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- เผยแพร่เมื่อ 14 พ.ค. 2024
- If high inflation hurts just about everyone, why can’t we have no inflation?
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Over the past few years, most of the world has experienced some pretty intense inflation, with prices rising as much as 10 percent in a single year. In 2024, even though inflation rates have fallen to more manageable levels, prices are still way up and are very unlikely to come down. Which, understandably, continues to be a source of major stress for people all over the world. So why can’t prices just stay the same?
As a consumer, steady prices and zero inflation seems like the ideal: You want your purchasing power to stay the same and for your dollar today to buy you exactly the same amount as your dollar tomorrow. But even in times of global economic health and stability, governments and their central banks actively avoid letting inflation get too low. That’s because 0 percent inflation might actually end up doing more harm than good.
In this video, we take a look at the reasons why.
Sources and further reading:
To take a closer look at inflation and interest rates in the US, check out FRED (the Federal Reserve’s economic data repository): fred.stlouisfed.org/
You can read more about inflation targets here: www.imf.org/external/pubs/ft/...
And you can see more of Rakeen’s work here: groundworkcollaborative.org/p...
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Inflation: 8%.
Pay raise: 2.6%.
Boss: "Congratulations on your pay raise!"
Yeah, we the biggest pay raise we've ever seen in decades. And it's still far below inflation. But apparently we're supposed to be grateful for this?
The US economy had much worse inflation in the late 1970's--early 80's. In my experience with a big company raises were from 5-7%. Commercial banks paid 5% (fixed by law) interest so people put their cash in money market funds (something new) that paid 8-9%. Mortgages were well over 10% (for a 15-30 year fixed rate) with 1 or 2 % points upfront. Credit cards charged 20%. Today's economy looks pretty good to me.
@@hewitc Young people could afford houses back then, especially with fewer credentials (like no university degree). Now, they can't. Today's economy looks not so good to me.
Also, things are supposed to improve. Mortgage rates may have been higher, but home costs were much, much lower. Also, how often did homes have high HOA fees? When we add everything up, the economy looks good to you because you are old and saved money and don't seem to understand the struggles of the younger folks who never got the chances you did.
Nobody forced you to get a credit card. If the rate didn't look good, you could just not use one. Housing, on the other hand, is something everyone needs, so when you are priced out of home ownership and have to rent forever, it's a little hard to say that things are good today.
And don't even get me started on student loans....
On average wage rises are now outpacing inflation.
Let's not get distracted by facts though.
@@gorgolyt Only for CEOs. When was the last time minimum wage was increased?
"Companies make more money, which means more people have jobs." Are you sure about that?
classic trickle-down economics scam
@@ryen7512 until people stop buying to the big ones... and they lower their prices, check the Argentina case.
Or "deflationary spirals can result in massive layoffs" pretty sure companies already do that anyway
Yeah, pretty sure. Try working for a company where revenue is not growing, very soon you will find out they will not hire anyone or, even worse, they will layoff people. Furthermore, no increasing revenues also mean no increasing salaries (raises).
What I'm sure of is that when companies make more money, they quickly look at ways of reducing costs to further maximize income. Labor cost gets their attention!
I believe the Inflation crisis will get even worse. Many struggle to save due to low wages, rising prices, and exorbitant rents. With homeownership becoming unattainable for middle-class Americans, they may not have a home to rely on for retirement either.
My advice to everyone is this : if you want to grow big this year especially in your finances. Be willing to make investments. Saving is great but investing puts you on a pedestal where you wouldnt have to worry about savings as you do now. Thanks to my FA, my portolio is doing really great and im proud of the decisions i made last year.
Nice. People often underestimate financial advisors' importance. Over 50 years of data reveal that those who work with advisors typically earn more than those who go it alone. I've been fortunate to work with one for 13 years, resulting in a $1 million portfolio, largely from early investments in AI and other growth stocks..
US is one of the worst countries to live in
It seems all big snd shiny but people are stressed out, losing jobs, worried for future...horrible depressing place
think you could suggest any professional/advisors i can get in touch with? i'm in dire need of proper portfolio allocation
@@AUstinnesc I agree, when it comes to investing, no one actually holds the candle.
I want to get into the market now and ride it out until the economy improves, as inflation is now at 3.70%. I'm assembling a $350,000 stock and exchange-traded fund (ETF) portfolio. Are there any suggestions you have that have good cash flow?
Knowledgeable Investors know where and how to put money during a crisis in order to reduce risk and maximize returns. See a market strategist with experience if you are unable to manage these market conditions.
I agree, having the right plan is priceless. My portfolio is well-suited for any market and recently doubled since early last year. My CFP and I are aiming for a seven-figure goal, which might take another year to achieve.
this is all new to me, where do I find a fiduciary, can you recommend any?
'Amber Dawn Brummit' is the licensed advisor I use. Just research the name. You’d find necessary details to work with to set up an appointment.
Thanks for sharing. I curiously searched for her full name and her website popped up immediately. I looked through her credentials and did my due diligence before contacting her.
Why does economics always feel like an big international game of tightrope walking
It is
its more like a tug of war.
More like musical chairs.
Because it is. I mean it reaaaally is.
Because they don't know what they're doing
Inflation allows companies to cut your wages without cutting your wages.
In the long run, nominal wages actually rise with inflation, increasing production costs and thereby reducing aggregate supply.This is how the economy self adjusts.
did you not watch the video? With the exception of COVID-19 2020-2023, wages historically have outpaced inflation. Wages are back to outpacing inflation again in 2024.
Every year in the last 5 years I got 3% raise but the inflation was higher, so today I can spend less than 5 years ago
@@fuzzywhyyy9639unfortunately the short-run can last very long though
"Inflation allows companies to cut wages without cutting wages" isn't necessarily a bad thing. Even in good times, some businesses do poorly because they're badly run, are overinvested in declining markets, or produce things that are losing their appeal to consumers. Inflation allows these companies to reduce the proportion of their income spent on wages while avoiding the morale shock of actually cutting wages. Sometimes this just delays these employers' inevitable collapse, but sometimes it gives them a chance to turn things around.
