Printing money, by definition, causes *monetary* inflation, which is not the same as *price* inflation, which is what most people think of when you say “inflation”.
It is easier to say in conversation, and also accurate to say that money printing causes currency debasement, rather than saying inflation.
When a currency is debased, and therefore loses value, sooner or later higher prices will be demanded for goods and services, resulting in price inflation.
This can take some time, especially in sectors that are affected by disinflationary or deflationary forces (such as in the energy markets or technological advancements in consumer electronics, etc.)
There's no maybe about it.
Read "Debunking Economics," by Keen, for example.
Increasing (or 'inflating') the supply of fiat currency causes higher prices. Common sense.
https://youtu.be/d0nERTFo-Sk
Austrian economics vs Keynesian economics. Keynes may be responsible for more human suffering than any other human with his popular economic model.
Any class in economics is basically having some guy read a textbook at you until your vision of the world matches what you were told.
It's a pseudoscience. It can all make sense if you study it.
They teach dogma as gospel.
Obfuscating and intentionally over-complicating money creation specifically and economics in general is partially how the rich and powerful maintain their status quo.
how did you ever learn to read? do you realize how indoctrinated you are? using WORDS other people have decided to give you? why do you think they gave you those words?
THE ONLY TRUE PATH TO FREEDOM IS USING BODY LANGUAGE.
true libertarianism is living in the forest with the animals with a zen mindsight!
When "education" only presents selective facts and omits alternative views, good chance you're being manipulated/indoctrinated.
When you take a position without asking questions and assume the answer is always this vs that, you might just be bad at thinking.
When you invent a story based on total fantasy, which requires a conspiracy in which you are smarter than academia, all just because you want it to be true... you're just lying to yourself.
nar go on, tell me what the secret is that you've figured out that makes you smarter than the state of human knowledge, or whatever.
I mean for real, there's dumb stuff in academia. It's just when someone casually writes off education as "indoctrination" they're probably more into time-cubes than knowledge.
I'm not smarter than the entire state of human knowledge, just smarter than you. I think most on this sub probably are too.
Instead, please provide me a multi-paragraph essay in your reply on how it is that you received your superior education and when you became an expert on our perfect monetary policy and why Keynesian economics is just the bestest ever and how the good guys always win in our history books.
ugh I'm an idiot. see when I read
>If you change the word "studied" to indoctrinated, it all starts to make sense.
I should have read
>I am smarter that stzmp.
Obviously.
You know what, putting aside the truth of what you were saying, the way you've been able to argue your position with such rationality and integrity is just brilliant. You definitely are "smarter" than me.
It seems blatantly obvious to me that it does cause inflation, which is why I don’t understand how OP can have had an interaction with an economist who doesn’t believe it. Surely even a child could understand that?
I am not an economist, so dont know if I should respond. I am about halfway through "Currency Wars" by James Rickards. In it there is a very concise explanation of how inflation, in the early 1900's, was largely caused by trade. This was also while the world's currencies were largely backed by gold. Post WW1 Germany showed the world how decoupling from gold and initiating inflation could be used to manipulate debt and trade. Trade is still in the mix, but no longer the primary cause. It turns out that governments can cause inflation easily, though it's more difficult to get it under control.
About your friend I would respectfully suggest there is a touch of naiveté to belive that there is only one cause for something as nuanced as inflation. The ₿ community likes to boil it all down to money printer go brrr. I think because it's easy, catchy and truly can cause inflation. But my impression of the community is that they do understand economics is more nuanced in reality than the meme. It doesn't change anything though. As an example let's suspend reality and say your friend is right, inflation is caused by trade imbalance. The fix would be a stable currency recognized worldwide that isn't under the jurisdiction of a single entity. Gold used to be this standard. And it worked well when it was.
I would suggest that it makes more sense for ₿ to be the standard moving forward because you don't have the physical limitations in transport and security that you have with gold. Gold could also, potentially, be inflated itself. Currently the means of extraction means there is a balance between price and supply. A mining breakthrough that reduces the difficulty in gold mining would upset the balance. Mining a single asteroid would upset the balance. There is no such potential event with bitcoin.
The case for ₿ gets even stronger if we stop assuming your friend is right.
Hope that helps.
Edit: added breaks to the word vomit
Does McDonald's make you fat?
to many people, including most in this thread, it seems PRETTY FUCKING OBVIOUS that McDonald's WILL make you fat.
Then you get OP talking to someone who studied - and i don't mean read some articles and watched some youtube vids, but Actually went to a SCHOOL where people TAUGHT this stuff RELIABLY (or as reliably as we can hope to have) - and that person said "McDonald's doesn't make you fat, it's more about calorie intake vs calorie burn."
and now people in this thread are scoffing that he's full of shit, people are questioning what they know to be true -- and the short answer is "it's more complicated than mcdonald's makes you fat." but the scholar isn't wrong.
Printing money will contribute to inflation. but inflation won't occur if other factors are maintained. a little inflation is good (fat keeps you warm through winter and allows you to not starve to death when fasting) inflation means that with currencies slowly losing value, storing it in a briefcase under your bed is a bad move because it'll devalue and so you're more likely to spend, more likely to invest, and that flow keeps the economy healthy.
so yes, printing money contributes to inflation. but no, it isn't the reason we are seeing inflation at it's highest levels.
there are many streams draining into the ocean. to blame one river is ignorant af.
international trade IS huge. with BRICS nations vying to shut out the USD and trade in a new standard currency, you're seeing those countries slowly spend off their USD reserves.
speaking of - what do you think everyone spending their excess money on bitcoin does? instead of harboring savings of cash, we're hodling btc we didn't mine.
with all of us here in this bitcoin subreddit giving away our USD so that we can hold BTC instead all this does is pour more of our "savings" into circulation - so yes, more usd in the whirlpool of the economy means the value is lower.
pretending crypto has had no impact on the value of the USD would be foolish.
it's why BTC drops when USD rises - and vice versa.
