Inflation and Deflation of Price and Money Supply

[Luc9988]

The core focus of Central bank is the inflation band.  If the economy is out of that inflation band, the central bank will either exercise the Monetary or Fiscal shocks  to put inflation back into the band  However, altering the nature dynamic of the economy will have a price to pay.  Usually the shock will change the direction of the exchange rate which in turns will affect wages, unemployment, the price ratios and interest rate and that affects the appreciation /deprecation of money.

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[mitch1212]

why do supply of money effect the inflation or deflation

Money supply is simply money in circulation. Monetary policy attempts to control this, thus, attempting to keep a little bit of inflation and keep it in check.

To answer your question:
Picture a helicopter full of unlimited supply of money, just flooding the streets, from city to city, coast to coast, as it drops money into circulation literally. So, given the extra money in circulation, this "waters down" the value of that money. So the $20 dollar bill you pick up will have less purchasing power, because there is soooo much more money in circulation.

Inflation (a little bit, not helicopters), is good -- The simplest way to think about this: We don't want consumers waiting to make a purchase. We want you to walk into a store, see a TV you like, and purchase it. We don't want you to think "hmm... my dollar may be worth more tomorrow, so I will wait". We want you to inherently know that your dollar LOSES value over time due to inflation. So you think "hmm.. my dollar is at peak value today, I will purchase the TV now".

The Fed has target inflation of 2% which has historically kept the economy from going into recession. Deflation has been top of mind for central bankers. They have literally had to throw full weight of their power to try and get inflation to pick up.

Hope this helps!!!!

[Luc9988]

why do supply of money effect the inflation or deflation

Money supply is simply money in circulation. Monetary policy attempts to control this, thus, attempting to keep a little bit of inflation and keep it in check.

To answer your question:
Picture a helicopter full of unlimited supply of money, just flooding the streets, from city to city, coast to coast, as it drops money into circulation literally. So, given the extra money in circulation, this "waters down" the value of that money. So the $20 dollar bill you pick up will have less purchasing power, because there is soooo much more money in circulation.

Inflation (a little bit, not helicopters), is good -- The simplest way to think about this: We don't want consumers waiting to make a purchase. We want you to walk into a store, see a TV you like, and purchase it. We don't want you to think "hmm... my dollar may be worth more tomorrow, so I will wait". We want you to inherently know that your dollar LOSES value over time due to inflation. So you think "hmm.. my dollar is at peak value today, I will purchase the TV now".

The Fed has target inflation of 2% which has historically kept the economy from going into recession. Deflation has been top of mind for central bankers. They have literally had to throw full weight of their power to try and get inflation to pick up.

Hope this helps!!!!

I love your analogy .  It is simple and easy to understand.  Can you give an analogy of consumer price index and the movement of commodity prices which spill over to that of inflation and deflation ?

[Frequencikis]

Have you heard of the EBSP company? It company team has been working since may 2016, during this time we have gained vast experience in the blockchain industry, recruited a large staff of professional linguists, programmers, marketing and crypto specialists. Carried out more than 20 blockchain projects

[energyces]

An area dedicated to discussing the differences between these two terms and the theories supporting them.

I'm looking forward to an in-depth discussion on the subject! I've noticed that confusion between the two seems to come up quite a bit on the blog, and thought it may be reasonable to dedicate a post on the matter.

Price-Deflation is what you are used to hearing about in Bitcoin. That term is used to describe the prices of goods/services as they decrease because the value of Bitcoin goes up.

Price-Inflation is the opposite. When prices of goods/services increase because the value of Bitcoin goes down.

So, when dealing with Price-Inflation or Deflation, there is an inverse relationship of price and value, in regard to goods/services and Bitcoin.

[jjjfff]

An area dedicated to discussing the differences between these two terms and the theories supporting them.

I'm looking forward to an in-depth discussion on the subject! I've noticed that confusion between the two seems to come up quite a bit on the blog, and thought it may be reasonable to dedicate a post on the matter.

Price-Deflation is what you are used to hearing about in Bitcoin. That term is used to describe the prices of goods/services as they decrease because the value of Bitcoin goes up.

Price-Inflation is the opposite. When prices of goods/services increase because the value of Bitcoin goes down.

