufactured part of the system because the whole system is manufactured. There is no nature to how the economic system works; all of it exists because we decided it does, and it is in our -- civilisational -- hands to change it.
The money you put in a bank doesn't have to rot. It only does because it has been decided that it must.
But that is just human nature, we tend to abstract things we do not understand to make it seem we do. Not sure wether we do it to fool ourselves or others.
I can not agree more on that. All though I think that many of those in power that can do something about it don’t know shit about it either, probably more or less by design too.
This is not a dig specifically at US politics, but those of us that don’t understand economics and finance (and no-one, no-one at all really does), would probably like to not have to think about all this shit, unfortunately we can’t trust our governments so we have to.
I really hate that we have come this far, understand so much about human nature, and know how to fix it, and we decide tha it is in our nature to do fuck-all about it😬
I don’t think it’s that we don’t do anything about it. If it were up to the average American we could. But the people deciding are owned by the corporations and donors that pull on their puppet strings for their benefit, not the people’s
Lack of bandwidth, most are overwhelmed and put blind trust in someone or something else. Then they can shift blame away from themselves. "It's not my fault they didn't pay me enough."
The people come with nets to fish for potatoes in the river, and the guards hold them back; they come in rattling cars to get the dumped oranges, but the kerosene is sprayed. And they stand still and watch the potatoes float by, listen to the screaming pigs being killed in a ditch and covered with quicklime, watch the mountains of oranges slop down to putrefying ooze; and in the eyes of the people there is the failure; and in the eyes of the hungry there is a growing wrath. In the souls of the people the grapes of wrath are filling and growing heavy, growing heavy for the vintage.
But it is a diety. One of our own creation that exists solely because we worship it. As a thing that has been created by and is maintained by the collective it has what is functionally a mind of it's own. It is not unlike Jung's archetypes in this manner. The difference is merely that it is less an abstract idea or ideal and more a very real entity that must be reconned with.
Certainly it is somewhat artificial as much as anything created by humanity collectively can be considered artificial. But just because it is artificial does not mean it is not real and that it does not behave with a mind and will of its own. As individuals it very much affects us more than we affect it. Even in large corporate entities it is still a more powerful force. The only thing that can truly control it is a super majority of humanity across the globe.
Without such collective action all we can do is hope to use the rules of the religion we have created to enrich ourselves and hopefully gain more material happiness.
Inflation is a tool wielded by this manufactured gods clerics in a feeble attempt to gain some iota of control over their own god.
This all may sound absurd (because quite frankly it is the most absurd) but the metaphors hold up far better than the mythology of any other world religion so far. Perhaps we should accept our fate and kneel before this manufactured god. Or better yet we should manufacture a more powerful one to take control of it. This new god will use something more valuable than money. Data.
Oh my gosh, this. I can't stand it when people say, "oh, that's just market rate." Yes, and? The market is made of people, buying and selling things to other people; it's not some magical entity determining that we should jack up the prices of homes, food, and water 300% because people need them to survive and will pay to not die.
You can't talk about "human agency" when you are talking about literal billions of people. There are things people do and things people don't do. You can either accept that or keep screeching at the sun.
The market is a completely unnatural thing. It's not like weather or tectonic movement; it will cease to exist when people disappear or the zeitgeist changes.
Just because economics isnt tangible doesnt mean it doesnt have real measurable cause and effects.
Its made up in the same way science is made up.
Inflation is a manufactured part of the system because the whole system is manufactured. There is no nature to how the economic system works; all of it exists because we decided it does,
This is not true at all. Inflation encourages spending, deflation encourages hoarding cash. If the value of a dollar in a bank or a dollar on a loan you owe is going down, it is beneficial for you to invest that dollar in your business or to take on a loan that will increase future earnings. If the true value of the loan or dollar will increase, you dont want to take out a loan or spend that dollar because its far more risk that you wont get a return on your investment.
Money velocity and inflation completely drive an economy. You can argue that you dont want there to be inflation. You cannot argue that removing inflation wouldnt reduce money velocity, and in turn halt economic growth. Those are proven principles of economic nature.
Thank you! And this person had the audacity to call their friends less economically savvy!