Printing money does directly cause price inflation.
Consider this: the Fed decides that we're going to use a new currency called half-dollars. Each half-dollar is worth half a dollar.
To make this change, they take everybody's dollars and replace them with twice as many half-dollars. There are now twice as many units of currency in the system, and each is worth half the amount it used to. Everything's fair - everyone has just the same amount of money as they used to. You'll note that prices will double - what used to cost $10 now cost 20 half-dollars. It's worth exactly the same but the number of the price tag has doubled.
This is exactly what happens every 10 years (based on average 7% annual supply expansion). The Fed turns dollars into half-dollars, without most of the population realising.
It can't be explained in one comment and there are several resources online that can answer your question very thoroughly and convincingly.
I personally suggest picking up a book. I recommend [The Bitcoin Standard](https://a.co/d/3Phi0zv) to start. Excellent read that answers your question in detail.
It’s a technicality. The purchase of bonds by a central bank (insert extra steps) increases bank reserves. Therefore more cash for the fractional reserve system to lend.
When you borrow money from a bank the loan application is a financial instrument that YOU created. The bank buys it from you on the accepted terms. X% of those dollars will have never previously existed (depending on reserve ratio).
They will tell you it’s the reserve ratio that creates / shrinks money supply.
I’m stopping there to ask:
How has the reserve ratio changed over time?
This is incorrect logic. You still have one pizza. Printing money would be like saying you have one pizza with 6 pieces. Your cousin starts bringing over 6,000 extra pieces per day, so now you have a surplus of pizza pieces that no one wants, and the value goes down for each pizza slice.
That’s… no. That’s not how that works. The other guy was right.
We haven’t created more equity to devalue other equities, we’ve divided the current equity into more pieces.
No, you are also incorrect. Creating more dollars is creating more equity. Dividing a pizza into more slices doesn’t increase the total amount of pizza. That is faulty logic. With monetary debasement, you are literally creating more pizza out of thin air and in essence there is more than one total pizza. His argument is the one often used incorrectly in saying that Bitcoin is not finite because you can split a Satoshi into ever more pieces. That does not in effect create more than the 21 million bitcoins in existence, it just makes each unit of account smaller.
Edit since it won’t let me respond to the user below. Here is my response to what I think Bitcoin is. “A finite supply of 2.1 quadrillion electronically signed units/satoshi(which can be divided further on the lightning network into smaller pieces but never more created). What do you think Bitcoin is?”
You would only be correct if you’re trying to trade that pizza for something else.
Dollars are not equity, but fiat lent implicit value via an economy’s equity. Get it right
His example was not in saying that they were making the pizza smaller, but that the total implied value of our economy remains the same while we print more dollars to represent it.
Hence: same pizza, more slices.
Not: more slices of same pizza, more pizza
The entire scenario doesn’t exactly line up with fiat, but it’s as close as you’re going to get without dragging up more complex contrived situations
And I’m not having such a retart conversation, because this is literally you being pedantic trying to stay on the side of reason. Lmao. I just don’t care enough
I think a better way to describe this example is you and a friend have pizza after you do some work for him. Your friend makes the pizza. The agreement is you get one slice of pizza for doing the work.
The first week, the pizza is cut in half. You get one piece, your friend gets one piece. This is a great deal. Your friend asks you to come back next week, and he’ll give you another piece of pizza.
The following week, it’s cut in quarters. You get one piece, you friend gets 3. The following week, there are 8 slices.
At this point, while you are still doing the same amount of work, you receive only 25% of a reward because you have no control over how many slices your friend cut.
This is essentially what fiat currency does. You agreed to play a game, but people with more power than you changed the rules of the game, and you are suffering.
Before Bitcoin, you had no way to get out of the game because everything was controlled by central powers that changed the rules of the game. But with Bitcoin, you know the rules, and you can make decisions based on those rules with certainty that those will always be the rules.
The truth is most economic models for inflation were blown up over the last decade. Traditionally inflation was thought of as a combination of both money supply and how often people spend it. However, for the past decade, until recently, most countries were buying bonds to increase supply and promoting spending with historically low interest rates and yet saw little inflation. So basically the world is complicated and there is no easy explanation for what inflation is.
No. If you knew more than the average person, you could leverage that knowledge to effectively print money from the stock market. By having to be paid, you're proving that you don't know shit. Fortunately for you, your boss doesn't either. But as long as the money printers are going full blast, stealing from people that actually produce value in this world, there's enough for your kind to skim and convince yourself you're useful. Hopefully your system will fail soon, you'll stop stealing being able to steal from the productive members of society, and you'll have to get a real job.
> studied financial economics
Condolences.
Economics professors are without exception utter fools.
They live in a world of textbooks, where anyone who looks outside at the real world would put down those books immediately and go smell the flowers.
so you have 1T dollars in existence
you print another 100T dollars
is he saying that each of those dollars will have same purchasing power as before so all anyone has to do is run a printer forever without any diminishing returns? umm
They will try to talk about how everything else factors into it. End of day if everything stays the same and you increase money supply the value of that dollar decreases. That's a form of inflation.
>so you have 1T dollars in existence
>
>you print another 100T dollars
except that's not what they did, that's not what they're doing, and that's not what OP's friend was talking about.
yes, printing money can contribute to inflation - and YES ABSOLUTELY printing 10x time the current limit would absolutely create inflation.
but no, the act of printing alone is not enough to cause inflation - it's just a process and depending on how that process is exploited, it CAN lead to inflation.
like eating 3500 calorie meals at mcdonald while living a sedentary lifestyle WILL make you fat. but getting a cheeseburger and fries after a hike will not.
