Inflation and Deflation of Price and Money Supply

[Berry2d]

When you talk about the law to a large extent the law is actually ment for the poor and weak in our society this is why top politicians can lunder Money and go away, am not surprised about this news because in my country I have heard this types of news on several occasions were public office holders especially state governments will siphon money ment for the development of the citizens to foreign accounts and on most cases bags of money has been found to be in the possession of these government officials. And yet even if they are caught the government will use deplomacy to silence the Case.


Corruption has been the main problem of most countries especially the developing world . If government main business one of the things that, they will have to fight openly is corruption because corruption is what brings nations and down to it kneels.

Exactly, the law has nothing to do with the rich as laws are made only for the supervision and correction of the actions of the poor and weak people while they believe the rich are never law offender's. The mentality of inequality between the rich and the poor before the law is the reasons behind the high increase in corruption all over the world and will continue in such velocity until we come back to full consciousness that all are equal before the law. When crimes are committed by the rich most especially stealing public funds, they find suitable ways to encourt the crime but leaves the floor open till when a poor man does something small compared to that of the rich man, all actions as stated in the constitution will Then be remembered just for his punishment.

[purple_sparkles]

Exactly, the law has nothing to do with the rich as laws are made only for the supervision and correction of the actions of the poor and weak people while they believe the rich are never law offender's. The mentality of inequality between the rich and the poor before the law is the reasons behind the high increase in corruption all over the world and will continue in such velocity until we come back to full consciousness that all are equal before the law. When crimes are committed by the rich most especially stealing public funds, they find suitable ways to encourt the crime but leaves the floor open till when a poor man does something small compared to that of the rich man, all actions as stated in the constitution will Then be remembered just for his punishment.

It is actually very sad that the law does not work equally for everyone. Moreover, I observe that laws are written in a way that destroys the middle class those who are capable of standing up for themselves. I see complete lawlessness, at least in my country. Politicians in power seem to care only about how to steal from the state, and as a result, they pass lobby-driven laws. Due to incompetent and corrupt governance, the national currency is devalued so much that salaries and incomes cannot keep up, and people become poorer. What needs to happen for things to change for the better. How far can politicians go in their greed and incompetence. And how long will people continue to tolerate this.

[AgriTrack]

You should have known this earlier before now that the law is meant only for the poor and not the rich which is why they can do whatsoever they feels like doing and nothing will happen in as much as they are among the winning parties. If we are to critically look into how the law is  meant to be, we all will know it is for everybody be it wealthy, poor or even a politician, but because of the introduction of corruption in the political system and that same political system is responsible for the leadership of the country, everything have changed so it could favour them without even considering the faith of the poor they are victimizing

Inflation or deflation To understand both of these, two things are needed, one is the value and the other is the quantity of money. If earlier 5 things were available for 100 rupees, now the same 5 things are available for 3 for 100 rupees, then this is inflation. The main reason for this is that if the price of 20 rupees increases in the market, the demand for things increases. This affects the life of a person. As the life of a common man becomes difficult, inflation increases, salaries remain the same, but expenses and needs of things increase. Deflation means that the price of things decreases and the purchase of money increases. The main reason for this is that if production increases, unemployment can increase and business can suffer.

[Youngrebel]

Inflation or deflation To understand both of these, two things are needed, one is the value and the other is the quantity of money. If earlier 5 things were available for 100 rupees, now the same 5 things are available for 3 for 100 rupees, then this is inflation. The main reason for this is that if the price of 20 rupees increases in the market, the demand for things increases. This affects the life of a person. As the life of a common man becomes difficult, inflation increases, salaries remain the same, but expenses and needs of things increase. Deflation means that the price of things decreases and the purchase of money increases. The main reason for this is that if production increases, unemployment can increase and business can suffer.

inflation is not really about demand increasing because prices rise and it is usually the other way around. Inflation happens when too much money is chasing too few goods, or when costs of production go up, pushing prices higher. Your example works better if you frame it simpl for example if ₦100 used to buy 5 items and now it only buys 3, the value of money has fallen that is inflation. And you are right about the impact, if salaries do not rise along with prices, people’s purchasing power drops and daily life becomes harder. Deflation is where things need a bit of correction. It is actually true that prices fall and money buys more, but that does not automatically come from higher production alone. More often, deflation happens when demand is weak and people are not spending, businesses lower prices to attract buyers, and that can slow the economy.

