I’m not quite sure what you’re saying here, it’s a bit ambiguous what you mean by propaganda.
To clarify, the holders of debt don’t want inflation. Debt decreases in value as inflation rises.
And if you’re already wealthy, you don’t want inflation. Inflation will cause nominal interest rates to go up, but that just offsets the decreasing purchasing power of your money, and after tax may not offset it completely. Zero interest rates are just fine if you’re living off assets (a wealthy person or a retired person), so long as inflation stays near zero too.
That’s what I meant to say. Inflation is mostly a concern of the wealthy, but not all the wealthy, just the ones who have chosen to hoard cash by either buying debt, bonds, or putting it in their mattress.
Minimum-wage workers tend to be highly mobile. They don’t get raises from their jobs, they get it by changing jobs.
I mean, when/where was ever a great place to be poor? Extreme economic conditions aren’t good for anybody, especially given that the powerful prefer to balance their books on the backs of the workers.
But if we look at the before/after of the Weimar Republic, who do you think lost the most? Obviously the folks who held a lot of mark-denominated wealth.
At any rate, I wasn’t saying the US could absorb 5-digit Weimar-style hyperinflation, just that current rates are at rock-bottom and a little more inflation would be both absorbable and good for the economy.
Right - so when you said propaganda, you meant people exaggerating the risk of inflation in order to advocate action to prevent it.
This is true, but unfortunately I think we’re in a situation where trying to restore modest normality to inflation and inflation expectations is going to be challenging. There have been compelling reasons to be worried about both a short-term deflationary spiral, and longer-term runaway inflation. The only predication I’m willing to make about the next couple of years is that the markets will probably overreact.
Continuing the tangent, I predict the media will over-weigh the importance of the stock market over the next 10 years. Because they always have in the past.
Seriously. The day’s performance means next to nothing if you are not buying and selling that day. I don’t think the market has over-reacted to existing inflation numbers: I think the media over-reacts to predictably varying volatility.
The mere fact that the rulers were Marxists had nothing to do with it; plenty of other countries have been ruled by Marxists for 40 years without suffering massive hyperinflation, and conversely plenty of countries not ruled by Marxists have experienced this phenomenon.
I think of money more as means of keeping score than as having inherent value. Points on a scoreboard have value because of what they represent, whether it’s a runner crossing home plate, someone crossing the goal line with the football, shooting a puck into the net, throwing a ball through a hoop, etc. If the scorekeeper just put up some random large number on the scoreboard without the players having earned it, that number would be worthless. Hyperinflation due to printing massive amounts of money is, in a sense, the same thing as a scoreboard operator putting up a large number on the scoreboard without the players having produced something of value to earn it. The money itself isn’t valuable, at least not any more valuable than the number on the scoreboard is to a sports team. What’s valuable is what it represents.
I went to a lecture by a mining engineer who went to Russia not long after the fall of communism when hyperinflation was becoming real. He said it went like this: People were paid every day at noon in Moscow, and rushed out to buy anything and everything they thought would have value. Then after work, at the suburban metro stations, you’d see lines of people standing there holding up what they’d bought (like t-shirts, or shoes, or vegetables), offering to trade for what they wanted more.
The thing with money -with any currency - is it’s portable, and subdividable, and others will accept it. Obviously, something you print yourself is not truly unique - but the government has the police to ensure that only its version of its issued currency is available, not copies. That anti-counterfeit enforcement is part of what provides confidence in national currencies.
Where this falls apart is if the government creates more currency for no reason, flooding the market.
Money is essentially a way to keep score - how many tomatoes is a chicken worth? How many chickens for a new car? How many cows to buy a Van Gogh?