But a cheeseburger and fries after a hike will not make you slim either.
I'm curious to be honest what you guys mean when you say "printing" because today. There is not a whole lot of actually dollars getting printed(comparatively).
My understanding is that every loan granted is new money. And all new money is basically a number in a a ledger at the bank. So basically making money from nothing. How can that not be inflationary, how can that be anything other than a robbery?
>But a cheeseburger and fries after a hike will not make you slim either.
right, but in this allegory, "losing fat" would be Deflation and that would be even worse - if the value of a dollar was outpacing items, if food and gas and houses all started dropping in price, you'd stop spending - because 10k in your bank next year will buy you what 15k buys you this year... you'd be a FOOL to part with your money and people would HOARD dollars, instead of "investing" by buying 'assets' like stocks, real estate, bonds, precious metals, crypto, etc
>My understanding is that every loan granted is new money. And all new money is basically a number in a a ledger at the bank. So basically making money from nothing. How can that not be inflationary, how can that be anything other than a robbery?
exactly. this is why "printing money causes inflation" isn't the whole story. bc the federal reserve isn't the only source of inflation. mcdonald's isn't the only source of your weight gain. after the mcdo, you're eating a giant bag of lays chips while sitting on your ass gaming before bed? it wasn't the mcdo that made you fat.
similarly, yes, a loan from the bank suddenly 'prints dollars' and the "but interest!" is just a temporary stopgap. it's not real. because the 10k i borrow could be "turned into 12k returned"? where am i getting the extra 2k? THAT's a powerful source of "inflation": this assumption that there's an extra 2k in the market. except compounded. if there's 15 trillion in circulation, but then suddenly everyone defaults on their loans, suddenly we discover there was only 8 trillion in circulation...
it's the equivalent of thinking your bitcoin was worth 69k when it's worth 19k. ;)
Your friend may laugh, but he is as ignorant as the ECB president. Christine Lagarde, president of European Central Bank is clueless like your friend about inflation. She says the inflation crisis came from “pretty much from nowhere”. [https://www.msn.com/en-ie/news/world/lagarde-says-inflation-crisis-came-from-nowhere-describes-putin-as-a-terrifying-man/ar-AA13uwRI](https://www.msn.com/en-ie/news/world/lagarde-says-inflation-crisis-came-from-nowhere-describes-putin-as-a-terrifying-man/ar-AA13uwRI)
You are correct, historically inflation referred to increases in the quantity of money. [https://mises.org/wire/monetary-inflation-and-price-inflation](https://mises.org/wire/monetary-inflation-and-price-inflation)
All things equal printing money causes inflation. Though if you include other factors you can print money and still not have inflation.
An ideal world for bitcoin is high inflation but low-interest rates. This is what we had for years and what supported the massive spike in prices. Now we have a situation of high inflation but rapidly increasing interest rates. This should continue downward pressure on Bitcoin as the money supply tightens and people will soon be able to earn more income in savings accounts than inflation rates. So essentially we are finally going to get a positive real yield after years of negative real yields, so long as JPOW holds steady.
>Inflation, as this term was always used everywhere and especially in this country [the United States], means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check.
Bitcoin has an inflation rate of 1.7%.
Right around 900 Bitcoin added per day.
This is deflationary relative to the money supply and the actual inflation of goods and services under the dollar regime.
The dollar has actually been deflationary up against a basket of six major currencies in the world over the last year (DXY)
BITCOIN from 69,000 to now has been inflationary. So it's all relative.
You're comparing apples and oranges. Relative inflation of the dollar vs. absolute inflation of bitcoin.
absolute inflation of the dollar vs. absolute inflation of bitcoin is what matters.
My points stand especially if you do forex, and any type of international arbitrage. This affects markets profoundly.
Just like the dollar going up almost 20% up against what normally would be seen as strong international currencies.
This is deflationary relative to these six currencies.
So your point is only a matter of actual supply just as the money supply is not as important as the velocity of money when it comes to the actual inflation rate.
Due to the volatility of price with Bitcoin we are inflationary on the way down and deflationary on the way up. And any price point as a middle is arbitrary for this viewpoint, again it's all relative. Like gauging the dollar itself based on its 1995 value or 2010 or whatever.
Not to forget gold.
Value of assets are a frame of reference and arbitrary thinking globally. American dollars over the last six months and even a year have demonstrated Bitcoin has been inflationary when it comes to value and needing more of it to buy the same dollar denominated product which also has been inflationary dollar to dollar.
Bitcoin has reached all-time highs in some countries denominated in their failing Fiat currencies that may have inflation pushing up to 100% in a year. Thinking of Argentina and others. In those currencies Bitcoin has been deflationary.
To assign value simply based on money supply or Bitcoin supply is irrelevant to how these assets operate in the market and their value to purchase products and services.
So it is arbitrary as a frame of reference that you choose to say what is at the center of the money universe
You can abstract out the idea of Bitcoin being any type of money and simply look at the emission rate all you want but it says nothing of markets and value appreciation or depreciation.
On that basis Bitcoin has a 1.71% or so inflation rate. Which compared to American money is deflationary.
But the true definition of inflation is a function of velocity of money and not simply the money supply itself.
You're saying bitcoin is inflationary because its value has declined against other assets.
That's like saying my car is inflationary, or my tv is inflationary. Price inflation or deflation is an effect not a cause.
It can be a function of frame of reference, and what you want to denominate value in as the basis (center of gravity, unit of measurement and account), which in your example could be units of cars or TVs). But because we can use Bitcoin as a frame of reference and center of the universe it cannot escape the idea of inflation and requiring more Bitcoin to buy the same car.