So when they say.. "inflation is a good thing"..
You mean.. "it's a good thing for companies. We don't care about the average people"
Companies are not lifeless entities. Companies are jobs, are taxes, are places of identity etc. If companies do well, society most likely does, too. Vice versa - not so much
@@musicnlove911 JEff please relogin.
@@musicnlove911 but we don't do well, all the video said is good... in theory at least. In reality? not so much, companies don't put the profits back into the company and give more to the employees, they keep it for the ceo and shareholders. If the money actualy went back in to elevate the wages than yeah society would do good, but society isn't good right now and won't be for years to come
And its good for the government because they can just spend more money
@@musicnlove911Sadly, yes. Companies are (sort of) sentiment entities that have a simple goal - to make as much money as possible for the shareholders. The problem is simple: making more money doesn't always include making the lifes of people better. Actually, it's rarely the case.
i see two leaps in logic
inflation, "people will buy something now, in fear of the prices rising"
deflation, "people will put off buying something, in hopes that prices will drop"
i don't think i'm typical of the average shopper\spender
but if i want
eed to buy something
i just pay the current price
i'm no good at predicting the economy
I think this video focused too much on the consumer base, the truth is, when there is deflation, your money litterally gets more valuable while sitting in your vault, so there is no point in investing it into the economy (stocks, entrepreneurship etc...). Inflation makes it so sitting money is losing value so people are encouraged to invest it into tangible assets. Knowing investments and creating companies is what runs our capitalist economies, then it makes more sense.
@@DemsWThat's better, thanks
Economics is full of theories that don't always accurately reflect reality. E.g. Many electronics get cheaper as they mature but people aren't simple algorithms that keep waiting for price drops. People who buy things earlier get to start enjoying them sooner. In real life, consumers normally don't mind waiting a few months for a sale, but not waiting for years until the prices stop falling.
@@DemsW If the ultimate goal of capitalist economies is to make people richer, why not just use deflation as a way to do that?
@@laine3396 I don't really understand your question. Deflation slows down the economy which in turns kills the abundance that a thriving economy gives. That is pretty undesirable.
You completely forgot about "parachute" pricing. This is where prices go up, the companies like the additional revenue and purposely slow the decline back to an acceptable amount. 🤬
It's a relative of inflation price-gouging, where companies jack up the prices to increase their profit margin, and then lie to the public and say that they're just "passing on inflationary costs" while simultaneously reporting record profits
Yeah, sticky prices, too. High inflation begets high inflation, unfortunately, and it could be difficult to reduce sticky inflation. Thats why central banks need to act quickly and aggressively to reduce inflation.
@@jennastephens1224well it’s all fractional. As inflation goes up more money exists. For companies to impress shareholders they need to outdo this rate of increase. Or at least increase. If they are increasing more than a 1:1 with inflation which is necessary to be investment grade over time, this must occur. Of course billionaires and ultra millionaires have lots of money in this but tens of trillions of dollars are held by regular people in pensions and retirement accounts. Those accounts rely on the companies to produce record profits nearly every year because they have to improve over time. It’s all cyclical. You can complain about one part of the system but you have to understand how changing it will affect the other parts. Companies do not lower prices because the economy is still inflating meaning more money is entering it. Unless deflation occurs prices will automatically never lower after periods of rise.
Their main concern is profit and if they actually lower prices too slowly then they will lose out on profit. The reason they do this is because inflation periods are uncertain, it's not the fault of the companies but of government and central banks.
Increases in wages and buying power never seems to “trickle down” nearly as fast as increases to prices, which seem to happen as fast as the companies can print the new stickers.
We are getting this concept told for decades now. But does it really make sense?
Do you buy a new laundry machine/smartphone/coffee because you fear that it will be more expensive next year?
Would you visit restaurants less frequently, when their prices get cheaper, expecting that prices will fall even more next year???
You are not understanding the argument. That is why they have to keep explaining it to you for decades.
This Simmons washing machine is $600, in two years it will be $400... correct.
But a new washer that is the equivalent of where in the spectrum that Simmons one had been on it's release to the market, that equivalent, it is not $600, it is $650.
Not the same exact item at different point in time. The same type of item, a mid-range, gadget w/ the bells and whistles customary to the development of like items.
@@Hollywood041 please lern some grammar and spelling before you answer. I'm not talking about technological superiority but homogeneous goods.
Of course it doesn't make sense because it's a lie to obfuscate that inflation is good for governments and rich people which is why they create inflation.
@@MRFLOPPYmr *learn
@@Nautiliam Thanks. As a german I'm always eager to improve👍
More people have jobs, but you forgot the part where the people who have jobs get paid the same.
As the video points out (and as a glance at my own paycheck and job signs in businesses reveal), wages have been growing. People are getting paid more than they were.
@@RyanMcCauley-cj5rwthat's a bit shallow tho. Two parts: first of all, growth doesn't equal that it's a good value. Only that it has been more than before, which turns out to be less than needed.
Secondly, inflation gets calculated on ALL goods that get produced or sold in an economy. But different categories of goods vary wildly in price change. Normally when there is an inflation inducing event, whole sectors may be cheaper than before the event, but other sectors rise much, much more.
Turns out prices rise most on consumer goods and housing. That leads to the individual consumer having to spend way more on necessities, so even if there is 5% inflation overall, the individuum might have to pay 15%+ more than they used to.
So a 3% raise might not even come close to stall the effect of inflation especially on low wage incomes
wages have been going up. the businesses I know keep offering higher wages because they can't get anyone willing to work.
So you tell me the economy runs by encouraging people buy things they don’t actually need? Because if they really need it, they won’t wait for lower price tomorrow
Right? Not to mention, many buy less not because they are 'waiting' but because they actually have no money to spend. (!)
@@unshakablesoul no inflation is still best if everyone just buys thing they need at the right time, and assuming everyone has basic income for living
@@unshakablesoul this is late state capitalism
Yes my guy we buy more than food, water and fuel. Any other interesting discoveries?