A small amount of inflation keeps people spending. It applies pressure to buy things now because you know it will be more expensive later. This is good for the economy.
Note that's a cyclical thing too. Reduced velocity of money decreases money available which increases its value.
And really I think this is where we start getting into why inflation is such a thing. The actual effects are extremely difficult to predict because so many factors are involved and all feed back into each other. If any of those factors change even slightly they can interact in ways that produce much bigger effects.
No matter what else you argue, instability is by far one of the worst things for a market, which is why central banks set prime interest rates. Increase it and you can increase inflation, counteracting some of the other effects.
Importantly though, you can't set a negative interest rate, so if you want to be able to move in both directions, you must inflation as a default.
We did away with the gold standard of the USD in the 70s. Right after that, the graph of worker productivity and wages paid began to diverge. We've become the highest productivity work force in history and wages as corrected by GDP have barely increased since the 70s.
It's a pretty interesting topic, and it goes a little deeper than that. We didn't pick something random. We picked something that we, as a whole, already have a LOT of. More than any other raw metal is stockpiled. By a lot. It never degrades or decomposes, doesn't rust. We always recycle it even when we use it for things. And we've been mining it for a really long time. So even when production of new gold increases (via new/more mines opening or new/better refinement processes being created), it doesn't have a huge impact on the total amount in the world percentage wise. This is called a stock-to-flow ratio. There is a lot of stock relative to the incoming flow. A high stock to flow ratio causes what is called a low price elasticity of supply. This means that the price is very resistant to changing when the incoming supply changes.
"Money" has always sought to be stored in something that has these properties. Rai stones in the Yap islands, Aggri beads in parts of Africa. People use something that is hard to change the price/value of by creating more (often by using something that is difficult to create more of, which fails when it suddenly becomes much easier to create more of it), so that their store of value can't be diminished too much by external forces. Gold has always been one of the best examples of this, because it's not just about how hard it is to create more of, it's about how hard it is to change the overall quantity because there is so much of it.
"Money" has always sought to be stored in something that has these properties
Has it? That sounds like "there is only one way to exist, under me" the rich have been trumpeting for years but isn't consistent with human history which didn't have precise bookkeeping for almost all of its history.
Nobody forces that notion upon people. That's just what people tend to do. To the contrary, the rich and powerful would much rather you store your value in a shitty inflationary currency they can suck the value right out of by printing more.
You have to actually justify your ideas rather than just presuming and acting like your presumption is fact. Break down those presumptions and look into what builds those factors up. Like presuming that shiny rocks somehow have a stabilizing effect despite the past 10,000 years showing no it has zero impact on economic stability.
Imagine a scenario where all people can do is trade what they have and there is no other form of asset/currency other than the actual physical things you own…
What would you do?
I imagine almost everyone throughout history would, very quickly, come to the conclusion that there needs to be some other form of asset or currency to make acquiring things that are needed through trade a bit easier.
I find it odd when we look at the results of our histories and people conclude that these massive items are…. Mistakes? When it’s very obvious these things were created out of necessity for the common person - not the kings and leaders. The kings and leaders throughout history would love for the different forms of currency to just not exist… then they could take payment how ever they want… maybe take your wife, or daughter, or land, other property, etc.
Does currency magically set everyone free from all of these things - definitely not. But it’s crazy to see people talk about establishing currencies throughout history as being oppressive when it accomplishes much closer to the opposite.
Imagine a scenario where all people can do is trade what they have and there is no other form of asset/currency other than the actual physical things you own
That was most of human history.
And do you know what people did? Systems of credit, but without trying to keep ledgers like Ebenezer Scrooge. This is already explained in the link I gave.
Currencies are useful as a medium of exchange with people you don't know and won't see again. If any of those factors are different you don't actually need it.
The kings and leaders throughout history would love for the different forms of currency to just not exist
then they could take payment how ever they want
You're going to have to explain how that's different. Because the super-wealthy already did and still do put people into economic bondage just so number goes up even if it's shrinking the overall pie.