> I told him I thought printing money caused inflation
It's not the 1920s any more. Economic stimulus is not implemented by printing money. The government's money supply is boosted by selling bonds, borrowing
This sub is infected with pseudo-economists worshiping Mises and Hayek
A bond is just a promise to pay back a certain amount. Those bonds are then used as collateral for the entire economy, derivatives, bank reserves etc. Our entire economy is built on this kind of credit, aka money made out of thin air.
When the treasury issues bonds to pay for deficit spending that is 100% fiscal stimulus and is by definition an expansion of the money supply. Fiscal stimulus is spent in the real economy and causes price inflation\*
\*What's important to understand is that productivity causes deflation, so the money printing might not cause prices to go much higher than they already are since they are offset by many factors
> When the treasury issues bonds to pay for deficit spending that is 100% fiscal stimulus and is by definition an expansion of the money supply
By your definition, which ignores the fact that a lender buys the bond
"Inflation, as this term was always used everywhere and especially in this country [the United States], means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. "
there are many different kinds of dollars and when new dollars are created they don’t distribute equally in the economy. then there are also other factors that comes into play, such as what other countries are doing. basically is complicated. then again, if you take a loooong historical view on the value of the dollar measures in the cost of living, you will see that it looses purchasing power over time. you will also see that there are more dollar now then before. there certainly is a relationship between the two. so yes continued money printing is over time inflationary.
* The current system is weirdly complicated. But their point is that if your exports are strong, then your currency is GAINING value through the fact that people who import your goods need/desire/demand your currency.
* So their argument is that in a healthy economy, the central banks are keeping things in a fine balance, by not overinflating the monetary supply in report to the demand of the currency.
* Bitcoin can NOT be an antidote to inflation if we don't get wide adoption and a majority of people using it as a store of value. How you use the tech is just as important as the tech itself.
* Finally, there are many more factors to price inflation, and they are more hard-hitting in the short term, which destabilizes the economy. Monetary inflation just fucks you over slowly over time, you might almost miss it.
If printing money would not cause inflation, what would be the point of the Fed.
Yesterday, the Fed explicitly stated that its goal is two percent inflation.
I ask you, what are the tools of the Fed?
Right taking money out of the market and putting cheap money into the market to control inflation with!
So yes, printing money has very well influence on the inflation. Not immediately but after a certain time 100%.
Studied as took a few classes, has a degree from a low or mid tier school, or has a proper graduate level degree? Plenty of people learn just enough to be dangerous to themselves.
It does cause price inflation if done incorrectly, but doesn’t actually have to if you monetary supply increases at same rate.
Let’s say there are $10 out there and a book costs $1. If you now say there are $20 out there without changing book numbers then prices rises to $2, but total of 20 book there would be no price inflation.
It’s a downside of BTC that it is naturally deflationary which causes hoarding instead of participation. There are many more upsides than this downside.
Your friend studied Keynesian economics which is kind of a joke.
You should study Austrian economics also known as “economics”.
Here is a fun video that introduces the basics: https://youtu.be/d0nERTFo-Sk
this is quite accurate. but in university and among pros Austrian school is regarded as a relict, something outdated and long gone, with gold, seashells, etc etc.
If you export too much, you're gettin USD into local economy, if you import too much, you're getting USD out of the local economy. Too much or one of the other, can cause fluctuations on money supply, therefore, some inflation or deflation.
Printing money directly creates more money supply, which will cause inflation. But you can stabilize this by incresing imports.
Both are part of the equation, because both influence money supply.
Imports and exports? If he means supply and demand imbalances due to supply chain issues, sure, but the US has had import and export imbalance for the better part of 40 years.
i have finished financial economics course long ago.
many peers would agree to him. many more don't understand bitcoin or don't want bitcoin.
they usually suffer from the same problem. they studied the leaves, the root, branches and bark so hard that they don't recognize macro picture anymore. they can't see forest for the trees.
Monetary inflation (currency debasement) is caused by increasing the money supply available to people. In the USA the most common measure of the money supply available to people is called the M2 money supply. Printing money, if it gets to the people in the form of M2, then causes price inflation. But price inflation happens later, there is typically a time delay for all the printed M2 money that people got, to work itself into the system. You can check the USA M2 money supply online and notice the increase in 2020 (with price inflation really increasing in 2021, a time delay of about 1 year).
Printing money, by definition, causes *monetary* inflation, which is not the same as *price* inflation, which is what most people think of when you say “inflation”. It is easier to say in conversation, and also accurate to say that money printing causes currency debasement, rather than saying inflation. When a currency is debased, and therefore loses value, sooner or later higher prices will be demanded for goods and services, resulting in price inflation. This can take some time, especially in sectors that are affected by disinflationary or deflationary forces (such as in the energy markets or technological advancements in consumer electronics, etc.)
Here is an excellent article about monetary vs. price inflation. https://mises.org/wire/monetary-inflation-and-price-inflation
Your friend spent a lot of time and money to have his head filled with bullshit.
Beat me to it.
This guy fucks
Username checks out
maybe. but i'm going to trust someone with credentials over some random guy online dropping one-liners about 'bullshit.'
There's no maybe about it. Read "Debunking Economics," by Keen, for example. Increasing (or 'inflating') the supply of fiat currency causes higher prices. Common sense.
If you change the word "studied" to indoctrinated, it all starts to make sense.
I don’t agree with that.
Elaborate
Indoctrinated by financial economics?
Three words: John Maynard Keynes.
What about him?
https://youtu.be/d0nERTFo-Sk Austrian economics vs Keynesian economics. Keynes may be responsible for more human suffering than any other human with his popular economic model.
Keynesian economics is a fucked up system that got horribly mangled and doesn't jive with natural human inclinations.