Except these days companies take all the profit of inflation for themselves and still lay off people.
There ARE no 'profits from inflation', this is a lie, and to be fair, this video parrots this lie to you, which is why you restponded. HOW does printing more pieces of paper create more purchasing power in the real world ? Of course it does not. Companies lay off people because they no longer need workers, full stop. The economy does not 'need' 2 % inflation, the economy needs 2 % (or more) real growth. If real growth in real profits was happening, then more workers would be needed, and since this current 'growth' is just an inflationary lie, of course no new workers are needed, and as customers are squeezed by inflationary theft of their real purchasing power, less employees are needed to earn what little real profits are still out there.
40+ years of consolidation. Where once there were a dozen suppliers now there are two or three. We need more competition in the market to drive down profits.
We need deflation ASAP. 2% inflation never benefited the people. It's always been for the corporations bottom line. Charge more and more. People always paying the price.
Over the past few years layoffs have been low (except in the tech sector) and wage gains has been high (especially among low income workers).
@@WhyWorldWet Not productive businesses, those who control the new currency pumped into the system.
Why do you think central bankers, bankers and wall street stay on the top? It's not hard when they get the new dollars first.
And when they spend tomorrows dollars at today's prices... well, they can consolidate their control on resources despite their mismanagement
That was a weird ad spot. Came out of nowhere
The increased CPM enable Vox to hire 1/20th more of an independent contractor though 😊
That's the idea, when it's predictable, you would be more inclined to skip it. Many regular youtubers do that as well as the opposite of it when they would change into a different set of clothes during the ad so you could quickly hover over the timeline and skip the ad.
They don't change conciously, they just record it on a different day because the sponsor often times comes after the production of the video. The effect you describe is still a nice thing for the consumer :) @@Alex-mc5yn
I love this and DCA everyday on what I'm overweight in. I used to do the auto deposit however I stopped when I couldn't guarantee at what time my deposit would go thru. I like to control the time I deposit and buy daily. Love your video. New subscriber here.
I invest everyday in a round of stocks always looking to DCA down. I increase my deposits monthly. I am never good at timing the market so long term and DCA mindset works for me. How do you go about yours?
@@Jaymilnere I do not invest on my own, I and a few Neighbors in Bel Air Area work with an advisor who prefers we DCA instead of a lump sum purchase, Following this, my portfolio grew 40% in the last quarter.
I do not invest on my own, I and a few Neighbors in Bel Air Area work with an advisor who prefers we DCA instead of a lump sum purchase, Following this, my portfolio grew 40% in the last quarter.
@@Jaymilnere I do not invest on my own, I and a few Neighbors in Bel Air Area work with an advisor who prefers we DCA instead of a lump sum purchase, Following this, my portfolio grew 40% in the last quarter.
@@Jaymilnere You're right, I and a few Neighbors in Bel Air Area work with such advisor who prefers we DCA instead of a lump sum purchase, Following this, my portfolio grew 40% in the last quarter.
I foresee a recession lasting 2-3 years, and if inflation continues to surge, the Federal Reserve will likely raise interest rates soon. Inflation is causing various issues worldwide, such as food shortages, scarcities of diesel and heating fuel, and significant spikes in housing prices, leading to a potential financial market crash. This global downturn could have long-lasting repercussions. Given the current inflation rate of approximately 9%, my main worry is how to optimize my savings and retirement fund, which has remained stagnant at around $300,000, yielding almost no gains for quite some time.
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I'm sure the idea of an invstment-Adviser might sound controversial to a few, but a new study by Motley-fool found out that demand for Financial-Advisers sky-rocketed by over 42% since the pandemic and based on firsthand encounter I can say for certain their skillsets are topnotch. I've accrued north of 580k within 16-months from an initially stagnant Portf0lio worth 85k.
Inflation is over 10% here in the UK, but as we know it's definitely way more than the Government would like to admit. My plan is to earn more passive income and ride this out, can your Investment-adviser assist?
She appears to be well-educated and well-read. I ran a Google search for her name and came across her website; thank you for sharing.
People like these have been foreseeing a recession since last 10 years. Heck we came out of the great recession of 2008 and people immediately started to wish for another
Companies cut labor no matter what because they are only concerned with increasing shareholder profit.
Correct
In every country in every side of this world. Math matters, no feelings. Greetings from Venezuela, bigger hiperinflation on this planet.
I sometimes don't get the whining about shareholder returns. If the bank reduced your interest rates on savings, you'd move somewhere else. Shareholders would do the same. "Okay, lower your profits, I want my money back though." If loads do that, the company folds as most companies are private and built off shareholders. So they get their returns, as agreed. As YOU'D expect if giving your money away. If these companies fail, people lose jobs. I get the frustration, but shareholders are entitled to returns, you'd do the same if you could.
Gotta show that YOY profit growth and the shareholders/board don't care what means is used to get it, even if it means dancing on the line of legality.
The shareholders won't get punished even if something illegal occurs and their profits won't be forfeited, so it isn't as if they need to care.
well yes!
3:47 < AD skip
3:04 - 3:47
get sponsorblock
@@flamerider03 I have sponcorblock, but people on mobile don't.
Get revanced
@@Occidentally Most people choose not to get it
the consumer mentality in the cycles is so wrong.
you don't buy less when price is lowering. you buy less when you have less money.
Its called expectancy of future prices. So if the consumers expect the future prices to keep decreasing, then of course the current demand would decrease
@@Shafiksz nah
prices decrease because of demand, not thd other way
@@gablit3316 you're using common sense to depict facts. That's why you're here
@@Shafiksz hey I think you don't know but... I'm the consumer
@@gablit3316 which percentage of consumer behaviour do you even represent? Following common sense yes people should buy when the price is already low but most people tend to be greedy and when they see a trend that has been consistent for few days or weeks they tend to want to maximize or capitalize on the profits that they can make from the already lowered price and choose to wait longer
So, basically, inflation happens because we need profit because we need profit because we need profit... God forbid we make the government spend money to make the economy stable for the people who live within it.
