Why is the US different from the ECB?

[JP Hochbaum]

This video is a great lesson on how our currency works:

Sovereign Currency Issuers Are Always Solvent | | New Economic PerspectivesNew Economic Perspectives

 

[RabidAlpaca]

This video is a great lesson on how our currency works:

Sovereign Currency Issuers Are Always Solvent | | New Economic PerspectivesNew Economic Perspectives

The majority of it was on point, but one thing in particular that stood out like a sore thumb was:

"As of now, there's no signs of inflation."

We've had over 30% total inflation in the past 10 years, I consider that quite substantial. A lot of people would disagree, considering the federal reserve's goal for inflation is a minimum of 2-3%, but I also don't consider inflation to be necessary for stability and growth.

Perhaps "As of now, there's no signs of hyperinflation." would've been better.

 

[JP Hochbaum]

They are referring to fiscal/monetary policies causing inflation.

Most of the inflation we are enduring is due to energy costs (supply or demand pull inflation).

 

[imagep]

They are referring to fiscal/monetary policies causing inflation.

Most of the inflation we are enduring is due to energy costs (supply or demand pull inflation).

I understand why the first graph makes a good argument for your theory, but how does the second graph have anything to do with energy price driven inflation?

 

[JP Hochbaum]

I understand why the first graph makes a good argument for your theory, but how does the second graph have anything to do with energy price driven inflation?

The second graph shows that inflation actually causes deficits to rise.

 

[imagep]

The second graph shows that inflation actually causes deficits to rise.

I don't get that out of the graph. I think you are hurting your arguement by making such claim as any such correlation is not consistant during the recessionary years (which are the periods which catch my attention). About half the time the red line and blue line move in the same direction, the other half they move in opposite directions.

 

[phattonez]

Most of the inflation we are enduring is due to energy costs (supply or demand pull inflation).

And how do you know that inflation is not causing higher energy costs? You can't prove directionality from correlation.

 

[JP Hochbaum]

I don't get that out of the graph. I think you are hurting your arguement by making such claim as any such correlation is not consistant during the recessionary years (which are the periods which catch my attention). About half the time the red line and blue line move in the same direction, the other half they move in opposite directions.

In every single recession inflation went up and started to go up before the recession. The correlation implies causation fallacy is thrown around too much, and in this case it happens numerous times, so this fallacy doesn't apply.

It also makes economic sense that inflation in certain sectors can cause recessions and crashes. An energy increase forces people to use their dollars on energy, go into further debt.

Inflation in the housing sector, causes people to go into debt, and then the point comes where those housing prices crash because too much debt is accumulated.

 

[JP Hochbaum]

And how do you know that inflation is not causing higher energy costs? You can't prove directionality from correlation.

Because the rise in energy happens first, then inflation occurs.

 

[phattonez]

Because the rise in energy happens first, then inflation occurs.

Only if you're looking at inflation as rising prices and not inflation as an increase in the money supply. Then where is your argument? Falls flat on its face, doesn't it?

In other news, rising prices cause rising prices! :shock:

 

[JP Hochbaum]

Only if you're looking at inflation as rising prices and not inflation as an increase in the money supply. Then where is your argument? Falls flat on its face, doesn't it?

In other news, rising prices cause rising prices! :shock:

Inflation IS a rise in prices not money supply.

 

[phattonez]

Inflation IS a rise in prices not money supply.

I'm just saying, if you're using that definition, it's kind of pointless. Of course a rise in energy prices will cause a rise in the price of other goods. It's pretty much a tautology, hence my comment of "rising prices cause rising prices."

Since I don't want to play the stupid semantics game that so many people on this board get hung up on, I just want you to know that historically inflation was defined as an increase in the money supply. It is a recent innovation that it is now an increase in prices. To help you out in understanding my argument, since apparently it is SO difficult: an increase in monetary inflation causes rising energy prices.

 

[JP Hochbaum]

I'm just saying, if you're using that definition, it's kind of pointless. Of course a rise in energy prices will cause a rise in the price of other goods. It's pretty much a tautology, hence my comment of "rising prices cause rising prices."

Since I don't want to play the stupid semantics game that so many people on this board get hung up on, I just want you to know that historically inflation was defined as an increase in the money supply. It is a recent innovation that it is now an increase in prices. To help you out in understanding my argument, since apparently it is SO difficult: an increase in monetary inflation causes rising energy prices.

I am sorry that old definitions get redefined. That is what happens when previous definitions are found to be wrong. In this case semantics is everything, so if you won't argue it then you are stuck believing in something that has been found to be false. It is like believing in santa, and creationism.

An increase in the money supply (it is important to drop inflation in this context because it is not a correct description of increasing the money supply) doesn't equal inflation. What inflation is, is this:

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.

Inflation is pretty well understood, and you could learn exactly what it is from my comments.

The term "general" is very important, because an increase in energy prices is not general. Energy itself is subject to it's own supply and demand constraints, outside of monetary policy. So your dollar will purchase less energy as energy prices rise, but generally speaking you could still by most other goods for the same dollar value. I say most because energy effects costs in a lot of sectors.

 

[phattonez]

I am sorry that old definitions get redefined. That is what happens when previous definitions are found to be wrong. In this case semantics is everything, so if you won't argue it then you are stuck believing in something that has been found to be false. It is like believing in santa, and creationism.

An increase in the money supply (it is important to drop inflation in this context because it is not a correct description of increasing the money supply) doesn't equal inflation. What inflation is, is this:

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.

Inflation is pretty well understood, and you could learn exactly what it is from my comments.

This is the worthless section that apparently tries to argue that a definition is just simply wrong.

The term "general" is very important, because an increase in energy prices is not general. Energy itself is subject to it's own supply and demand constraints, outside of monetary policy. So your dollar will purchase less energy as energy prices rise, but generally speaking you could still by most other goods for the same dollar value. I say most because energy effects costs in a lot of sectors.

That's the point. Of course rising energy prices will cause rising prices.

 

[JP Hochbaum]

This is the worthless section that apparently tries to argue that a definition is just simply wrong.



That's the point. Of course rising energy prices will cause rising prices.

What definition is wrong?

Inflation?