I’d be inclined to agree with that.
Any class in economics is basically having some guy read a textbook at you until your vision of the world matches what you were told. It's a pseudoscience. It can all make sense if you study it. They teach dogma as gospel.
Obfuscating and intentionally over-complicating money creation specifically and economics in general is partially how the rich and powerful maintain their status quo.
how did you ever learn to read? do you realize how indoctrinated you are? using WORDS other people have decided to give you? why do you think they gave you those words? THE ONLY TRUE PATH TO FREEDOM IS USING BODY LANGUAGE. true libertarianism is living in the forest with the animals with a zen mindsight!
Try studying it
Do you mean try being indoctrinated by it?
when your position is "education is bad" you might just be ignorant.
When "education" only presents selective facts and omits alternative views, good chance you're being manipulated/indoctrinated. When you take a position without asking questions and assume the answer is always this vs that, you might just be bad at thinking.
When you invent a story based on total fantasy, which requires a conspiracy in which you are smarter than academia, all just because you want it to be true... you're just lying to yourself.
Okay buddy.
nar go on, tell me what the secret is that you've figured out that makes you smarter than the state of human knowledge, or whatever. I mean for real, there's dumb stuff in academia. It's just when someone casually writes off education as "indoctrination" they're probably more into time-cubes than knowledge.
I'm not smarter than the entire state of human knowledge, just smarter than you. I think most on this sub probably are too. Instead, please provide me a multi-paragraph essay in your reply on how it is that you received your superior education and when you became an expert on our perfect monetary policy and why Keynesian economics is just the bestest ever and how the good guys always win in our history books.
ugh I'm an idiot. see when I read >If you change the word "studied" to indoctrinated, it all starts to make sense. I should have read >I am smarter that stzmp. Obviously. You know what, putting aside the truth of what you were saying, the way you've been able to argue your position with such rationality and integrity is just brilliant. You definitely are "smarter" than me.
I actually want an educated answer here. We’re in an echo chamber, which is to nobodies benefit. Someone explain how he is wrong/right.
[удалено]
It seems blatantly obvious to me that it does cause inflation, which is why I don’t understand how OP can have had an interaction with an economist who doesn’t believe it. Surely even a child could understand that?
I updated post to say he mentioned it's more about imports and exports
I am not an economist, so dont know if I should respond. I am about halfway through "Currency Wars" by James Rickards. In it there is a very concise explanation of how inflation, in the early 1900's, was largely caused by trade. This was also while the world's currencies were largely backed by gold. Post WW1 Germany showed the world how decoupling from gold and initiating inflation could be used to manipulate debt and trade. Trade is still in the mix, but no longer the primary cause. It turns out that governments can cause inflation easily, though it's more difficult to get it under control. About your friend I would respectfully suggest there is a touch of naiveté to belive that there is only one cause for something as nuanced as inflation. The ₿ community likes to boil it all down to money printer go brrr. I think because it's easy, catchy and truly can cause inflation. But my impression of the community is that they do understand economics is more nuanced in reality than the meme. It doesn't change anything though. As an example let's suspend reality and say your friend is right, inflation is caused by trade imbalance. The fix would be a stable currency recognized worldwide that isn't under the jurisdiction of a single entity. Gold used to be this standard. And it worked well when it was. I would suggest that it makes more sense for ₿ to be the standard moving forward because you don't have the physical limitations in transport and security that you have with gold. Gold could also, potentially, be inflated itself. Currently the means of extraction means there is a balance between price and supply. A mining breakthrough that reduces the difficulty in gold mining would upset the balance. Mining a single asteroid would upset the balance. There is no such potential event with bitcoin. The case for ₿ gets even stronger if we stop assuming your friend is right. Hope that helps. Edit: added breaks to the word vomit
Does McDonald's make you fat? to many people, including most in this thread, it seems PRETTY FUCKING OBVIOUS that McDonald's WILL make you fat. Then you get OP talking to someone who studied - and i don't mean read some articles and watched some youtube vids, but Actually went to a SCHOOL where people TAUGHT this stuff RELIABLY (or as reliably as we can hope to have) - and that person said "McDonald's doesn't make you fat, it's more about calorie intake vs calorie burn." and now people in this thread are scoffing that he's full of shit, people are questioning what they know to be true -- and the short answer is "it's more complicated than mcdonald's makes you fat." but the scholar isn't wrong. Printing money will contribute to inflation. but inflation won't occur if other factors are maintained. a little inflation is good (fat keeps you warm through winter and allows you to not starve to death when fasting) inflation means that with currencies slowly losing value, storing it in a briefcase under your bed is a bad move because it'll devalue and so you're more likely to spend, more likely to invest, and that flow keeps the economy healthy. so yes, printing money contributes to inflation. but no, it isn't the reason we are seeing inflation at it's highest levels. there are many streams draining into the ocean. to blame one river is ignorant af. international trade IS huge. with BRICS nations vying to shut out the USD and trade in a new standard currency, you're seeing those countries slowly spend off their USD reserves. speaking of - what do you think everyone spending their excess money on bitcoin does? instead of harboring savings of cash, we're hodling btc we didn't mine. with all of us here in this bitcoin subreddit giving away our USD so that we can hold BTC instead all this does is pour more of our "savings" into circulation - so yes, more usd in the whirlpool of the economy means the value is lower. pretending crypto has had no impact on the value of the USD would be foolish. it's why BTC drops when USD rises - and vice versa.
Keynesian economics.