The gist seems to be that prices can't stay the same because the economy assumes a state of perpetual growth, specifically growth of revenues, is natural and so companies constantly increase prices and decrease the value of currency in circulation. Thus the economy has to "expand" with the creation of more jobs and more resources. The expansion further decreases value of our money and necessitates further growth. Stability in this kind of economy is equated with "stagnation" to make it seem undesirable.
Until the last drop of water flowing.
Ok it's never too late...
If the government spends money that also contributes to inflation. Besides interest rates, the only other significant control governments have to curb inflation is taxation which is almost always politically unpopular and requires legislation (at least in the US). You need to take money OUT of the economy so there’s less dollars chasing the same amount of goods.
No. Inflation is literally because the government has an infinite money printer. The definition of inflation is the expansion of money supply. Not higher prices
@@kevinburrows7940 nope this is just wrong. "in economics, inflation is a general increase in the prices of goods and services in an economy." Wiki
@@marcusstrinidad Interest rates effect inflation. Higher interest lower inflation. hire interet enough and inflation will deflate as many need to cut spending to pay for interest.
It's tax on people who stuff their money in their mattress.
You're not wrong.
Incentivizing more productive use of capital Is a side effect of inflation.
to those most in debt (the richest have access to most debt).
It's devastating to people on fixed incomes like pensioners and people on welfare.
But putting your money in your mattress is straight up not a good idea, risk premiums are highly correlated with inflation
So.... Billionaires?
As a medieval historian, I can tell you that the modern approach to inflation ("a little inflation is a good thing") is an historical abnormality. Historically, prices stayed relatively the same, even over generations, unless there was a major shock to the economy (like the king discovering a new gold mine, or something).
Historical y we had far more economic crisis then today
yes, but greed was allowed to balloon.
They also burned witches in the middle ages. But people get smarter.
Lol, you are no economic historian. Periods of inflation and deflation have both been common historically.
@@pfefferle74 burning of witches only really picked up in the modern age and was rare in the middle ages
"The reason inflation can't stay at zero is because governments and their banks don't want it to"
Oh, so it can stay at 0. People are just greedy. Shocker
You didn't watch the whole video or you just didn't understand it?
No, in the US, if inflation stays at 0%, things for the average American would be WAY worse. With inflation, business have a small pie to get a slice of that the federal government creates. If businesses have no pie to chase, businesses are more likely to hoard cash instead of hiring and investing.
Did the whole video go over your head lol ?
If inflation stays at zero, you also don’t get pay hikes.
@@lesmurphy4441 You mean like they are already doing now?
5:00 "consumers stop making purchases in hope things will be cheaper"? Am I the only one who buys things because I need them, not because they are cheap or expensive?
The “virtuous cycle” primarily benefits debt-holders by eroding debt. Who are the biggest debt-holders? Governments and corporations.
Also, governments with a graduated tax structure (e.g., the U.S.) bring in more real tax revenue because the tax brackets aren’t appropriately indexed for inflation.
Hold on, most debt has interest rates greater than 2% which would completely erase this effect.
If someone offers to pay you back with less than 2% interest... who would make that deal? I'm gonna guess no one?
@@spaceprior You’d think that, but consider how artificially low the interest rates on U.S. bonds were up until very recently. They had interest rates less than 1% in 2020. For the U.S., foreign governments are big buyers of U.S. debt and have been even when the interest is less than the U.S. inflation rate. If the foreign country has an inflation rate higher than the U.S., it may make sense to invest in U.S. bonds even if the returns do not exceed the U.S. inflation rate.
@@spaceprior My bank took that deal. I have my mortgage set for 20 years against 1,4%
@@theaxer3751 That's extremely confusing. Is it subsidized?
noboby i know has a wage that has kept up with inflation!
"If I haven't personally experienced it, it doesn't exist!!!"
@@aolson1111 you can just search for wage grownings and inflation rates, most wages really dont keep up with inflation
@@aolson1111No OP is right, even if he is citing anecdotal evidence. There are entire swaths of demographics that didn't see wages change at all, which this video did a bad job talking about. Generally if you were a middle income earner or higher OR you lived in a metro area, you saw your or your neighbor's wages climb in some way. However, rural residents and lower income earners hardly saw their wages change at all. These groups of people don't have much power or influence to change their wages even as prices go up around them. It's one of the main reasons homelessness is climbing and farmers/small towns are declaring bankruptcy.
I don't know what "keeping up" means for sure, but businesses are raising salaries to attract people, in my experience.
@@hewitc doesn't mean its equivalent to the massive amount of wage stagnation the west has seen for the past 30 years. Min wage would be near 25 to 30 $ if it kept up with productivity. the primary driver for labour
Come to Australia - we have 2 major grocery stores that have made record profits in the past 2 years not only in Australia, but the world. A country of 27~ million having 2 companies making the most amount of profit in the world. It also doesn’t help that these two companies also own most of the petrol stations and liquor stores. What about banks? There are 75~ banks in AUS and 95% of them are owned by the four biggest ones.
It's such a tough one, because I love the idea of capitalism and free markets, but they inevitably lead to consolidation. It's basically a law of nature at this point. How on earth do we keep the benefits of capitalism while stopping all of this consolidation?
There needs to be an asterisk next to your title - "Why can't prices just stay the same? *in theory"
I feel like deflation is a fear of corporations. We definitely need to lower these out of control prices with a small deflation.
Yeah. As soon as they brought up deflation, they immediately jumped to the worst case deflationary spiral. There can be inflationary spirals (hyperinflation) too, so why the instant jump to the worst case scenario for deflation? They also didn't mention how much inflation benefits those with high debt.
@@andrewn7365it's much harder to control deflation, as they said. The economy isn't smth you just control with a lever.
@@spe3dy744 True. I'm just feeling that there's nuance missing from their explanation of deflation.
