Arsene Posted March 16, 2016 Posted March 16, 2016 What else beside printing money can cause long term inflation? And how? I was arguing with a friend, he said that wealth differences causes long term inflation, not sure how. Im not sure how cutting taxes can per se cause the worth of 1 dollar to decrease. If there would be no government who prints money, how can money loose it's wealth/inflation occur?
Spenc Posted March 16, 2016 Posted March 16, 2016 Cutting taxes would only result in inflation in the sense that government never cuts spending, thus the deficit is financed by monetary inflation. Therefore, cutting taxes would correlate to inflation. I haven't really heard this argument that I can recall, that cutting taxes has a causal relationship to inflation, however I could imagine why some Keynesians and MMTers would propose such nonsense because they have to point somewhere other than monetary policy, so any plausible scapegoat will do
dsayers Posted March 16, 2016 Posted March 16, 2016 What else beside printing money can cause long term inflation? Inflation is the increase in money supply. So this is the only way to induce inflation in fiat currency.
shirgall Posted March 16, 2016 Posted March 16, 2016 Lending money on reserve produces an apparent increase in money supply, and when some loans can be decades-long, it can have pretty long term effects as well.
Mister Mister Posted March 16, 2016 Posted March 16, 2016 There are two definitions to inflation. The classical definition is a rise in prices. The Austrian definition is an increase in the money supply.A lot of politicians who say they are going to cut government, end up cutting taxes without cutting spending; usually they increase spending. GW Bush is of course one of the worst examples of this. It's frustrating because if you talk about reducing government, many people will interpret this as equivalent to these kinds of policies.
shirgall Posted March 16, 2016 Posted March 16, 2016 The 1922 Encyclopedia Britannica termed inflation before "The World War" as an increase in circulation of paper money: Before the World War the term "inflation" was in general applied to paper money. The paper money was thought to be inflated when the amount was greater than if the paper were strictly convertible or definitely related to the metallic standard. From this point of view inflation would now mean an abandonment of the gold standard, together with a consequential increase in the quantity of the currency in which prices are expressed. This is the interpretation given to inflation by Francis A. Walker. "A permanent excess of the circulating money of a country over that country's distributive share of the money of the commercial world, is called inflation" (Political Economy, 1887). His subsequent treatment shows that Walker had in view an excess of paper money consequent on partial or complete inconvertibility. So, "classical" is poisoning the well, here, implying that the Austrians invented or championed an alternative definition, when it fact the term has its roots in the concept of debasing a currency. https://en.wikisource.org/wiki/1922_Encyclop%C3%A6dia_Britannica/Inflation 4
David Ottinger Posted March 17, 2016 Posted March 17, 2016 What else beside printing money can cause long term inflation? And how? I was arguing with a friend, he said that wealth differences causes long term inflation, not sure how. Im not sure how cutting taxes can per se cause the worth of 1 dollar to decrease. If there would be no government who prints money, how can money loose it's wealth/inflation occur? In short... The money supply is increased at the top (i.e. "printed" into the economy). And the taxes serve to lessen this increase in supply by taking it out of circulation, usually from the middle/lower class. So, in the simplest sense, more taxes means less in circulation and less taxes means more money in circulation. Does that help?
Mister Mister Posted March 18, 2016 Posted March 18, 2016 The 1922 Encyclopedia Britannica termed inflation before "The World War" as an increase in circulation of paper money: So, "classical" is poisoning the well, here, implying that the Austrians invented or championed an alternative definition, when it fact the term has its roots in the concept of debasing a currency. https://en.wikisource.org/wiki/1922_Encyclop%C3%A6dia_Britannica/Inflation Cool, thanks, I didn't know that.
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