Bitcoin Forum

Roughly, how much per cent of the Annual Gross Income value does a State rip in currency debasement? I mean, how the two values can be related, roughly, just to have an idea.

I heard current "Quantitative Easing" makes the dollar loose 3% to 4% value per year.

It's not the income itself that really gets affected from what I know but rather how much you can afford, so what inflation does it causes prices to rise far more than any speculative trading could cause and that means if your employers aren't getting extra money from money printing both you and they have to work longer and cut costs even further in order to pay for things that would previously be lower in price.

This is a completely made up example but:

You normally buy a loaf of bread: $0.95

inflation hits from printing: $1.95

inflation hits again: $19.95

inflation even more: $119.95

depression: $1119.95

it will keep going like this until the printing stops, normal people often don't get affected usually in income but rather in the price of ordinary items, your employer is likely going to get even harder hit than you are because they are having to support an entire company and deal with more expensive things than just the usual basic necessities which of course means loans for the business etc. if a government gets desperate you might see your income actually rise slightly as they try to keep the inflation going but in the end it's all just going to collapse.

I assume by "a State" you really mean "a private monopoly of currency creators". 

The traditional way to answer your question is to use the numbers helpfully given to us by the private monopoly of currency creators, such as M3. 

Of course it changes quite a bit from place to place and time to time.  The last 100 years have put a nice average of somewhere around 7% annually, leading to the lose-half-your-purchaing-power-every-10-years rule of thumb that we have come to expect. 

Unfortunately however, there's no real way to answer your question with certainty except to wait a very very long time indeed and see how much you can buy with your old currency.   

It's dynamic: If the money printing speed is not enough high, there will be deflation; if it is too high, there will be inflation.

The Annual Gross Income of the whole society is increasing all the time due to higher and higher efficiency caused by automation and technology advance. Actually, it can increase much faster if enough money is supplied

If most of the companies did not get the newly printed money, how could the price rise? A price rise only comes from either salary rise or raw material price rise, but salary level will be contained in a high jobless rate environment and raw material price will be pushed down by expanding mining capacity

It's effects the price of everything because the newly printed money is now in circulation this means that the currency you have has less value and means you can buy less things with it, some companies i.e Goldman Sachs/J.P Morgans etc. would get the printed money in the form of bailouts which they then in turn also invest to companies that are listed on the stock market so that adds to the devaluation.

They really are a bunch of devious bastards lol.

Isn't inflation like 3%, and inflation is supposed to represent buying power?

Debt defaults create deflationary pressure.  QE is an effort to print money to counteract this pressure, but it will ultimately fail in the face of the massive weight of unaffordable debt that has been created.

In the short run, quite impossible to say IMHO.  In the long run, I think something like the inflation rate+ productivity increase.

Do we have any estiated figures that have attempted this?

Even just roughly using GDP, population, amount debased using SDR or gold,

 to figure out just how much has be taken from the country over a set period such as 5 years?

2.432 trillion USD - UK GDP for 2011

Cash printed - Well at first I looked at inflation figures but that's a load of rubbish so better just to look at exchange rates and bear in mind that the thing you're comparing against will fluctuate too.

Very roughly £1=

2.432 x 5 years = 12.16 trillion, 5 years

Assuming gold isn't a bubble and is roughly stable over time including now we have a 155% change so £1 five years ago is now worth £0.55

12.16 / 0.55 or about 2 = is about 6 trillion in gold terms.


Next question, where exactly does this cash go? We know it goes to the banks but can I'd like to know it more exactly

This can make a nice flowchart infographic

No :) 

Well, "inflation" is one word, and without some context and clarifiers it will simply spawn inflation of this forum as people put their own context on it.  Without more clarification, it could refer to the hubble law, obesity, baloons, etc. 

Buying power is also not so clear, because there's a lot of stuff one might want to buy.  Bitcoins for example.  Or gold, or transistors.  Or bread.  Very different answers from all. 

The OP mentioned currency debasement, my reply did not use the word inflation but currency debasement could be called inflation of the money supply.  How that inflation of the money supply trickles down into purchasing power is a very interesting question and science that some people call "economics".