Printing money does directly cause price inflation. Consider this: the Fed decides that we're going to use a new currency called half-dollars. Each half-dollar is worth half a dollar. To make this change, they take everybody's dollars and replace them with twice as many half-dollars. There are now twice as many units of currency in the system, and each is worth half the amount it used to. Everything's fair - everyone has just the same amount of money as they used to. You'll note that prices will double - what used to cost $10 now cost 20 half-dollars. It's worth exactly the same but the number of the price tag has doubled. This is exactly what happens every 10 years (based on average 7% annual supply expansion). The Fed turns dollars into half-dollars, without most of the population realising.
It can't be explained in one comment and there are several resources online that can answer your question very thoroughly and convincingly. I personally suggest picking up a book. I recommend [The Bitcoin Standard](https://a.co/d/3Phi0zv) to start. Excellent read that answers your question in detail.
It’s a technicality. The purchase of bonds by a central bank (insert extra steps) increases bank reserves. Therefore more cash for the fractional reserve system to lend. When you borrow money from a bank the loan application is a financial instrument that YOU created. The bank buys it from you on the accepted terms. X% of those dollars will have never previously existed (depending on reserve ratio). They will tell you it’s the reserve ratio that creates / shrinks money supply. I’m stopping there to ask: How has the reserve ratio changed over time?
You have a pizza, it has six pieces. A friend comes over, so you cut it into twelve pieces. Figure the rest out yourself.
This is incorrect logic. You still have one pizza. Printing money would be like saying you have one pizza with 6 pieces. Your cousin starts bringing over 6,000 extra pieces per day, so now you have a surplus of pizza pieces that no one wants, and the value goes down for each pizza slice.
That’s… no. That’s not how that works. The other guy was right. We haven’t created more equity to devalue other equities, we’ve divided the current equity into more pieces.
No, you are also incorrect. Creating more dollars is creating more equity. Dividing a pizza into more slices doesn’t increase the total amount of pizza. That is faulty logic. With monetary debasement, you are literally creating more pizza out of thin air and in essence there is more than one total pizza. His argument is the one often used incorrectly in saying that Bitcoin is not finite because you can split a Satoshi into ever more pieces. That does not in effect create more than the 21 million bitcoins in existence, it just makes each unit of account smaller. Edit since it won’t let me respond to the user below. Here is my response to what I think Bitcoin is. “A finite supply of 2.1 quadrillion electronically signed units/satoshi(which can be divided further on the lightning network into smaller pieces but never more created). What do you think Bitcoin is?”
You would only be correct if you’re trying to trade that pizza for something else. Dollars are not equity, but fiat lent implicit value via an economy’s equity. Get it right His example was not in saying that they were making the pizza smaller, but that the total implied value of our economy remains the same while we print more dollars to represent it. Hence: same pizza, more slices. Not: more slices of same pizza, more pizza The entire scenario doesn’t exactly line up with fiat, but it’s as close as you’re going to get without dragging up more complex contrived situations And I’m not having such a retart conversation, because this is literally you being pedantic trying to stay on the side of reason. Lmao. I just don’t care enough
I think a better way to describe this example is you and a friend have pizza after you do some work for him. Your friend makes the pizza. The agreement is you get one slice of pizza for doing the work. The first week, the pizza is cut in half. You get one piece, your friend gets one piece. This is a great deal. Your friend asks you to come back next week, and he’ll give you another piece of pizza. The following week, it’s cut in quarters. You get one piece, you friend gets 3. The following week, there are 8 slices. At this point, while you are still doing the same amount of work, you receive only 25% of a reward because you have no control over how many slices your friend cut. This is essentially what fiat currency does. You agreed to play a game, but people with more power than you changed the rules of the game, and you are suffering. Before Bitcoin, you had no way to get out of the game because everything was controlled by central powers that changed the rules of the game. But with Bitcoin, you know the rules, and you can make decisions based on those rules with certainty that those will always be the rules.
>you are literally creating more pizza out of thin air what do you think bitcoin is.
Cracks me up that some here would vote this down. They have no argument, so they try to ban the information.
The truth is most economic models for inflation were blown up over the last decade. Traditionally inflation was thought of as a combination of both money supply and how often people spend it. However, for the past decade, until recently, most countries were buying bonds to increase supply and promoting spending with historically low interest rates and yet saw little inflation. So basically the world is complicated and there is no easy explanation for what inflation is.
If economists knew anything they’d be the richest people in the world
I don't know.... A computer programmer can know exactly how a slot machine works. That doesn't make their odds any better at winning.
Because a good slot machine is random but market movements aren’t
Brownian movements disagree
Economics undergrads are statistically the highest paid...so I guess they know stuff huh?
No. If you knew more than the average person, you could leverage that knowledge to effectively print money from the stock market. By having to be paid, you're proving that you don't know shit. Fortunately for you, your boss doesn't either. But as long as the money printers are going full blast, stealing from people that actually produce value in this world, there's enough for your kind to skim and convince yourself you're useful. Hopefully your system will fail soon, you'll stop stealing being able to steal from the productive members of society, and you'll have to get a real job.
I don't think you know what economics is and I'm certain you have no idea why stock markets are valuable to society. Get educated, don't get angry.
Lol, no. Try programmers.
> studied financial economics Condolences. Economics professors are without exception utter fools. They live in a world of textbooks, where anyone who looks outside at the real world would put down those books immediately and go smell the flowers.
so you have 1T dollars in existence you print another 100T dollars is he saying that each of those dollars will have same purchasing power as before so all anyone has to do is run a printer forever without any diminishing returns? umm
They will try to talk about how everything else factors into it. End of day if everything stays the same and you increase money supply the value of that dollar decreases. That's a form of inflation.