[Olotu20]

Snip

Inflation or deflation To understand both of these, two things are needed, one is the value and the other is the quantity of money. If earlier 5 things were available for 100 rupees, now the same 5 things are available for 3 for 100 rupees, then this is inflation. The main reason for this is that if the price of 20 rupees increases in the market, the demand for things increases. This affects the life of a person. As the life of a common man becomes difficult, inflation increases, salaries remain the same, but expenses and needs of things increase. Deflation means that the price of things decreases and the purchase of money increases. The main reason for this is that if production increases, unemployment can increase and business can suffer.

From this discussion about inflation and deflation of our currencies and it impacts on the purchasing power of a currency. I have not seen money money deflating in terms of the purchasing power in my economy. I don't know about other currencies but I also think that this is also a global issue. Inflation keeps increasing every day in every economy across the world, so the question one should be concerned is what is government doing to metigate the effect of inflation and control it . I feel that this whole inflation stuff is a well planned scheme by government to keep the masses working there by controlling the majority of the citizens.

[@Afzaal126]

Inflation is the condition when the prices of everyday items increase. This happens when there is an excess of money in the market. The prices in people's markets increase.
Deflation is the opposite. It happens when the prices of things start to decrease in the markets. One reason for this could be that there is a shortage of money in the markets. Due to the low prices of things, people buy more things. But this benefits the middle class, but it can reduce business income and job opportunities can also be affected.
Therefore, it is important for the economy to maintain a balance between the quantity of money and prices so that both people and businesses benefit.

[Yeesha]

When you talk about the law to a large extent the law is actually ment for the poor and weak in our society this is why top politicians can lunder Money and go away, am not surprised about this news because in my country I have heard this types of news on several occasions were public office holders especially state governments will siphon money ment for the development of the citizens to foreign accounts and on most cases bags of money has been found to be in the possession of these government officials. And yet even if they are caught the government will use deplomacy to silence the Case.


Corruption has been the main problem of most countries especially the developing world . If government main business one of the things that, they will have to fight openly is corruption because corruption is what brings nations and down to it kneels.

Exactly, the law has nothing to do with the rich as laws are made only for the supervision and correction of the actions of the poor and weak people while they believe the rich are never law offender's. The mentality of inequality between the rich and the poor before the law is the reasons behind the high increase in corruption all over the world and will continue in such velocity until we come back to full consciousness that all are equal before the law. When crimes are committed by the rich most especially stealing public funds, they find suitable ways to encourt the crime but leaves the floor open till when a poor man does something small compared to that of the rich man, all actions as stated in the constitution will Then be remembered just for his punishment.

If justice is been serve, and the rule of equality before the law is being followed we will not be suffering today. Corruption and bribery is making the law so dumb, it doesn't allow the law to speak for the poor, so they don't have the ability or capability to claim for their rights and justice. The riches are enjoying their lives while the poor are suffering. After the poors are being cheated, and treated as trashed, they are also being deprived or restricted from their freedom of speech. Because who ever try to raise his or her voice against the government or the leaders will end up in jail, so it is better to be safe than sorry.

[NicoJackson]

When you talk about the law to a large extent the law is actually ment for the poor and weak in our society this is why top politicians can lunder Money and go away, am not surprised about this news because in my country I have heard this types of news on several occasions were public office holders especially state governments will siphon money ment for the development of the citizens to foreign accounts and on most cases bags of money has been found to be in the possession of these government officials. And yet even if they are caught the government will use deplomacy to silence the Case.


Corruption has been the main problem of most countries especially the developing world . If government main business one of the things that, they will have to fight openly is corruption because corruption is what brings nations and down to it kneels.

True.
In many cases, it’s the very systems designed to safeguard people that are manipulated for personal gain.

The country we are into, all their problems is the corruption that the country has, that why we are facing all of this issue and the unnecessary suffering that would have been solved but the government didn’t care for his people. So that why the country is so down and bad, the country are just for the rich ones and left the poor behind to suffer alone.

[Nmjut]

An area dedicated to discussing the differences of 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 forum, and thought it may be reasonable to dedicate a thread on the matter.

Pulled from a discussion in Wall Observer


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.

Example: As the Bitcoin price goes from $10 to $20, the prices of goods/services goes down from 20BTC to 10BTC. As the Bitcoin price goes from $20 to $10, the prices of goods/services goes from 10BTC to 20BTC!

Why does the price of Bitcoin go up and down? The price of BTC goes up and down based on the exchange rate, or market price, which is set by buyers and sellers, or traders. They directly trade the Bitcoin currency with all sorts of other currency, and even some with gold; the most popular being the USD (US dollar). They set the price when executing orders to buy or sell. I will get into the actual reason of why the price fluctuates in the last section.