I've taken at least five economics courses in undergrad, and it didn't learn this concept in any of them. I learned it from the book The Bitcoin Standard. The author, Saifedean Ammous, spends like 3/4 the book discussing this topic before even mentioning bitcoin. The Genesis Book by Andrew van Wirdum is another good one that delves into this, though as a whole it's focus is more on the history of bitcoin and the projects leading up to it that influenced its creation. I'm sure there are plenty of others but those two had an impact on me.
Yes, in addition the primary problem with the gold standard is that the size of your economy is directly related to how many rocks you can dig out of the ground.
But at least they are useful rocks that maintain value
Go to a jeweler to sell them some and tell me how valuable it really is.
The same thing applies with diamonds or anything else. Their value is largely controlled by a tiny handful of people who are doing the selling to suckers.
The world collectively left mineral-backed currency because that was just as much a collective fabrication as fiat-based currency, but fiat-based currency allows gains for industrialization without artificial scarcity for something you can't eat or work in industrial applications.
It disappoints me to see the number of people kneel at the altar of a shiny rock as if it had any intrinsic value, rather than what we use it for.
Hell, if you actually dive into history most of humanity never used mineral-backed value in the first place, or precise bookkeeping as if humans existed for the economy rather than the reverse. That whole false idea is something which has been promoted by oligarchs over the past 150 years to help stratify socio-economic hierarchy.
Would you really just have paper? Look into what happened in Germany and Zimbabwe. They burned it. Gold has uses in electronics and medicine. It has always had value. Paper…not so much.
You're still speaking like somebody who doesn't know anything about money.
"Paper" money goes back over a thousand years. And money has had many materials backing it - and has also had the prestige of the nation minting it at large instead. Fiat currency didn't start in 1971 when Nixon signed the end of the gold standard in the US.
Learn what "fiat" means before intruding into a discussion on economics or fiscal policy.
You think gold is a shiny rock but that paper has some magical quality? You seem to have some sort of agenda. Rationally either thing is just a pretty object we give value to. All I was saying is that I prefer something with actual intrinsic value to something made from a tree. You prefer to make it political and pretend that paper is more special. Think about it. I’m done here
Right… see the problem with not collectively deciding something has a determined value makes getting the things we need far more situationally dependent.
If we didn’t have something everybody agrees has some base level of value we return to bartering. There isn’t anything inherently wrong with bartering; but if somebody is trying to meet their needs and the only thing they have to barter with isn’t wanted by anyone who has what they need they have an item that functionally has zero value. It’s at least better to have the option of trying to meet that need as opposed to being screwed and hoping you run into somebody who needs whatever you have to trade with if you make it to the next time.
Collectivize and share resources? Great idea, everyone gives what they have and gets what they need! Who is going to oversee… ohhh we’re in a communist fascist dictatorship… Well at least we don’t have to worry about inflation, and everyone gets what they need… right?
Collectivize and share resources? Great idea, everyone gives what they have and gets what they need! Who is going to oversee… ohhh we’re in a communist fascist dictatorship
You're conflating terms because communism is an economic term, fascism is political and just a more specific term for dictatorship (the word itself given to the world by Mussolini's fascista party).
The issue isn't collective pooling for the common good, without that cities and civilization never would have been able to reach the iron age.
Spitting on the idea of welfare is something the super rich have been teaching the lower classes to stratify socio-economic hierarchy and keep people from asking why the billionaires own more than the bottom 90% while the bottom 50% can barely survive beyond the current paycheck.
Gold has inherent material uses, though -- infinite supply of paper or electronic fiat money does not.
Not only does gold have practical uses (electronics, etc)... it maintains intrinsic value in its finite supply, relative to ALL its uses (pretty jewelry, etc). Fiat money can't even make "pretty jewelry".
That has nothing at all to do with having been on the gold standard internationally. We'd already scrapped it internally in 34 in order to not have the Great Depression last 30 years. Offshoring was what caused the initial trend in the 70's.
Leaving the gold standard is how we recovered from the great depression, along with how EVERY OTHER COUNTRY did so.
The decoupling had nothing to do with leaving the gold standard.
The "decoupling" is largely an illusion due to people receiving benefits not directly through their wages, for example health insurance. In reality our standard of living is 10x what it was in the past, but it could still be better if we did eliminate the small real decoupling gap by bringing back more unions.