@@andrewn7365 because it's harder to control deflation
It's a really fear of governments... corporations are nothing more than the high-functioning part of government. From the old kings of Europe, corporations like the West India Company still are issued charters and treated as "individuals". It's a practice that wont look great 1000 years from now (IMHO)
I thought about it, and I don't agree. "People buy stuff now because they fear that the price will increase." Well, there's some things that consumers can't put off buying like food and gas. People will buy regardless of the price, they might just use substitutes. Then there's stuff that People buy relatively infrequently like TVs and computers. The prices of TVs ans computers continues to decrease because of Moore's Law. Then there's the things that people really seldom by such as cars and household appliances. I feel that people buy this when they meet the intersection of needing to and having the money to do so. I've never had a perfectly good refrigerator and said, let me go out and get a new one because it will cost more in a year. Prices increasing year after year will always be the case. I'm not saying that inflation doesn't have to exist, but I'm saying that I don't believe that's the reason that inflation exists.
100% agree
That's one of the things inflation tend to influence. If you keep your money under your bed, you're not putting them into the economy, you're saving them for when you need them. Good for you, bad for the economy. With policies like this, you're more likely to spend those money in some form or the other, put them back in the economy and that keeps things going, it's not about you losing value of your money, is about you not keeping money and actually put them to use. Now this might mean you have to live paycheck to paycheck and are constantly in debt, but what's more important here, the life and well being of common people or the well being of multi billionaires and trillion dollar companies.
@AndiKola I don't think a lot of people put their money under the bed. Illegal immigrants and survivors of the great depression tend to as well as underbanked individuals. However, as long as your money is in a savings account it is contributing to the economy. Even if you are not personally reading the benefits. I personally keep my money in a HYSA and a 401k index fund, so I don't... I don't know I find the whole anti-saving theory to be confusing because I don't know what defines savings and what defines investing in this regard. 🤔
OMG I was looking for this comment! As someone who has always been in the working poor income bracket, I can guarantee you I don't buy like that. When prices are high, I delay buying - even if it's an important purchase. If push comes to shove and I absolutely can't put it off, I buy the cheapest option possible (which usually means thrift/used). Who are these people who go: "Wow everything's so expensive now....better go on a shopping spree!" 🙄
agree, that's a really weird assumption on which the cycle seems to heavily rely on
i think most people are like me who is a hospital bill away from bankruptcy, so i can't imagine how the cycle implies that the majority would minmax their purchases as though they have their morning coffee observing the inflation rates. the first thing that comes to mind where this sort of spending behavior is sane and expected is with GPUs -how the prices for them increased heavily due to demand from people using them to mine cryptocurrency
for most else i think more studies need to be made about how people spend their money. all this talk seems like it's the businessmen feeding the economists their qualitative data.
No mention of the most important contributor to long term inflation: Money creation
When money can be created out of thin air whenever somebody takes out a loan, it devalues all existing money.
In the short term supply and demand impact prices, in the long term it is the devaluation of money which continues the unending increase in prices.
@terry9397 Thank you for being like the only person here who actually understands the main cause of inflation. We need to teach economics in high school because almost everyone commenting here obviously never studied economics or classical monetary theory.
Thats not how the accounting always works. Whenever you deposit cash at a bank, a matching deposit is created. In a simple model, this would double the money supply. No prices change however because everyone's networth remains the same, so everyone's purchasing power remains the same. You traded a cash asset for a deposit asset, and the bank recieved a cash asset for a deposit liability. Money doubled, but no networth created. There are ways to create money "out of thin air" which effect networth, but this disconnect means that money supply numbers are not reliable. To add to this, the type of money also matters. Reserves at the fed are a kind of money only used between banks and are not used for consumer goods. There's no reason to believe that increasing reserves at the fed would increase CPI prices.
This is wildly incorrect. "printing money" doesn't devalue currency. period. this is a capitalist myth. devaluing happens because of inflation. inflation happens because of Demand. money printing can CAUSE demand increase. which is where you get printing devalues currency. its not exactly as straight line as the statement implies. im not even talking MMT im talking literally just how money works.
@@harrisjm62 in a closed loop system, perhaps. But this is a global economy. It's not just a coincidence that literally every time government creates a bunch of money they a bunch of inflation. The causation could not be more clear.
I'm only a minute into this video, but I'm not gonna watch the rest of it if they don't mention the literal thing that causes inflation. I actually came to the comments to see if anyone was mentioning that, because if not, this whole video is literally useless. Other than a short term supply shock, these days inflation only comes from the printing press. It's no wonder we have such a bad policy when for some reason, the media does not want to acknowledge that the government is 100% the cause of inflation. I'm not surprised people have no idea.
Thank goodness you brought this up!
Truly, investing has changed my perspective on how one can succeed in life; working multiple jobs isn't the optimal way to attain financial freedom and unfortunately, we discover this later in life.
Currently earn as much as 10 grand weekly and this has improved my financial life. Great piece!..
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i have seen a 50% increase in the cost of living over the past 2-3 years. It used to cost me $5k a month to get by, now it's more like 7-8K food almost costs double what it used to and no change in sight (Canada)
stop voting for liberals
Then move.
In 2-3 years you haven't changed the way you live at all?
@@aolson1111 a condom could have saved the world from this comment
@@aolson1111 To where?
The 1% dont want to lose their money. So they increase their prices. Instead of taking a loss themselves.
Correct. That is Capitalism.
Inflation hurts the poor more than the rich
@@raffiklausner5016 Inflation hurts the poor *and benefits* the rich.
Economics proffessor I see.
@@John_Jack yeah, I guess so
We want deflation. But to have steady deflation we need to consistently incentivize spending. People must be encouraged to continue to spend, even as prices go down. So, they need more cash. This is where things like Universal Basic Income come in. We've just never done this before and it's scary. Technology is a deflationary thing. If we want things to improve, we must embrace sustainable deflationary systems.
UBI means printing more money which means inflation. It might be possible, but only if the government is *much* less wasteful than it currently is.
@@RT-. nope. wrong and wildly incorrect. it can be paid for with Social spending that's already in the budget for most countries. Canada's will actually DECREASE spending if we swapped to a negative income tax model. I've ran the numbers. its extremely feasible to set a bottom for the economy.