Now that we've gone over PRICE Inflation and Deflation (which honestly, to me, is a term made popular by Keynesian's to hide the real facts, as price inflation/deflation is simply the market exchange rate, reflective of the money supply into a currency from itself and other currencies), let's go over the REAL inflation/deflation of a currency (otherwise known by many as Monetary Inflation).

MoneySupply-Inflation is when the value of Bitcoin decreases when the total supply of Bitcoin increases. In our current state, this is at a generation rate of 25 BTC every 10 minutes.

MoneySupply-Deflation will essentially never occur. It is when the value of Bitcoin increases when the total supply of Bitcoin decreases. This may happen, say, when someone loses their private key and all the BTC associated with it are lost. This effectively "makes the rest of us richer". That being said, there is a SET DECREASE in the generation rate of BTC, so you have sort of a "deflationary effect" in the value, as long as more exchange occurs for BTC at a rate which is faster than that set generation rate.

When all 21 million coins are produced, the MoneySupply will be neutral, and the value will continue to increase (prices will decrease, consequently), as long as people continue to exchange in BTC.

This leads me to the last section.


What determines the PRICE of Bitcoin? The VALUE of Bitcoin at a particular moment.

What determines the VALUE of Bitcoin? The SUPPLY and DEMAND of Bitcoin in the economy.

What determines the SUPPLY of Bitcoin? Currently, the MoneySupply-Inflation rate of 25 BTC every 10 minutes, and traders willing to SELL Bitcoin to BUYERS in exchange for other supplies of money (currencies).

What determines the DEMAND of Bitcoin? Traders willing to BUY Bitcoin from SELLERS in exchange for other currencies.


Therefore: BUYERS, SELLERS, and MONEYSUPPLY-INFLATION (miners) determine the VALUE of Bitcoin, which determines the PRICE of BTC as BUYERS and SELLERS trade based on that VALUE (or supply and demand) of Bitcoin.


We don't exactly know the totality of the supply and demand. Sure, we could try and aggregate data from all the exchanges, but we will never be accurate as there are exchanges which can not be accounted for (OTC). The cool thing is that we DO know the MoneySupply rate, and we DO know the exchange rate. From this, we can determine a real value of Bitcoin when simply multiplying the two factors; a sort of inflation-adjusted view of the currency.

Effectively, the quantitative analysis of supply and demand is really what the currency exchange traders attempt to accurately determine which is conveyed through buying and selling of Bitcoin, setting a VALUE via the PRICED exchange rate of the currency. On a side note, most of the big Market Makers (FX Traders) use this price movement as a way to make a profitable living, as well. Especially when price fluctuations are a consequence of hype or fear (bubbles, cliffs), not factual supply/demand data, and are wildly out of the real price range.

Thus, if you analyze the proper macroeconomic data in an attempt to forecast future DEMAND for more Bitcoin (price increase), you will realize some very interesting things, and have a more accurate picture of where the price is going...

Happy trading!

You have explained  these two terms of inflation and deflation in a well manner. Both these terms have inverse relation. In inflation arena the prices of good reach on the skies due to shortage of goods or high demands as done in iran case( its currency goes devalue due to high demands of goods).. While on the other side, in defalation the currency of certain place goes valued and the prices of goods decrease.

[Uhwuchukwu53]

When you talk about the law to a large extent the law is actually ment for the poor and weak in our society this is why top politicians can lunder Money and go away, am not surprised about this news because in my country I have heard this types of news on several occasions were public office holders especially state governments will siphon money ment for the development of the citizens to foreign accounts and on most cases bags of money has been found to be in the possession of these government officials. And yet even if they are caught the government will use deplomacy to silence the Case.


Corruption has been the main problem of most countries especially the developing world . If government main business one of the things that, they will have to fight openly is corruption because corruption is what brings nations and down to it kneels.

Exactly, the law has nothing to do with the rich as laws are made only for the supervision and correction of the actions of the poor and weak people while they believe the rich are never law offender's. The mentality of inequality between the rich and the poor before the law is the reasons behind the high increase in corruption all over the world and will continue in such velocity until we come back to full consciousness that all are equal before the law. When crimes are committed by the rich most especially stealing public funds, they find suitable ways to encourt the crime but leaves the floor open till when a poor man does something small compared to that of the rich man, all actions as stated in the constitution will Then be remembered just for his punishment.