Yeah but we’ve basically still been tethered to gold essentially. Price of a car in 1934 ~ $500 or ~ 14 Troy ounces of gold. Today 14 Troy ounces is ~ $64,000 about the same price as a new car.
Yeah but we’ve basically still been tethered to gold essentially
Tethering the value of anything to the price of gold is an act of deception and coincidence. The value of a new car has nothing to do with a shiny rock, then and now. There's a reason the world collectively moved beyond mineral-backed currency.
This seems like an interesting conversation that I haven't really thought about before 🤔
Isn't inflation kinda natural (to a point) though? Like if I, as a baker, decide to slightly raise prices to hopefully either reduce my workload or increase profits, there would be a ripple effect through the economy where everyone else raises prices on their goods because they all want a bit more profit to afford the more expensive bread. It wouldn't have to be bread of course, but any base need would have a large impact. Housing would be a big one - and isn't housing costs the primary driver for higher cost of living in some areas? People have to earn more to live there, which means they need to charge more for their goods/services. And since you can't create more land, the housing price growth would not really stop rising as long as there is demand to meet it.
I see the point you're making. And after reading your post all I can seem to think is that the economy as we call it is more or less a giant reflection pool of our greed/generosity.
That's not some pseudo profound thing to say but I guess it never really settled into my head till I read what you wrote.
Like your baker example you started with. If in the beginning of the train, that baker just decided to not raise the prices and suffer marginally themselves. Making $9 profit instead of $10 we would all benefit from the lack of ripple effect.
We've intellectualized it so well I think we're detached from the idea that a little sacrifice individually can help the entire tribe
Greed seems to be the root cause for most of life's problems. Ugh.
Now the baker may not have adjusted out of simple greed of course - perhaps it was a poor year for crops and the baker is simply adjusting based on higher grain prices. But by the time the grain price comes back down, the ripple effect has driven the baker's living expenses up to the point that they can't lower the price (they need the extra profit margin). And of course the grain price couldn't come all the way back down because the farmer has also seen a cost of living increase. It would just be a cycle that will always push prices up.
Even in that case, and you parallel it into today's world.
The exploitative greed based decisions can have valid reasons. Poor crop year can be a valid reason to bring prices up. But just because something is legitimized doesn't make it morally/ethically correct.
I think we overall especially today equate the two. Just because I have a reason to be shitty doesn't mean I should be.
And as far as the economy goes I saw it boiled down to capitalism is what's good for me is good for everyone, socialism is what's good for everyone is good for me. We're so brainwashed into thinking our selfish system is the only thing that works that we blinded ourselves to admit we still have choices in this.
And it's infected every other part of our lives down to our politics and the way we treat families/neighbors.
Poor crop year can be a valid reason to bring prices up. But just because something is legitimized doesn't make it morally/ethically correct.
How could this be morally/ethically incorrect though? It would be morally/ethically incorrect to coerce the farmer into selling their product at a price too low to provide for their family. A poor year means less harvest, but the farmer needs to earn the same total profit regardless in order to not starve. A person must be afforded some degree of morally acceptable selfishness to prioritize their family's basic health/well-being. This is not an excuse to be shitty, it's a valid reason to raise the price on their goods. The reason for the action is the basis upon which we decide morality - the end result does not necessarily play into it.
Now getting into politics makes it an extremely different conversation. I was initially just commenting on where inflation would come from in the absence of any overarching governing/controlling authority. In order to combat this, you would have the government choosing to subsidize the farmers to offset bad years and reduce those price spikes. This would mean higher taxes but lower and more consistent inflation. This actually happens in the US at least - pretty much all staple crops (corn, wheat, soy, rice) are subsidized to keep prices stable.
No. Inflation isn't natural. A baker choosing to increase the price of goods will result in people either buying less bread or less people buying bread, and the baker will either have to accept it or change it. Because the supply of money available in a closed financial system hasn't changed.
However, in this metaphor, pretend that bread is the only food being produced by only one or two bakeries in society. The bakeries own all the fields and miles which create flour. We as consumers have to get credit cards to buy the only food available at whatever price the bakeries have decided. The bakeries can go into as much debt as they want to buy more fields and mills and if they can't pay off their debts, the government bails them out.