You incentivize people to spend by making good products that people think is worth giving away their hard earned money, inflation just creates the opposite incentive to make worse and worse products. You can see it now and last few years especially when companies just keep cutting and worsening their products while keeping or raising prices. If there was 0 inflation or mild deflation those companies would need to make good products so people want to actually buy them, also there would be less waste in general when people would not buy some useless trinkets and products would be more like many years ago when they were designed to last as long as possible and be good quality.
Deflation is a terrible idea, it kills investment, makes debt harder to pay and has led to decades long economic stagnation in Japan for example.
@@NearQuasar Sustained Deflation. leads to what your refering to. Deflation happens all the time with products. the issue is it doesn't happen on the economy as a whole at all. a little bit of deflation is actually a good thing every few years. but Capitalism will resist the Boom and Bust cycle it enforces. so never deflate ever because bahhhhhddd
they cant stay the same cause greedy employees keep demanding more yachts.
This is all theory. Companies and raking in cash and still laying off workers.
It used to be that all products were physical. I make corn, corn gone, corn bad, I make new corn.
Now a lot of product is digital, or intellectual. I make algorithm, it works, you copy/copy/copy and sell, I am doing nothing b/c there is no new algorithm needed, you fire me.
Unemployment in the US is getting lower though. It could also be that companies aren't economical feasible. Thats what happen to the gaming industry after the covid phase, because less people were inside and playing games.
Because they have to please investors, and just merely keep workers in. They "don't have money left" after pleasing investors and paying board of directors. Even if they do, they will invest in growth. Employees just have to no incentive to leave... That's how I see it at least.
@@BenterKoux unemployment is getting lower, yes it sure does when erasing people from the unmemployed list
The companies I know (smaller businesses) are not laying off people. They are having trouble getting employees even as they offer higher wages. Unemployment is historically low. People can get jobs and have choices. And many today don't really want to do any work that involves getting out of bed, dressing and leaving the home.
Ah, yes, losing 2% of my purchasing power every year is great! /sarcasm
Gaining 2% & more given real wage rates is great!
It mean that ur life in 50 more years will be double spending
thats the trade off for growth and high employment levels. No free lunch. Also wages rise with inflation, so your purchasing power often stays the same or grows over time
That is why you are [[[supposed]]] to get a wage increase to match inflation every year, that is what the govt does for its employees ie soldiers, but then also your company should be doing performance reviews to pay you more for good work, and That is where you would get your Purchasing Power Parity that you afford: a vacation, or a better vacation, or a second vacation, wtc whatever it is you wish to spend money on. That is is supposed to be your reward for good work, but you should definitely be getting a raise every year to coincide w/ the allowed inflation to cover rent, food, utilities.
@@Hollywood041but it doesn’t happen when private institutions can get away with it
Does it annoy anyone else that they literally said that the graph is for the rate of change of inflation and not inflation itself, then proceeded to use that graph incorrectly for the rest of the video?
Prices can stay the same, people are just greedy.
Ok so what about the wage issue..? Is that going to be a separate video cause this one kind of didn’t help explain anything lol
Wages are going up with inflation
@@JZTechEngineering as if 😂
@@thastayapongsak4422 you can check the data but they are
It’s hard to have it track inflation because it’s unpredictable and it is very difficult/impossible to reduce wages.
It’s also hard to retain workers if you increased suddenly increased wages for one year and then a decade of little increase
Thanks for this. Very interesting, and informative
I think one of the most entertaining things a business owner can do is cut prices and watch their consumers flourish and the utter chaos of the other businesses in the sector.
I’m pretty sure people will not hold off from buy a carton of milk half the price it was yesterday. Like no. People will hoard that stuff because they know prices will rise again. Necessities essentially have an infinite demand.
you can't hoard milk
@@tonypalmentera7752 That doesn't mean people won't try it.
Lol clearly you never learned about the Substitution Effect.
Example: people switch from expensive beef to cheaper pork, pork to cheaper chicken, and finally chicken to rat in a siege or apocalypse scenario.
@@vinnycordeiro they wouldn't, en masse...if you think they would, go back to school and take psychology and economics.
@@tonypalmentera7752 I lived in Brazil through their hyperinflation period, I may have first hand experience that economics books don't tell you because it isn't based in real life, but that's me.
I have absolutely no nostalgia of the time when my family had to rush to the market to make the monthly purchase of food when my dad got his payment because prices were raised every single day. In the worst periods prices would raise twice a day. So yeah, believe in what you will.
So they want infinite growth on a finite planet.
Yes, finally. You get it. Just continuously make more even if there is no room/use for it.
Myopic view.
The universe is pretty big though
@@DemsWBut we don't have access to that
@@NautiliamSpaceships
This isn't how it was explained to me, but it seems internally consistent.
What I was taught is that inflation is aimed at a population of homeowners - such as the boomers in their youth. A young couple save up and buy a house, with a mortgage that is going to take every cent they can spare. They're living on jam sandwiches when they can afford jam, but they feel good about owning their own home. Then over the next few years, their wages go up with inflation, and while the cost of everything else they buy from one week to the next goes up too, their mortgage payments stay the same. They have a little bit more money left over each week than they used to, and this makes them feel prosperous. Feeling prosperous makes them confident - they'll try harder to get a promotion at work, they'll be more likely to buy stuff, all those things. By the time they're ready to have children, they can live on one wage while the other parent is at home with the kids, and although changing down to one wage is a big economic shock just like taking on the mortgage was, they still have the same pattern of every year having a bit more disposable income than the year before, so they still feel prosperous and confident about themselves, their finances, the economy, and their future.
It doesn't work on a population that has been priced out of home ownership, but also, just like your explanation, the whole thing falls apart when wages don't rise with inflation. We have to fix wage stagnation!
If you want to see an example of a country that manage to be as close as posibble to 0% inflation/deflation, take a look at Japan before the covid pandemic, their economy basically stayed stagnant for the past 20-30 years since their 1980-90s bubble bursted
So if there is always inflation, does that mean prices will always go up, slowly (preferably)? Does that mean that eventually we'll need thousand dollar bills? Does that seem ridiculous?
