Inflation - Learning Resource
- Thread starter kmiklas
- Start date
The challenge is that pretty much all info on inflation these days is a lie. Central banks and the governments benefitting from money printing want us to believe there isn't any and if there were, it would be great. Pseudo-academics in cahoots with governments provide cover for this narrative.
Let's start really basic with the word itself. In the economic context, inflation used to be defined as the act of expanding the money supply. That's it. So each time central banks print money, it was understood that inflation just happened. The definition was later supplemented and is today substituted with a rise in consumer prices. Because that is far easier to manipulate. Some sources on that (sadly behind paywall):
https://www.wsj.com/articles/SB10001424052748703730804576319173360183278
https://www.wsj.com/articles/BL-REB-13924
Moving on to how it's measured, and going with the now common definition of a rise in consumer prices. It used to be good but then everyone could see there was massive inflation in the late 1970s. So the CPI was changed on political pressure to output vastly lower readings since the 1980s. In the PDF below you can find actual quotes from politicians regarding the CPI.
http://www.shadowstats.com/alternate_data/inflation-charts
http://www.shadowstats.com/article/no-438-public-comment-on-inflation-measurement.pdf
One way today's CPI is manipulated is with hedonic adjustments. Basically means that if the quality of a product rises while price stays the same, that's assessed as an imaginary price decrease even when there isn't one. Sounds fine on the surface but is maximally exploited by the U.S. Bureau of Labor Statistics. In the link below you can see a concrete example. A new television set was $200 in the 1950s. Accoding to the CPI, that same TV now costs just $1.72 in 2021. That's not a typo. The pseudo-justification for that massive plunge in prices is that today's flat screens are better than the tubes of the 1950s. They are, but one could get an actually working new TV for $200 in the 1950s. It wouldn't work anymore because analogue broadcasting stopped. Today's cheapest TV with at least a digital tuner is $100, far more than the official $1.72 you can't buy anything with.
https://www.in2013dollars.com/Televisions/price-inflation/1950-to-2021?amount=200
https://www.bls.gov/cpi/quality-adjustment/questions-and-answers.htm
https://wolfstreet.com/2019/12/05/what-worries-me-about-hedonic-quality-adjustments-cpi/
Next we can get into the discussion of economic effects. The false narrative here is that deflation is bad and inflation is good. However, capitalism works by bringing the quality of goods up and the price of goods down. More people can afford more things and corporations make more profits on volume than on a few luxury items. I recommend Peter Schiff's channel for the economic effects.
https://www.youtube.com/c/peterschiff/videos
Let's start really basic with the word itself. In the economic context, inflation used to be defined as the act of expanding the money supply. That's it. So each time central banks print money, it was understood that inflation just happened. The definition was later supplemented and is today substituted with a rise in consumer prices. Because that is far easier to manipulate. Some sources on that (sadly behind paywall):
https://www.wsj.com/articles/SB10001424052748703730804576319173360183278
https://www.wsj.com/articles/BL-REB-13924
Moving on to how it's measured, and going with the now common definition of a rise in consumer prices. It used to be good but then everyone could see there was massive inflation in the late 1970s. So the CPI was changed on political pressure to output vastly lower readings since the 1980s. In the PDF below you can find actual quotes from politicians regarding the CPI.
http://www.shadowstats.com/alternate_data/inflation-charts
http://www.shadowstats.com/article/no-438-public-comment-on-inflation-measurement.pdf
One way today's CPI is manipulated is with hedonic adjustments. Basically means that if the quality of a product rises while price stays the same, that's assessed as an imaginary price decrease even when there isn't one. Sounds fine on the surface but is maximally exploited by the U.S. Bureau of Labor Statistics. In the link below you can see a concrete example. A new television set was $200 in the 1950s. Accoding to the CPI, that same TV now costs just $1.72 in 2021. That's not a typo. The pseudo-justification for that massive plunge in prices is that today's flat screens are better than the tubes of the 1950s. They are, but one could get an actually working new TV for $200 in the 1950s. It wouldn't work anymore because analogue broadcasting stopped. Today's cheapest TV with at least a digital tuner is $100, far more than the official $1.72 you can't buy anything with.
