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Economics question...

Could someone please explain to me why, if prices on everything go up due to inflation and people are having trouble affording the things they need, why does the gov't raise the interest rates and tell us it is to help curb inflation? Seems to me by raising the interest rates, they are adding to the list of things we can't afford.

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redredred · M

Inflation is too many dollars chasing static or too few goods. Nobel prize winning economist Milton Friedman said that inflation is ALWAYS caused by government; it’s a policy not a natural disaster.

When the government spends money it does not have, it either borrows it or prints it and usually a bit of both. By raising the interest rates two things happen. Our bonds (the mechanism by which the government borrows money) become more attractive to investors and the cost of money (your credit card etc) becomes more expensive and your buying slows down reducing the rate of inflation.

It is never necessary, it is always a result of government over spending.

whowasthatmaskedman · 70-79, M

@redredred Essentially Friedman is correct.. Although Global trade and floating currencies add complications.. However the other factor is that no economic model can work perfectly once it has been touched by human hands./.😷

redredred · M

@whowasthatmaskedman Never let the perfect be the enemy of the good. An open market economy reasonably free of constraints to the greatest degree possible produces the greatest benefits possible for the greatest number of people. Perfect? No. But pretty damned good.

whowasthatmaskedman · 70-79, M

@redredred I absolutely agree.. And since people operate the sytem, the focus has to be on getting the right people. Frankly I would settle for mediocre on either side..😷

Ryderbike

@redredred Inflation is too many dollars chasing static or too few goods. Nobel prize winning economist Milton Friedman said that inflation is ALWAYS caused by government; it’s a policy not a natural disaster.

You just contradicted yourself .

redredred · M

@Ryderbike no I didn’t but let’s hear your error.

Ryderbike

@redredred “ Inflation is too many dollars chasing static

“”””or too few goods.”””””

Inflation is caused today by too few goods because the global supply chain isn’t working properly .

That has nothing to do with spending

Which by the way is why every country on earth is suffering from inflation

redredred · M

@Ryderbike Oh, boy. So what effect on domestic and international economy do you think printing an additional trillion dollars of the worlds reserve economy in the last two years might have done?

Ryderbike

@redredred america has always done that . In fact trump added 8 trillion to the debt.

But that has nothing to do with the supply chain limiting the amount of goods available world wide

redredred · M

@Ryderbike So when the markets shut down while Trump was president in 2020 why was inflation so low?

80% of the US currency in circulation was printed in the last two years.

Supply chain? What are you not able to buy if you’re willing to spend enough

Joe Stupid has inflated the money supply cheapening the value of the dollar, the actual definition of inflation.

Ryderbike

@redredred

Because the effects supply chain interruptions don’t happen over night,

You seem unaware of capitalism “supply and demand” principles.

I know how badly the partisan trump cult would like to blame Biden,

And it’s been my experience they are not interested in facts or truth.

Im not an American so I’m not into your game.

And I’m wise enough to know whatever I say won’t affect your cult delusions,

The world of today,

redredred · M

@Ryderbike You’re simply not informed enough to understand basic economics. I and Nobel prize winning economist Milton Friedman are on one side and you and your completely uninformed opinion are on the other side.

We can leave it at that. It’ll be less embarrassing for you.

Ryderbike

@redredred of course I do. My country is suffering from inflation due to a shortage of goods as is every other nation,

But let’s say you’re right?

Trump added 8 trillion to the debt.

But that has no effect right?

redredred · M

@Ryderbike It’s minuscule to what the democrats did to the money supply. Assuming debt and printing money are two different things. See Weimar Germany for clarification.

Ryderbike

@redredred wrong.. of the 5=trillion in stimulus 3.5 was under trump

whowasthatmaskedman · 70-79, M

@Ryderbike And even that isnt the full story. The wholesale printing of money goes back to the end of Bush 2 with the Bank bailout and before that the $US was manipulated by other means under Clinton with the real estate bubble. So there is plenty of blame to go around in trying to avoid the recession that would have levelled the ship.😷

redredred · M

@Ryderbike I’m not going to argue economics with a demonstrated idiot. You don’t have even a basic understanding of economics if you can’t distinguish debt from currency inflation. I directed you to the Weimar Republic for clarification, you didnt read up on it. It’s like teaching algebra to a beagle.

redredred · M

@whowasthatmaskedman Once again, learn the difference between debt and “quantitative easing”

whowasthatmaskedman · 70-79, M

@redredred I know the difference. "Quantitative Easing" is inflation by stealth. It morphs into debt when people realise the goods and services they want to purchase cost more than they used to in paper money or accounting terms.. And just to educate you, the fraud on the people was perpetrated when some bright spark on Wall Street decided money was more than a means of exchange and that you could "create" it. Money is no nore than an accepted means of exchanging real value. If the idea of money had remained pure, then inflation would never happen. Because one cow would always be worth three pig or thirty chickens.😷