Now yes, maybe in 1000 years no
I mean isn’t that how Japan works as well? Even at the level of coins they have 500 yen and thousands of yen notes so how is that actually making everything affordable and keeping prices stable?
Its true we could just increase it like Japan but we could also just do a currency transfer if we care about keeping a low number. The gov just accepts the old USD and recycles it and only prints a new USD
Japan has stagflation or even deflation; sometimes, low interest rates from the Fed. Prices seem so low because they don't have much inflation, and purchasing power has lowered for the yen because of a drop in value compared to the dollar
It's not ridiculous, it's pretty normal. You used to be able to buy a soda for 5 cents many decades ago
"It's ok if prices rise, so long as wages rise, too."
Thats not true. It makes it impossible to safe money for a longer period of time, because it looses it's value.
Great point. We are at the stage now. Where are the only proper way to keep long-term savings is in the S&P. If your savings aren't in some thing that roughly keeps up with inflation at the very least, then, yeah, saving half your paycheque isn't gonna help you much 50 years later when that money is worth a fraction. Inflation means you can't just save money.
You say when prices fall, consumers "may hold off on making big purchases." Is there any evidence of this?
In housing this is absolutely true beyond a shadow of a doubt, as well as automobiles. Probably not for things like major appliances, but if you're buying something that's equivalent to a year or more's worth of your wages, you absolutely will hold off if the prices are noticeably coming down.
@@jasondashney So if you want to buy $30k car you are not gonna buy it because it will probably be $600 cheaper after 1 year? Then why buy it even then because if you wait 1 more year it will be $1200 cheaper!! I will answer, no you would not wait unless you didnt really need or want it. Also this already happens so it makes no difference anyway to todays life, well other than you probably dont get enough raises at job to keep up with inflation.
You DID NOT explain the topic proposed in the thumbnail. Zero explanation of money volume vs demand, why government needs to print money etc etc. You just chose ONE of the reasons inflation is kept at a certain level, and disregarded the rest. Very poor coverage of the topic.
Lol.. what did u expect from Vox?
@@Dan-Rather fair enough
Two percent is a lot higher inflation tax than we think. Think about it this way, NATO has a two percent target for their defense budget. And countries say it’s too expensive. Our American government is not efficient at all. Waste money everywhere, laws should expire in different amounts of time. All these laws that waste money should only last a couple years
What you call waste may be vital to another. Rethink how you perceive an entire nation.
Of course, the government needs to waste money. That's the point of the government.
@@Hollywood041 sending money to a foreign nation that dont care about us is a waste of money
Not really comparable, NATO asks 2% of GDP, GDP is very much huge, and is so much greater than the actual government's budget (usually around 15%). You are looking at this wrong.
@@chaptersword472 You'll be better if everyone is better. You benefit more from cooperation than competition
Prices 'can' stay the same because that has actually been the case before. That was the Federal Reserve's goal at one point.
Most consumer goods actually *decrease* in price year-over-year. Only ones created and regulated heavily by government go up.
no it wasn't. What kind of silly thing is that. The federal reserves goal, just like every other central banks goals have always been to create inflation. Inflation is a TAX, it does not happen naturally
it can, Japan was proof of that, but their period of negative interest actually makes the economy suffer somehow, because the government expenditure continue to increase. regardless of having no inflation.
@@minyaksayur deflation was only savings grace of Japan's economy during the 90's and early 2000's. Now that they have inflation destroying the purchasing power of their wages, you are starting to see migration out of Japan and towards countries with stronger currencies like Australia, something that was unherd of while Japan was enjoying the benefits of a constantly decreasing cost of living, aka deflation.
One thing this video misses: innovation makes products cheaper which drives deflation. Look at the cost of a big screen TV today compared to 10 years ago, for example. Businesses are constantly trying to make products less expensive so that they are more competitive in the marketplace. The government has many ways that they prevent this not just interest rate. Regulations are another big tool. They regulate business which make certain products more expensive than they need to be. This is why politicians are so rich: they use regulations to pick the winners and losers in an economy so they can always invest in the winners. The result of this is things being more difficult for all of us.
Regardless of whether government chooses interest rates or regulations, the fact is that they deliberately make things more expensive knowing that wages will not keep up. Politicians do not care about us. They only care about themselves.
"Guys I promise, inflation is good, you want thing to cost less? You won't buy stuff if things get cheaper, I promise, you'll only buy stuff when it's more expensive. Also here's an article as to why you should stop eating breakfast to save money."
We are in a finite world that we are seeking infinite growth, forever at 2% or more a year. What?
Correct. That is Capitalism.
Economists only care about on-paper growth. If the value of the dollar goes down, then an equal amount of wealth appears to increase in value (on-paper).
@@John_Jack great but shareholders and CEOs very much just want infinite money forever and they are the people who run things
Well said but i think we are in a system built on everexpanding growth due to nationstates competing for power on the world stage and capitalism won over collective socialism due to the increased efficiency and we took the dollar of the gold standard to promote lending and growth in the shorterm but it is leading to inflation problems now that are allmost inpossible to fix.
The entire economy is a Ponzi scheme
Forgot about AI, now companies don't have to hire more to keep up with demand, they can cut employees, and increase prices with nothing to stop them, and that's mass layoffs with extreme inflation and unemployment on the rise... This is the state of 2024
Capitalism has mechanisms to prevent price gouging like competition (though that fails when patents or the likes prevent it), so where AI cuts jobs, it also cuts costs so the end consumer will pay less.
Wish should cause deflation (yup
What's stopping you from using AI in your own business?
@@DemsW Competition in modern capitalism is a joke. nearly the entirety of the usa meat packing industry is owned by 4 companies
The problem with all of this now is that the average American doesn't have a clue about inflation, but more importantly borrowing.
They don't care about debt, it is seen as a necessary evil.
So when they increase interest rates, no one pays attention anymore, because house ownership is down and they don't care about credit card debt, (until it's too late), so it doesn't have the same affect as it used to.