So, when dealing with Price-Inflation or Deflation, there is an inverse relationship of price and value, in regard to goods/services and Bitcoin.

That's correct.

You also have monetary inflation, which is what the FED does.

The "solution" to the 2008 crash was to print money. The FED discovered something very interesting (but evil): if you print money and give it to the masses, price inflation happens. In that case monetary inflation leads to price inflation.

BUT. And here's the evil twist to the FED's game: if you print money and that money stays with bankers, and never reaches The People, then price inflation does not happen. Because The People can't spend the newly printed money.

That's the FED's game. They print money for bankers. This money never reaches you.

If you try to buy stocks and other equities, you'll find that your money isn't worth anything because the FED has printed trillions of U$ and bankers buy it all cheaply while you work 9-5 for 30 years to build savings that they can simply pull out of their virtual money system.

That's the cruelty of the FED system. They simply print money for themselves, this money never reaches you. 15 families for whom they print money hold half the world's wealth, while 7 billion people work for them for free.

That's the difference between monetary and price inflation. The FED discovered a way to get one without the other and that's what's destroying the middle class around the globe.

[berrehili]

An area dedicated to discussing the differences between these two terms and the theories supporting them.

I'm looking forward to an in-depth discussion on the subject! I've noticed that confusion between the two seems to come up quite a bit on the blog, and thought it may be reasonable to dedicate a post on the matter.

Price-Deflation is what you are used to hearing about in Bitcoin. That term is used to describe the prices of goods/services as they decrease because the value of Bitcoin goes up.

Price-Inflation is the opposite. When prices of goods/services increase because the value of Bitcoin goes down.

So, when dealing with Price-Inflation or Deflation, there is an inverse relationship of price and value, in regard to goods/services and Bitcoin.

That's correct.

You also have monetary inflation, which is what the FED does.

The "solution" to the 2008 crash was to print money. The FED discovered something very interesting (but evil): if you print money and give it to the masses, price inflation happens. In that case monetary inflation leads to price inflation.

BUT. And here's the evil twist to the FED's game: if you print money and that money stays with bankers, and never reaches The People, then price inflation does not happen. Because The People can't spend the newly printed money.

That's the FED's game. They print money for bankers. This money never reaches you.

If you try to buy stocks and other equities, you'll find that your money isn't worth anything because the FED has printed trillions of U$ and bankers buy it all cheaply while you work 9-5 for 30 years to build savings that they can simply pull out of their virtual money system.

That's the cruelty of the FED system. They simply print money for themselves, this money never reaches you. 15 families for whom they print money hold half the world's wealth, while 7 billion people work for them for free.

That's the difference between monetary and price inflation. The FED discovered a way to get one without the other and that's what's destroying the middle class around the globe.

That's exactly what happened with the European central Bank. The money that is printed never reaches the small people through salary increase, but get lended at 0% interest to private banks that only lend money to rich people.

I do think that inflation and deflation is the only egalitarian way of taxing / retributing the people.

[Majormax]

That's the difference between monetary and price inflation. The FED discovered a way to get one without the other and that's what's destroying the middle class around the globe.

Contrary to what many believe, I don't think the money creation was intentionally 'evil' (ie for the purpose of hurting classes of persons) but merely a knee-jerk response to the fear of loss (and consequent lobbying/pressure) by the owners of the 'capital' (actually only money) which was under threat from the 'crisis'.

Of course, the crisis should have taken its course, and removed the dead-wood capital from the system, to allow fresh solid growth. Had that happened , a few years of deep recession would have been followed by a well founded fresh growth cycle.

[falalpy]

thanks

[tradersnow]

why do supply of money effect the inflation or deflation

Money supply is simply money in circulation. Monetary policy attempts to control this, thus, attempting to keep a little bit of inflation and keep it in check.

To answer your question:
Picture a helicopter full of unlimited supply of money, just flooding the streets, from city to city, coast to coast, as it drops money into circulation literally. So, given the extra money in circulation, this "waters down" the value of that money. So the $20 dollar bill you pick up will have less purchasing power, because there is soooo much more money in circulation.

Inflation (a little bit, not helicopters), is good -- The simplest way to think about this: We don't want consumers waiting to make a purchase. We want you to walk into a store, see a TV you like, and purchase it. We don't want you to think "hmm... my dollar may be worth more tomorrow, so I will wait". We want you to inherently know that your dollar LOSES value over time due to inflation. So you think "hmm.. my dollar is at peak value today, I will purchase the TV now".