As for the concept that “printing money”, as is being done for Covid relief, may create inflation - what I see is that the money injected into the system is substituting for products not produced, to keep wheels of commerce turning. In a lot of cases - especially rents and mortgages, car payments, etc. - this money is disappearing into the sinkhole of existing mortgages and loans. Its addition will only be apparent years or decades later, when those loans are fully paid off. The banks are not seeing a flood of extra payments. It substitutes for lost income, so the people in the stream are not enjoying more dollars than they would normally have. It goes to groceries, rent, and other expenses that people would have had wages to pay. So nobody suddenly has twice as much money in their pocket, to run out and spend on more goods than normal and bid up prices in the medium term, like our hypothetical Zimbabwe civil servants. It’s offset by businesses like airlines, hotels, restaurants that are not spending anything (or getting income) so the total money in circulation balances out. …we hope.
The thread has wandered far from the original question, as often happens.
In specific response to this, a lot of local-currency government spending in these hyperinflations goes to people and institutions that have little leverage - teachers, civil servants, small vendors, etc… They put with being paid in almost valueless currency for a while at least, because what other option do they have?
It has to pay for all the things governments normally do. Military, police, education, civil servants, subsidies for infrastructure, etc. If they aren’t taking enough in taxes and can’t borrow, printing money is the only option.
They actually do have options although very often these cause additional problems. It’s very common in countries where hyperinflation takes place for a culture of corruption to set in, or become much worse. Formerly honest civil servants demand bribes, police shake down the public, teachers expected “gifts” from families. This can happen, at heart, because hyperinflation up-ends the normal leverage. Since the government is no longer providing anything like a reasonable pay, the only thing it has to offer is the position itself. The government will implicitly allow for the abuse because it no longer has the resources to pay employees.
There are LOTS of variances as to how this manifests in a specific time and place, of course.
Could be. My hypothesis (I’m willing to look at evidence to the contrary) is that we are seeing inflation to some extent in the shortages we have. Things of value aren’t being produced to the same extent as they were in the past, including in this case literal rather than just the proverbial chickens that are already under discussion. It’s also lumber, cars, toilet paper, Playstation 5s, and many other varied goods. In part that’s because people are staying home instead of showing up to cut down trees, kill chickens, and so on so we really do have less wealth than we did before COVID-19.
There’s the option that was previously used, which is to be pain in dollars or euros or some other external currency. Failing that the option is to not show up to work, because if you’re being paid in money that no longer is accepted in exchange for other goods that you need, why show up at all?
You can also go to a commodities market and sell your future chickens - chickens that don’t even exist yet. Effectively you promise to deliver chickens at an agreed price on an agreed date. The price may be lower or higher than the price you would get for physical chickens at that date and that represents less or more profit for you.
This can go further, as the buyer of your future chickens may well sell them to someone else, either because he is offered more than he paid, or because there is a glut of chickens and the value is falling so he wants to limit his losses.
What you are saying is that money is worthless during a period of hyperinflation, which I agree with wholeheartedly. But as a general rule, I would argue that during normal times in a semi well managed economy, money is worth more than anything. Because although I can eat a bushel of tomatoes, if I had the equivalent value in money, the money could be used to buy any other good or service. That IS its value. I might buy tomatoes, the alcoholic next door a case of beer, and you chicken breasts. It allows us to access what we have a scarcity of right now without finding the person who has an equal and opposite scarcity.
Yes. If I knew something about economic theory, I’d figure out how printing covid relief money is substituting for the slower “velocity” of money through the system, and propping up the economy by substituting for the lost productivity and output of the items that did not get produced or services consumed. Thus the real increase in money supply is not as large as expected. Higher prices are due to shortages, as you mention, not because there is more money over all. If it were due to more money, consumption would be higher and so all prices would be rising.
I think part of the problem is that you named your currency the same as ours. So the expectation is a dollar is a dollar, but due to exchange rates the Canadian $ is generally worth less. And then since your money is much prettier than ours it feeds into the “play money” meme.
If you renamed your base unit to something like canabucks (or pounds or smiths) then maybe some of that would go away (although I don’t think the Mexican peso is held in any higher regard than the Canadian $, being the other foreign currency that American’s might run into casually (if in the southwest, anyway).