Like why does the price of groceries, takeout and even houses go up every single year without fail? And why does it go up at a rate completely disproportionate to the average salary/wage? It’s the same groceries as 5 years ago but now it costs double the price for some fucking reason and I’m tired of pretending I understand why. Are the chickens charging more to lay the eggs?
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Deflation can happen, and usually does a little bit when the economy struggles. It’s just really really bad and we have very few ways of dealing with it. So we’d much rather have slight inflation.
Inflation happens because of rising costs (like wages, energy, materials), corporate pricing power, and more money in circulation; deflation’s rarer because economies fear it—it slows spending, profits, and growth.
Because people have more money so can buy more stuff, it’s supply and demand.
Because people have more money so can buy more stuff, it’s supply and demand.
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You don’t want deflation….because that means that no one is buying anything because everyone is unemployed and losing their homes.
Inflation happens because governments make it happen. A small amount of inflation is good and deflation is very bad. What you’re seeing, though, isn’t inflation, but prices rising due to a combination of monopolitic practices and corporate greed.
Most central banks want to maintain a low rate of inflation (around 2%) so they enact monetary policies to target that. A little bit of inflation is good because it encourages people to spend and invest. If your money will be worth less in a year from now, you will likely invest it and will be more likely to spend it. That stimulates the economy.
Deflation is usually very bad because it means that demand has cratered and people are spending less, which in turn leads to less economic activity. In a deflationary environment, people don’t spend money because it’s going to be worth more in the future.
Deflation happens, it’s worse than Inflation
Money doesn’t have any inherit value. Even gold or silver doesn’t, but because people liked the shiny metal for making nice gifts and king hats, they would trade a lot of food for it or stab you. Inflation initially was thought to occur when too many coins were made out of too little real shiny metal, but really, it’s only ever been a greed response to the larger market. If there’s more money, the hoarders of that wealth will raise their prices to gather more of it. If people never raised prices nothing would naturally happen, money doesn’t get worthier or worth less, it’s a make believe concept to allow the easy translation from eggs to shiny metals. Everything doesn’t cost more, it’s just the hoarders always want more of the make believe value. If we de-headified more hoarders, studies show that prices would begin to drop again.
At the end of the day, inflation of consumer goods and assets prices the average person out of ownership. This benefits the 1% over time. The fed in the USA claims that a 2% annualized inflation rate befits the economy but this is patently false for the bottom 99% as that rate of inflation raises the bar for the cost of ownership tear over year. Inflation happens because the rich are greedy (specifically in the USA).
It’s wild, right? My groceries cost 30% more and my income sure didn’t.
I’ve heard it’s partly because businesses raise prices just *because they can* when others do.
I am a bit of a dumb ass so take this with a pinch of salt but. People earn money, people spend money, business produce goods and services that people buy. Profit is made and taxes are paid. That’s the basis of the economy.
In periods of deflation things become cheaper. If people expect things to keep falling in price they will often wait and see if the price falls further. This means they don’t spend their money. If they stop spending then companies may need to produce less which may mean laying off staff so unemployment rises. If unemployment rises there is less money in the economy and less money to be spent so more layoffs. Rinse and repeat.
Inflation is when prices go up which in a normal economy is a healthy thing as long as they only go up a little. What has happened with grocery prices recently and house prices for a long time is not healthy. Inflation is needed to keep debt under control and shows the economy is growing.
It really is worth taking 20 minutes to do a bit of reading from reliable sources.
Finance professional here.
Inflation is an inevitable side effect of growth. As the population of a city, state, or country expands, demand increases for finite resources such as real estate. As prices rise, workers demand more money. Capitalists aim to protect their profit margins, so they raise prices for the goods and services produced by these workers, which in turn causes further inflation.
Modern governments also intentionally promote modest inflation by printing more money and adding to the currency supply. They do this for political reasons (so the party in power can promote GDP growth) and for practical reasons (such as the fact that governments can often borrow money at lower interest rates than inflation, resulting in government debt losing real value over time).
Keep in mind that inflation is beneficial for anyone who has more liabilities (debt) than assets. As inflation rises, the value of this debt decreases, benefiting the borrower.