The Fed has target inflation of 2% which has historically kept the economy from going into recession. Deflation has been top of mind for central bankers. They have literally had to throw full weight of their power to try and get inflation to pick up.

Hope this helps!!!!

Love the analogy. What are your thoughts on the effect of liquidity on price?

If the liquidity characteristic of supply is adjusted, could that be a way to regulate price? What if that rate of liquidity change was voted on in a democratic way? I ask because one of the projects I follow, BitBay (BAY) is attempting to do that exact thing. Wondering if the principles hold up or not.

[berrehili]

A video to watch, and you'll get everything about Inflation, Deflation and Money Supply: https://www.youtube.com/watch?v=THAaIZmxfNA

[Atheneum Blockchain]

I'm a supply side economist.  Build it and they will come!

[Atheneum Blockchain]

If everyone hoarded bitcoins.
Bitcoins will end up up up.

And one day someone finally decides to sell her stash and it all comes down down down...

I agree.  The price could crash once a few people started selling but if you could get every holder to really HODL and take away all supply then you'd get some crazy prices.  Yes, there are other factors.  But decreased supply would make things go haywire. 

[Reinsurer]

I look forward to learning more about the market, that examines its underlying "nature." All very intriguing. It seems at first glance there is something "deep". I am watching the ocean and observed that the markets unfolded quite similiarly to stocks.

the market has a disproportionate potential. but for now he presents itself only a jungle filled with chaos.

[talkbits]

To be honest, i really upset how people runs our economy nowadays, majority of nations are currently experiencing high inflation rate so that the poverty rate in those country are consistently increasing!! Government around the world should settle this general issue about high inflation rate. because of this value of money depreciate overtime because of this fucking inflation rate!!! 

[Stblcn]

To be honest, i really upset how people runs our economy nowadays, majority of nations are currently experiencing high inflation rate so that the poverty rate in those country are consistently increasing!! Government around the world should settle this general issue about high inflation rate. because of this value of money depreciate overtime because of this fucking inflation rate!!! 

That's one the reason of creation of cryptocurrency. Like what happened in venezuela when they experienced hyperinflation since at least 2014. Bitcoin unexpectedly save their country from economic collapse. venezuela uses bitcoin as their currency and it was the first time that bitcoin used as currency.
Because of this, venezuela became one of the Biggest Markets for Crypto in the World.

[feyd27]

To be honest, i really upset how people runs our economy nowadays, majority of nations are currently experiencing high inflation rate so that the poverty rate in those country are consistently increasing!! Government around the world should settle this general issue about high inflation rate. because of this value of money depreciate overtime because of this fucking inflation rate!!! 

That's one the reason of creation of cryptocurrency. Like what happened in venezuela when they experienced hyperinflation since at least 2014. Bitcoin unexpectedly save their country from economic collapse. venezuela uses bitcoin as their currency and it was the first time that bitcoin used as currency.
Because of this, venezuela became one of the Biggest Markets for Crypto in the World.

really?
what i know is that they tried to launch their national crypto the petro twice, and failed both times. the last i've readon the subject was that they were forcing the usage of crypto in some instances (pensions and such), but the petro still hasn't become the national currency.

[Reinsurer]

To be honest, i really upset how people runs our economy nowadays, majority of nations are currently experiencing high inflation rate so that the poverty rate in those country are consistently increasing!! Government around the world should settle this general issue about high inflation rate. because of this value of money depreciate overtime because of this fucking inflation rate!!! 

Much depends on the regions. In fact, inflation is not the best indicator of economic stability. Since inflation depends on many factors. in the third world, it is minimal, while in Europe and North America there is a significant increase.

[marcelocoin]

yes speaking of inflation, every country has its own, but bitcoin and altcoins are worldwide, depending on the country can be much cheaper to invest in crypto!

[Yield7]

we would have Economical problems Long time ago.
the money has been printed way too much...
and its devalued if the right methods not used by government and feds.

but guess what?  : D

Our government not dumb


They have eliminated money supply,  Smart ways.
as we all see that cash is Less and Less in circlelation.