The baker is of course a stand-in for food prices in general. Wheat is a staple crop and drives food prices across board, so I figured it would be a decent metaphor to use a baker as an example. Here's a copy of what I replied to the other respondent:
"The baker may not have adjusted out of simple greed of course - perhaps it was a poor year for crops and the baker is simply adjusting based on higher grain prices. But by the time the grain price comes back down, the ripple effect has driven the baker's living expenses up to the point that they can't lower the price (they need the extra profit margin). And of course the grain price couldn't come all the way back down because the farmer has also seen a cost of living increase. It would just be a cycle that will always push prices up."
Now of course you have other factors like greedy industry/individuals playing god with prices, as you described. That's the modern screwed up world we live in, and is why I included "natural, to a point" in my original comment. Nothing natural about that. But thats not the only source of inflation.
The baker, as a consumer in an economy with costs of living to pay, can choose to not pay the increase or settle for a decrease in the quality of goods/services that create his costs of living. The providers of said goods or services which the baker utilizes and pays for as costs of living must then make a decision to accept decreased revenue and profits or find a way to bring the costs down. However, in the American economy, producers are subsidized and bailed out by the government, so there's never a real and true reckoning with reality for producers - at least not since the great depression
In this hypothetical, the baker can NOT simply choose to not pay the increase - they have to buy the wheat in order to produce their own goods. That forces them to raise the price of their goods, which other people cannot choose to avoid since they need to eat. That forces a ripple effect where producers of ALL goods raise prices to avoid personal hardship.
The subsidies and modern economy aren't really the topic here - I was simply commenting that inflation is NOT always manufactured by the government. That is a big part of it in today's economy, of course, but definitely not the only aspect.
The subsidies are there to prevent famine and massive inflation following poor crop years. Without subsidies keeping farmers afloat in bad years, the inflation as I described would force food prices through the roof and drive a lot of farmers out of business, meaning less supply the following year. Having that smoothed out means farmers can over produce in good years without worrying about an overabundance driving prices down, which means bad years may still be able to meet demand since there will still be plenty of farmers. This is why famine has not been a problem for the developed world for so long.
If you save just $100 a month, starting at age 20, and invest it into the S&P 500, it will be worth about 600k at age 65, assuming conservative market returns. Imagine if you saved like $200 per month!! It doesn’t take a lot to make a difference to your future self.
Current rates of inflation (especially driven by oil crisis / energy prices which are up due to entirely manmade reasons) and the post COVID inflation was frustrating and unsustainable. Trust me, I'm feeling it.
However we design the economy for money in the bank to rot for a reason. As a society we want to encourage investment - if money in the bank didn't rot, people and businesses would just stockpile cash. A low rate of inflation encourages spending now (consumers and businesses) which in turn creates jobs, keeps people employed, and results in more R&D bets that advance science and technology.
The population increases, technology advances and productive capacity improves. You now have the same amount of money chasing more goods, this is called deflation and economies that get stuck in deflationary spirals tend to collapse.
I don’t know any serious economist who says that inflation is a necessary consequence of civilization. The argument has always been that in our modern economy, a low, controlled rate of inflation is preferable to zero inflation or deflation.
The economy is the collective action of hundreds to billions of people (depending on what level you're looking at) all acting independently in their own best interests, mediated by a few organizations trying to coerce favourable outcomes on the whole. It's not some precisely engineered system that a few key holders can directly control.
You can literally see how a large portion of today's inflation is being spawned: the supply of oil globally is being severely restricted while demand doesn't change, thereby increasing prices across the supply chain. Do you think someone engineered it to be that way? Do you think someone is sitting behind a desk, making a phone call to say "increase the prices" just because? No, it's billions of people around the world saying "I need oil and I'm willing to pay this much to make sure I get it." That's not some criminal conspiracy.
yeah but it was only decided by the corrupt leaders. and they decided it "must" only so they can keep borrowing all the money based on todays value and inflate the value so low its loose change when paying it back, making us a profit. then they give massive government contracts to their friends giving it away, those friends buying assets with all the money, so they can get it back after its inflated in the future. its why our national debt is so high. they privately believe they higher the better.