Countries that lack inflation or go through deflation are often facing serious economic trouble.
Deflation does happen. Japan had 20-30 years of deflation which only ended recently. Deflation is bad too.
Basically, there is too much money in the system, so the fed raises interest rates to squeeze the poor. The wealthy don’t get affected at all except for more dividends due to elimination of jobs. No such thing as deflation because prices never go down. Greed keeps their wealth from shrinking.
Groceries are going up in price because of climate change. More droughts and floods mean fewer crops. Chickens were mass-culled to contain an outbreak of bird flu and egg laying populations haven’t recovered yet. When resources are more scarce, prices go up.
Climate change is only beginning so be prepared for many more price increases in the future.
You call it inflation. I call it corporate greed. You call it inflation, I call it rich people yachts money.
Cynic here. Inflation is a thing because billionaires want it to be. It continuously reduces the value of money, but not assets. The rich have wealth as assets. It keeps the poor poor.
Wages are actually outpacing inflation. This doesn’t necessarily mean your specific wage has increased, but overall, they have.
If an economy starts to detract, that’s generally a bad thing and those people making “the same wage” you reference may not be employed for much longer.
The Great Depression was a deflationary event.
Some fucking reason?
Prices are comprised of the costs of inputs, peripheries and, if it exists, a surplus margin.
So if you bought something directly from the producer I.e. a farmer, then he’d give you a prise that covers his costs for labor, resources, land rent etc. as well as some markup so he can turn a profit. If his costs rise or he wants to make more profit, he’ll raise the price for you. If this happens across many different product categories nationwide, you get what the news refer to as inflation.
Modern supply chains are much more complicated than this though, adding costs for shipping, transportation, lawyers and so on, but the principle remains the same. To produce anything, incurs costs and market actors want to turn a profit.
If costs rise or the seller wants to fleece you for all you’ve got to make himself richer, they’ll raise prices. As much as they think most of their customers are willing to pay. That’s why McDonalds is so expensive and turning record profits.
Deflation can happen, but typically only during sever economic downturns, meaning mass layoffs, increasing poverty and the like.
If the prices you pay keep rising, it’s usually a good bet to assume some capital owner is getting richer off of you. Especially if you’re American.
Technically a man made principal. Someone came up with it.
Just wait we may see deflation soon enough and I assure you it will not be a good thing.
Inflation continues to happen as wages increase and cost of oil/gas increases. It costs money for someone to drive your eggs in their gas guzzler across the country.
Now deflation is typically bad. But controlled it’s good. Now tariffs, tariffs on imports will cause inflation, simply just increases price. Might even cause lower supply and higher demand making th issue worse. But you could tax exports causing deflation. Let’s use eggs as an example. If egg prices are increasing like crazy, we could tax exports of eggs, causing less demand , increasing supply, forcing egg suppliers to drop prices.
But with all that said, it’s whatever you are willing to pay for a product. If a company knows you will suck it up and buy eggs for $8 a dozen, there’s no reason to really drop prices even if supply is higher than demand.
It’s been 30 yrs since I took economics so I have no idea what I am talking about.
Please watch this video from Nobel prize winning economist Milton Friedman. This originally aired on PBS.
The entire series is called Free to Choose and it’s a wonderful way to learn basic economics.
Money printing, mostly.
In short: supply and demand
I think people can somewhat easily understand that the more supply of something, the less valuable it is. Think of toilet paper during COVID. Suddenly the lack of supply made things more expensive. It works the other way too. Anything that is over supplied will lose value.
Money works this way also. We print more and more money to pay for our debt spending. Increasing the supply of money makes it less valuable. When money loses value it takes more of it to buy the same item….. Inflation.
That’s the supply side. Deflation happens when the demand side drastically reduces. If businesses can’t sell products because people don’t have any money, or there’s high unemployment, then they will start receiving prices. The problem with that is that people tighten up spending even more because items are dropping in value (why buy something today that will cost less in a week?). That really hurts the economy and causes more jobs to be lost since no revenue is coming in. That leads to a depression
It’s supply and demand. Want waterfront property? Guess what, do does everyone else! But there is only so much land next to the water. It therefore goes to the highest bidder.