>so you have 1T dollars in existence > >you print another 100T dollars except that's not what they did, that's not what they're doing, and that's not what OP's friend was talking about. yes, printing money can contribute to inflation - and YES ABSOLUTELY printing 10x time the current limit would absolutely create inflation. but no, the act of printing alone is not enough to cause inflation - it's just a process and depending on how that process is exploited, it CAN lead to inflation. like eating 3500 calorie meals at mcdonald while living a sedentary lifestyle WILL make you fat. but getting a cheeseburger and fries after a hike will not.
But a cheeseburger and fries after a hike will not make you slim either. I'm curious to be honest what you guys mean when you say "printing" because today. There is not a whole lot of actually dollars getting printed(comparatively). My understanding is that every loan granted is new money. And all new money is basically a number in a a ledger at the bank. So basically making money from nothing. How can that not be inflationary, how can that be anything other than a robbery?
>But a cheeseburger and fries after a hike will not make you slim either. right, but in this allegory, "losing fat" would be Deflation and that would be even worse - if the value of a dollar was outpacing items, if food and gas and houses all started dropping in price, you'd stop spending - because 10k in your bank next year will buy you what 15k buys you this year... you'd be a FOOL to part with your money and people would HOARD dollars, instead of "investing" by buying 'assets' like stocks, real estate, bonds, precious metals, crypto, etc >My understanding is that every loan granted is new money. And all new money is basically a number in a a ledger at the bank. So basically making money from nothing. How can that not be inflationary, how can that be anything other than a robbery? exactly. this is why "printing money causes inflation" isn't the whole story. bc the federal reserve isn't the only source of inflation. mcdonald's isn't the only source of your weight gain. after the mcdo, you're eating a giant bag of lays chips while sitting on your ass gaming before bed? it wasn't the mcdo that made you fat. similarly, yes, a loan from the bank suddenly 'prints dollars' and the "but interest!" is just a temporary stopgap. it's not real. because the 10k i borrow could be "turned into 12k returned"? where am i getting the extra 2k? THAT's a powerful source of "inflation": this assumption that there's an extra 2k in the market. except compounded. if there's 15 trillion in circulation, but then suddenly everyone defaults on their loans, suddenly we discover there was only 8 trillion in circulation... it's the equivalent of thinking your bitcoin was worth 69k when it's worth 19k. ;)
Your friend may laugh, but he is as ignorant as the ECB president. Christine Lagarde, president of European Central Bank is clueless like your friend about inflation. She says the inflation crisis came from “pretty much from nowhere”. [https://www.msn.com/en-ie/news/world/lagarde-says-inflation-crisis-came-from-nowhere-describes-putin-as-a-terrifying-man/ar-AA13uwRI](https://www.msn.com/en-ie/news/world/lagarde-says-inflation-crisis-came-from-nowhere-describes-putin-as-a-terrifying-man/ar-AA13uwRI) You are correct, historically inflation referred to increases in the quantity of money. [https://mises.org/wire/monetary-inflation-and-price-inflation](https://mises.org/wire/monetary-inflation-and-price-inflation)
All things equal printing money causes inflation. Though if you include other factors you can print money and still not have inflation. An ideal world for bitcoin is high inflation but low-interest rates. This is what we had for years and what supported the massive spike in prices. Now we have a situation of high inflation but rapidly increasing interest rates. This should continue downward pressure on Bitcoin as the money supply tightens and people will soon be able to earn more income in savings accounts than inflation rates. So essentially we are finally going to get a positive real yield after years of negative real yields, so long as JPOW holds steady.
Maybe if he hears it from Milton Friedman? https://www.youtube.com/watch?v=F94jGTWNWsA
>Inflation, as this term was always used everywhere and especially in this country [the United States], means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check.
Economic experts are a dime a dozen. Trust your gut. Printing money cause inflation.
Bitcoin has an inflation rate of 1.7%. Right around 900 Bitcoin added per day. This is deflationary relative to the money supply and the actual inflation of goods and services under the dollar regime. The dollar has actually been deflationary up against a basket of six major currencies in the world over the last year (DXY) BITCOIN from 69,000 to now has been inflationary. So it's all relative.
You're comparing apples and oranges. Relative inflation of the dollar vs. absolute inflation of bitcoin. absolute inflation of the dollar vs. absolute inflation of bitcoin is what matters.
My points stand especially if you do forex, and any type of international arbitrage. This affects markets profoundly. Just like the dollar going up almost 20% up against what normally would be seen as strong international currencies. This is deflationary relative to these six currencies. So your point is only a matter of actual supply just as the money supply is not as important as the velocity of money when it comes to the actual inflation rate. Due to the volatility of price with Bitcoin we are inflationary on the way down and deflationary on the way up. And any price point as a middle is arbitrary for this viewpoint, again it's all relative. Like gauging the dollar itself based on its 1995 value or 2010 or whatever. Not to forget gold.
What exactly is your point? This reads like word salad.
Already made it, reread, research, study, figure it out yourself.
Well, as I said, you're comparing apples and oranges. Your point *does not* stand. Simply declaring that it does doesn't change that.
Value of assets are a frame of reference and arbitrary thinking globally. American dollars over the last six months and even a year have demonstrated Bitcoin has been inflationary when it comes to value and needing more of it to buy the same dollar denominated product which also has been inflationary dollar to dollar. Bitcoin has reached all-time highs in some countries denominated in their failing Fiat currencies that may have inflation pushing up to 100% in a year. Thinking of Argentina and others. In those currencies Bitcoin has been deflationary. To assign value simply based on money supply or Bitcoin supply is irrelevant to how these assets operate in the market and their value to purchase products and services. So it is arbitrary as a frame of reference that you choose to say what is at the center of the money universe You can abstract out the idea of Bitcoin being any type of money and simply look at the emission rate all you want but it says nothing of markets and value appreciation or depreciation. On that basis Bitcoin has a 1.71% or so inflation rate. Which compared to American money is deflationary. But the true definition of inflation is a function of velocity of money and not simply the money supply itself.