https://www.in2013dollars.com/Televisions/price-inflation/1950-to-2021?amount=200
https://www.bls.gov/cpi/quality-adjustment/questions-and-answers.htm
https://wolfstreet.com/2019/12/05/what-worries-me-about-hedonic-quality-adjustments-cpi/
Next we can get into the discussion of economic effects. The false narrative here is that deflation is bad and inflation is good. However, capitalism works by bringing the quality of goods up and the price of goods down. More people can afford more things and corporations make more profits on volume than on a few luxury items. I recommend Peter Schiff's channel for the economic effects.
https://www.youtube.com/c/peterschiff/videos
https://mises.org/library/inflation
People don't understand that specifically hyper inflation has the same effect as a huge permanent sell off in the market a lot of people trying to exit out a very small door....it's a crash....the panic selling of dollars for anything that retains value....REAL goods.. while the fed likes to believe it has the instruments to control inflation we have seen historically that governments aren't to be trusted with the capacity to print money out of thing air under the guise of some quantative theory to "help" the economy....anyone who believes inflationary monetary policy "helps" the people have a real naive understanding of this type of wealth redistribution
People don't understand that specifically hyper inflation has the same effect as a huge permanent sell off in the market a lot of people trying to exit out a very small door....it's a crash....the panic selling of dollars for anything that retains value....REAL goods.. while the fed likes to believe it has the instruments to control inflation we have seen historically that governments aren't to be trusted with the capacity to print money out of thing air under the guise of some quantative theory to "help" the economy....anyone who believes inflationary monetary policy "helps" the people have a real naive understanding of this type of wealth redistribution
How much is inflation and how much is due to devaluing the dollar?
Is it demand push or cost pull?
One thing I watch is wages. Once that takes off you have real inflation...more dollars chasing a relatively fixed amount of goods and services.
Guess what happens when you increase wages?
100% chance that rents go up.
Is it demand push or cost pull?
One thing I watch is wages. Once that takes off you have real inflation...more dollars chasing a relatively fixed amount of goods and services.
Guess what happens when you increase wages?
100% chance that rents go up.
Rather than read random websites and blogs, it’s best to go straight to the premier sources.
Start with this:
[URL]https://www.frbsf.org/education/publications/doctor-econ/2002/october/inflation-factors-rise/[/URL]
Then read this:
https://www.piie.com/system/files/documents/wp15-19.pdf
Start with this:
[URL]https://www.frbsf.org/education/publications/doctor-econ/2002/october/inflation-factors-rise/[/URL]
Then read this:
https://www.piie.com/system/files/documents/wp15-19.pdf
The book I always recommend is L. Randall Wray's book, "Understanding Modern Money, " because it is at once authoritative, readable, detailed, and available used at reasonable price, under 40 bucks. This was published in 1992, but is by no means out of date except in minor detail with perhaps the exception of his chapter on Employment which did not foresee the impact of automation; thus Wray treats fiat money as though it is based on a Labor standard, whereas today it would make more sense to treat it as based on a productivity standard. This chapter is extraneous to your main interest however. Every aspect of inflation is well covered. Wray also has a second addition of his book on Modern Money Theory out in paper back, available used for less than $40. And the New Macroeconomics text that he co-authored with William Mitchell is available in paperback for around $60 . I recommend going to amazon and reading the reviews/ I have to say though, that my preference among all these, if I am interested primarily in the causes of inflation, remains the 1992 Wray book.
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This morning while ordering a book from Amazon I noticed that there is a new 2006 edition of Wray's book -- I had recommended the 1992 ed above -- out in paperback at an increased price. I think if you search used book sellers on line you'll still be able to find the 1992 ed in hardback at a considerable discount.