Inflation is when people want things so badly that they are willing to spend more money then someone else. Deflation is when there is a surplus of goods, so it’s on sale. Shitty unfarmable rural land is a lot cheaper then waterfront in a busy city.
Your boss wants to keep hiring talent so (s)he can make money. It’s hard to find talent if the neighbouring business is paying more money, so they need to up their wages.
There are growing pains when supply and demand are out of balance. Pre COVID, it was realistic. Post COVID, the supply/demand/labour income/realestate balance is out of wack. Add tariffs and other measures that cause uncertainty or surprise expenses to anyone and any business and you have this current situation.
Think of a pond of fish ecosystem. There are only so many resources… Some fish will live to be big and strong breeding stock while others will die and be eaten. The supply/demand for resources.
But everything will balance itself out again. Sadly, some fish and some people will drown.
Basically, because of population growth and/or supply constraints. Last year, 100 people wanted to buy eggs. This year, 102 people want to buy eggs. But the egg farmers were already using the best/affordable workers, land, and facilities to produce eggs for 100 people. But somehow they manage to squeeze out 2% more, and because they have 102 people bidding on the price instead of 100 they can charge slightly more. Of course, the price of eggs/celery/potatoes/etc change all over the place due to good/bad harvests changes in technology etc. But on average across all products, that’s the general idea.
Even if your country doesn’t grow, the global population does, and resources grow more constrained. Then the same thing happens again the next year across thousands of products and services.
This process is replicated when we put restrictions on housing like single family zoning, healthcare like limited residency slots, and education when colleges accumulate endowments instead of expanding the number of students. The supply is capped, but the demand grows every year.
This isn’t true for everything, most obviously the rapid improvement and cost reductions in electronics and digital storage. You can have access to vast numbers of on demand tv shows and movies for the price of a single streaming service. Compared to the price of cable and movie tickets back in the day, the price is much lower.
Good grief. Read “Basic Economics” by Thomas Sowell.
So long as those in power operate by borrowing a lot of money they will also have an interest in making sure inflation makes it easier for them to repay the money they have borrowed. It doesn’t mean deflation never happens, but the government itself has a vested interest in minimizing the chances of it happening.
Inflation is money supply x money velocity- Government issues Treasury bonds → Banks buy these bonds.
Central bank (e.g., the Fed) buys bonds from these banks → pays by crediting bank reserve accounts (creating money out of thin air).
Banks now have more reserves → Banks can lend more money to consumers, businesses, or other banks.
Increased lending multiplies the money supply in the broader economy
Inflation occurs when you have more money chasing fewer goods. This can be caused both by the money supply increasing faster than the goods supply (ie when the government prints lots of money) or when the supply of goods shrinks faster than the money supply (ie when you have a shortage, setting off a bidding war for the supplies that exist). It is also a general side effect of economic growth, since increases in demand will always move before increases in supply.
Deflation occurs when you have more goods chasing less money. This can be caused both by the goods supply increasing faster than the money supply, or the money supply suddenly shrinking. Deflation is usually very, very bad, and normally is tied with major economic crashes, as it means that demand for goods that have already been produced is shrinking. One of the most prominent cases of deflation in US history was the Great Depression, where our capacity to produce goods greatly exceeded our society’s ability to pay for them, leading to a massive oversupply, factories shutting down, and millions of Americans losing their jobs.
Modern national monetary policy has largely been developed to prevent similar Great Depression style deflation from ever occurring again, since it was so catastrophic, but the consequence is that we tend to run higher levels of inflation now than we did prior to the Great Depression.
it is 99% your “money” losing value,
you’re losing value just like you would be losing time if clocks were controlled like governments control money, as they basically did before the industrial age, the solution for value measuring and collaboration finally showed up in 2009 but its taking forever to be widely implemented, natural selection is quite dramatic
I’m of the opinion that inflation is just the economics term and understanding of human greed spread throughout our economic system.
People charge more because they can.
I always thought that it was supply and demand. As long as there is demand at the high price it will stay there until the demand goes away at that price. Only then will the price lower to meet the demand.
All that given you have the supply.