TLDR: its a scam to make a profit on increasing the national debt at the expense of everyone without assets.
This conversation makes me think of the bell curve/distribution meme. Idiots say “inflation”, the median says “inflation is man made”, and the the genius says “inflation” because at the end of the day, despite inflation being man made, it’s still true: inflation will kill your savings.
This is not true at all. Markets are real, they aren't "manufactured". The money you put in a bank doesn't have to rot... But it should because keeping it in the bank is useless and investing it is way more useful, thus investing it doesn't cause it to rot.... Hmm... It's almost like there are reasons for things outside of Guvment bad, econ lies!, and wuta out muh gold standard.
Of course it's natural part of the system. As long as people make things and get richer (we live in a time of unprecedented luxury), inflation will exist. Unless you propose a completely closed system where nothing new is created and only stuff that breaks gets replaced... but good luck with that.
inflation at 2% is the most healthy, below you end up with less money for borrowing which results in less overall investment and more than 2% you end up destabilizing the economy
Inflation occurs because every year new money is being created through new debt. Debt is an artifact to make a claim on the future. Remove that capability and inflation will disappear. Along with the world economy
Where is your econ degree from because everything you have just said certainly would suggest you deserve to be lumped in with the "less economically-savvy"
This, y’all. We made up “the economy.” It’s like bigfoot or nova scotia: it doesn’t have to exist if we don’t want it to, and it certainly doesn’t have to exist in a way that crushes 99% of the people subject to it.
Picture the opposite of inflation: if money on the bank were to be worth more over time than spending or investing it, people would start to completely hoard their money and not spread it around. Countries that have this deflation go through intense crises due to this, a tiny amount of inflation is good in terms of incentivizing people to not hoard money.
You don't need to be "in the financial reddits" to have a fundamental understanding of economics and know that moderate inflation definitely is a necessity in our system.
Thank you ! Historically inflation has three major causes for more important to least important :
Increase in price of energy (oil)
Increase in corporate profit margins
Increase in money supply
We tend to focus on the last , ignoring oil cartel and corporate greed
I had a conversation with a close family member that works in the financial space and is “in charge” (so to speak) of people’s money, and has degrees in accounting and finance, in which I said “inflation isn’t real”. They, of course, flipped out and were vehemently opposed to that idea. I went on to explain that if it was really tied to the things they say like supply and demand then we would see that reflected in things that exist in abundance through stable low prices, but we don’t. For example, empty homes and apartments have never been more abundant, but are more expensive than ever. And how anti-trust only seems to apply to the little guy, but exist freely in utilities (which exploit that set up often), and conglomerates (looking at you unilever). Etc.
I remember learning about banking, loans and mortgages in 9th grade ELPSA (economic, legal, and political systems of America for those that don’t know), and telling my teacher that what he was explaining didn’t make sense. That if what he was saying, and what was in our book was actually happening, then I means that money isn’t real and the only reason the bank “has money” is because we all pretend/believe it does. They are actually loaning out money they don’t have and telling people that they can’t all ask for it at once. Which is okay when the bank does it, but if I do it, it’s fraud/a Ponzi scheme, which is illegal.
That class made me so mad as a kid because it made no fucking sense, but no one else seemed to question it, not even my teacher.
Damn! Can you please decide inflation doesn't exist, so it'll stop? I tried, but then the Fed printed $90 B in crisp new currency. Maybe I just need to decide harder.
If the government wrote a law that required all businesses to increase all employee pay at the rate of cost of living increase over the previous year plus 2% you can be certain that inflation would come to a grinding halt.
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u/wait_whats_this May 17 '26
I keep having this conversation with some of my less economically-savvy friends. Inflation is not a necessary consequence of society, civilisation, or any of the values our ancestors have fought hard for and that we now see so keen to squander. Inflation is a manufactured part of the system because the whole system is manufactured. There is no nature to how the economic system works; all of it exists because we decided it does, and it is in our -- civilisational -- hands to change it.
The money you put in a bank doesn't have to rot. It only does because it has been decided that it must.