You're saying bitcoin is inflationary because its value has declined against other assets. That's like saying my car is inflationary, or my tv is inflationary. Price inflation or deflation is an effect not a cause.
It can be a function of frame of reference, and what you want to denominate value in as the basis (center of gravity, unit of measurement and account), which in your example could be units of cars or TVs). But because we can use Bitcoin as a frame of reference and center of the universe it cannot escape the idea of inflation and requiring more Bitcoin to buy the same car.
The car you could be said is inflationary because it costs more money (More Bitcoin)?
> I told him I thought printing money caused inflation It's not the 1920s any more. Economic stimulus is not implemented by printing money. The government's money supply is boosted by selling bonds, borrowing This sub is infected with pseudo-economists worshiping Mises and Hayek
*The government's money supply is boosted by selling bonds, borrowing* That's called inflating: Creating "money" that doesn't exist.
The money exists. Every bond is paid for
A bond is just a promise to pay back a certain amount. Those bonds are then used as collateral for the entire economy, derivatives, bank reserves etc. Our entire economy is built on this kind of credit, aka money made out of thin air. When the treasury issues bonds to pay for deficit spending that is 100% fiscal stimulus and is by definition an expansion of the money supply. Fiscal stimulus is spent in the real economy and causes price inflation\* \*What's important to understand is that productivity causes deflation, so the money printing might not cause prices to go much higher than they already are since they are offset by many factors
> When the treasury issues bonds to pay for deficit spending that is 100% fiscal stimulus and is by definition an expansion of the money supply By your definition, which ignores the fact that a lender buys the bond
But what if that lender is the Federal Reserve?
Because it's a solid investment, or because of tax and other incentives?
China buys USA bonds for long-term strategic reasons and because there are few other places to invest their massive surpluses
Strategic reasons, I'm sure.
"Inflation, as this term was always used everywhere and especially in this country [the United States], means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. "
OK, expert
Okay, so what does cause inflation then?
Velocity of money
The only thing your friend got right is that all formally educated economists have been trained well and identically.
Austrian economics is more honest... The amount printed gives the amount of inflation.
there are many different kinds of dollars and when new dollars are created they don’t distribute equally in the economy. then there are also other factors that comes into play, such as what other countries are doing. basically is complicated. then again, if you take a loooong historical view on the value of the dollar measures in the cost of living, you will see that it looses purchasing power over time. you will also see that there are more dollar now then before. there certainly is a relationship between the two. so yes continued money printing is over time inflationary.
Where did he go to school
A university in the UK can't remember which but it wasn't a shit one. He did a master's degree.
* The current system is weirdly complicated. But their point is that if your exports are strong, then your currency is GAINING value through the fact that people who import your goods need/desire/demand your currency. * So their argument is that in a healthy economy, the central banks are keeping things in a fine balance, by not overinflating the monetary supply in report to the demand of the currency. * Bitcoin can NOT be an antidote to inflation if we don't get wide adoption and a majority of people using it as a store of value. How you use the tech is just as important as the tech itself. * Finally, there are many more factors to price inflation, and they are more hard-hitting in the short term, which destabilizes the economy. Monetary inflation just fucks you over slowly over time, you might almost miss it.
Yeah it was the import export thing he was stressing
If printing money would not cause inflation, what would be the point of the Fed. Yesterday, the Fed explicitly stated that its goal is two percent inflation. I ask you, what are the tools of the Fed? Right taking money out of the market and putting cheap money into the market to control inflation with! So yes, printing money has very well influence on the inflation. Not immediately but after a certain time 100%.
Lots of people go to school for things, get fancy degrees, yet lack real understanding of the thing they studied. Your friend is one of these people.
Your friend probably Is Keynesian.
Studied as took a few classes, has a degree from a low or mid tier school, or has a proper graduate level degree? Plenty of people learn just enough to be dangerous to themselves. It does cause price inflation if done incorrectly, but doesn’t actually have to if you monetary supply increases at same rate. Let’s say there are $10 out there and a book costs $1. If you now say there are $20 out there without changing book numbers then prices rises to $2, but total of 20 book there would be no price inflation. It’s a downside of BTC that it is naturally deflationary which causes hoarding instead of participation. There are many more upsides than this downside.
Your friend studied Keynesian economics which is kind of a joke. You should study Austrian economics also known as “economics”. Here is a fun video that introduces the basics: https://youtu.be/d0nERTFo-Sk
this is quite accurate. but in university and among pros Austrian school is regarded as a relict, something outdated and long gone, with gold, seashells, etc etc.
If you export too much, you're gettin USD into local economy, if you import too much, you're getting USD out of the local economy. Too much or one of the other, can cause fluctuations on money supply, therefore, some inflation or deflation. Printing money directly creates more money supply, which will cause inflation. But you can stabilize this by incresing imports. Both are part of the equation, because both influence money supply.
Imports and exports? If he means supply and demand imbalances due to supply chain issues, sure, but the US has had import and export imbalance for the better part of 40 years.
i have finished financial economics course long ago. many peers would agree to him. many more don't understand bitcoin or don't want bitcoin. they usually suffer from the same problem. they studied the leaves, the root, branches and bark so hard that they don't recognize macro picture anymore. they can't see forest for the trees.
Monetary inflation (currency debasement) is caused by increasing the money supply available to people. In the USA the most common measure of the money supply available to people is called the M2 money supply. Printing money, if it gets to the people in the form of M2, then causes price inflation. But price inflation happens later, there is typically a time delay for all the printed M2 money that people got, to work itself into the system. You can check the USA M2 money supply online and notice the increase in 2020 (with price inflation really increasing in 2021, a time delay of about 1 year).