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So I’ve been reading about inflation. While I know that printing new fiat currency fuels inflation, I’m not sure exactly why. Let’s say I have ten people and ten thousand distributed entirely between them, but not equally because that isn’t the way the world works. They participate in an economy self contained amongst them, and I show up with an extra 10% of the total economy and start to participate by lending this money to the ten people in a discriminating way. What happens to their purchasing power and why?

( -_-) 2y ago

Try a simpler example.

The 2 of us are an economy.

You have $10, and I have $10.

I print $20 for myself.

The amount of goods and services in our economy didn't change, but you went from having 50% of the money to 25% overnight. While I went from 50% to 75%. i.e. I stole half your purchasing power. (This is the initial fraud/theft)

Now as I spend the money, prices start to rise simply because there is more money chasing the same amount of goods and services. (This is the Cantillon effect). If I don't spend the extra money, there will be no price inflation, just wealth redistribution.

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Discussion

Jac 2y ago

That makes sense. Amazing that the government gives themselves the power to apply exactly this premise and the people, largely, do nothing to stop it.

( -_-) 2y ago

They rely on people believing this one fallacy:

"My spending is for the greater good, while your spending is selfish."

They push that message relentlessly through propaganda, and create masses of naive/gullible commies.

Jac 2y ago

While I think that community is important, and that less capable people can benefit from charity coming from the top, that charity should be motivated by guilt or pity, or from a sense of plentiful resource generosity, it should never be compelled or proctored by any government.