If justice is been serve, and the rule of equality before the law is being followed we will not be suffering today. Corruption and bribery is making the law so dumb, it doesn't allow the law to speak for the poor, so they don't have the ability or capability to claim for their rights and justice. The riches are enjoying their lives while the poor are suffering. After the poors are being cheated, and treated as trashed, they are also being deprived or restricted from their freedom of speech. Because who ever try to raise his or her voice against the government or the leaders will end up in jail, so it is better to be safe than sorry.

Corruption has existed from time immemorial, but them it's seem not visible by people because back them human still have consciousness of hotting their fellow unjustly, but today it's not because people are more if self mindedness and greed to dominate all sphere of their lives rather than the safety of the fellow in the societies. The major problem identify with out laws propelled by the judicial system leading to the most vulnerable thing damaging the society is the bribery and turning blind eye to Justice, there are some questions I do puzzle when injustice occur where the rich overwhelmed the poor , such as the society ideas and support to the poor been not sufficient to suppress such development as continuous then not taken certain action that will deprived the rich even the judge or justice system in taken bribe by staging protest or riot that will put higher level of fear in whoever that deem it fit to actualize corruption.

[Gadis90]

This post is very informative. At first I never thought that inflation and deflation also happen in cryptocurrency. In this information it also shows the law of supply and demand wherein if the supply is high the demand is low and if the supply is low the demand is high. It shows that the more people are trusting and using bitcoin the supply will be low so the exchange will be high. I hope my comment will be a help to those who are into trading.

I agree with that view. In my opinion, what makes crypto interesting is how clearly supply and demand mechanisms are reflected in price movements. When the asset supply is limited but public confidence and demand rise, its value has the potential to increase. Conversely, when confidence wanes or the circulating supply expands without a corresponding rise in demand, the price can come under pressure.

[fruktik]

The rate of inflation is getting alarming especially in African countries which the primary cause is considered to be corruption, over 80 percent of African countries blessed with mineral resources are been affected by the same problem and solution is yet to be found.
Corruption they say is the root cause of inflation which can not be controlled until corruption is properly managed, and to manage it some drastic decision must Be made to archive it for example,   in 2022 a young brave citizen of Burkina Faso called Abraham Traore  stood up to fight against corruption in the country which payed off by sudden increase in there GDP by 22 percent since he took of power and have reduced constant inflation in the country

I am sick and tired of hearing the authorities lie, claiming that inflation in my country is around 5%. Economists say something completely different—it’s closer to 20%, and I’m inclined to believe that figure. I see prices in the store shooting up several times a year. Purchasing power drops annually, yet wages remain stagnant. So, how are we supposed to survive under these conditions? We’re already running short on money for basic necessities. I have to skimp on food and buy the cheapest, lowest-quality options—but right now, there’s simply no other choice.

[louis2608]

An excellent post that I'll sticky so people can learn from.

Man, reading through old Bitcointalk threads like this is such a throwback. It’s wild how people were breaking down basic monetary theory and trying to separate price inflation from money supply inflation back when 25 BTC per block was still the standard.

Spot-on breakdown by the OP on how people constantly confuse the exchange rate/price action with actual monetary expansion or contraction, though it’s funny looking back at 2013 and seeing how much of the macro-economic chatter was just pure optimism and theory crafting. Classic forum gold right there.

[raymks737]

Separating price inflation from money supply expansion makes a lot of sense when looking at fixed-supply assets like Bitcoin. Market demand drives short-term price swings regardless of issuance rate.

[boumalo]

There is the possibility of a huge crisis but more likely, like always, the economy and assets prices keep going up, fueled by the rise of productivity thanks to AI and the rise of the money supply to help western governments keep the spending high.
Assets prices will rise.
Btc should rise too because some will buy it with their profits, bonuses,
Youngs get more money as time goes buy, a disproportion high of them buy btc compared to younger folks and their salaries, bonus, inheritances, luck businesses, are higher and higher every year.
60k seems like a floor
120k inevitable
150k a new high and passing through
200k maybe we'll pause

[lavaai]

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.

No, price deflation is when the abundance of goods that [whatever currency] can be exchanged for increases, the relative price-per-good decreases.  Saying "because the value of bitcoin goes up" is not only tautological, it is incorrect in the causal sequence of what causes what.  The representation of value is downstream from the actual valuable itself.  (And never the other way around)

[Kol:on]

An excellent post that I'll sticky so people can learn from.

I agree makes alot of sense with plenty to learn from and it sounds so natural

[Anyarowell]

Interesting discussion, especially seeing how much Bitcoin has changed since this thread started. Demand is still a huge part of what gives BTC its value.