Hate to say it, but government jobs are the best way to control inflation, gets to high, lay people off, goes to low, hire people.
Most of the time when 'deflation' was solved it was by large amounts of government employment, or contracts, often related to wars,
hmmm, it's almost like now they cause wars to keep control of the economy, but that would be cynical. (Not that there hasn't been a war of some kind every decade since WW2).
WW2 -> Korea -> Vietnam -> Lebanon -> Grenada -> Libya -> Gulf War -> Bosnia/Croatia/Kosovo -> Afghanistan -> Yemen -> Iraq(2) -> Syria -> Ukraine/Israel
Nah, that can't be right? Causing wars to make sure you can sell things???
Woah...I was just thinking the same
The problem is that nobody cares, so nothing gets solved or done.
Debt keeps on debting, inflation keeps on inflating
We ALL care, we just mostly feel powerless to stop it b/c that requires struggle, like for real real struggle... like, physically taking the means of production away from corporations and them legally changing the circumstances afterward to make it Just.
This slaughterhouse no longer belongs to JBS, it is worker owned, let's say that fair compensation is covered by back owed wages, deal complete. Co-op now registered w/ the BBB.
if people actually cared then they should learn about bitcoin and how it can protect people's purchasing power against rising inflation
@@LiveFreeForLife you're way better off buying gold, crypto is not stable enough.
@@stt.9433 if you study enough about Gold and Bitcoin, you'll learn that gold is the worst performing asset compared to stocks, S&P500 and you'll learn that Bitcoin is the best performing asset in the last decade and huge companies and banks are stacking Bitcoin. Learn, research it now
@@stt.9433 Dont you think it would be bit weird if the price of BTC was stable and still gained all the gains it had? You pay the price of gains in volatility, nothing can go up so much and be stable, the stability will come later when its much bigger and when media isnt full of misinformation and the space isnt full of scammers trying to sell their dog, cat, trump and elon coins. Also gold havent kept up with inflation for at least 40 years so I would say you dont gain anything going from dollar to gold when both lose value against inflation.
Come to JPN.
No inflation, No wage increase, No growth, but another countries continue to grow and importing naturalresources becomes harder and harder.
wage increases, in your mind, only come from inflation? Where did you learn economics, so I never send my kids there.
Nah you forgot karoshi culture
On my way.
Don't forget one of the main reasons for wanting modest inflation--to stimulate investment in appreciating assets (in order to keep up with inflation).
I just got an ad for this exact video after it finished ??
I kinda expect this video to answer what would happen if inflation change keeps happening. $1 right now isn't as valuable as $1 100 years ago. Does that make money less and less valuable? If it is, is that a problem? How to solve that problem so that we don't keep adding zero on our money just because inflation keeps happening? Because personally I don't want my $1 to be less valuable in the future than now
You just redenominate your currency
Any individual dollar can become less valuable but don't forget the rest of the money supply. Also its not like this is unique to the US. Do you look at the Yen and think "useless currency" or do you think "Oh, I can make 4.5 million yen per year, guess these prices make sense". Also you can always just do a currency transfer. 1000 USD for a new USD and the government will continue to accept old USD but will only print new USD and will recycle the old USD it receives to new USD. Its way better we have to do this kind of thing every couple of centuries than having to constantly worry about a deflationary spiral.
@@daviddavidson6278 I see, so that kind of thing to recycle a currency, e.g. decreasing it's zero does exist. I guess that solves my anxiety.
wages rise with inflation
@@grimaffiliations3671they used to, not anymore. Or you are lucky to get a one-off 20% rise after 3-4 years of inflation being above 5% (which is compounding, unlike the wage increase)
Economics is totally made up, and we do an awful job as a society in making it work for all its people instead of the ultra rich. For example, if a company is making profits, why is it legally acceptable for that same company to layoff hundreds or thousands of employees? Doesn’t that break the cycle? Why aren’t wages forced to be given out in a more equitable scale, instead of the c-suite making multi millions but the poor front line employees are basically given table scraps? Wouldn’t having more wealthy employees keep the cycle going properly? Why aren’t interest rate changes raised in a targeted fashion, so that it hits the ultra rich individuals and companies that are often causing inflation harder then it does the unemployed families who need a loan just to keep their house?
People would likely say capitalism, American values, or well that’s just how it works. But it doesn’t have to be this way. Economics aren’t some natural phenomenon like the tides. If people go away, so does the economy. We have the power to change it and fix it however we want to. The problem is that there is little political pay off to change anything and lots of reasons to keep the status quo. Call me a socialist, but it feels wrong that there are individuals who make more money than some countries while there are people in so called first world countries starving and homeless, not to mention all the rest of the world. How broken of a system is that.
But i continue to be baffled by why “creating jobs” is an answer to anything. Technology is supposed to be labour saving. We should aim to not work. Nature grows, and machines work. Humans should live. But the obsession with ‘jobs’ is just a social status that provides basic access to what nature makes for free. It only perpetuates the cycle of needless consumerism for the health of financial markets.
There's a reason mostly sociopaths make it to the top of this system. They can't help but take it to its breaking point.
@@Rnanknexactly this. Humans will always have to labor - we have to grow food and build shelter no matter what. But work for the sake of profit is literally meaningless other than to further the 1%'s god complexes
Inflation is the expansion of the monetary base by the government (printing money).
Governments justify their actions in times of crisis by offering bailouts, stimulus, or by passing "recovery plans", but they also do it a lot to finance wars.
Nowadays, they expanded the scope of the money printing to pay all sorts of entitlements as well as to support the stock market always going up.
That's the problem with governments and central banks.
It's just too easy to print money and let everybody feel good on the short term while they get reelected, but they always blame someone else for prices going up.
If the feds lower interest rates to almost zero, the way to reverse deflation is pretty easy. Give money to the lower income brackets. Wages are criminally low at that bracket so they have to spend all their money, even money freely given, just to survive. That creates more demand, jobs, etc. which reverses the deflation into an inflation.
The way to fix the whole system is also easy. Make employers pay wages that match inflation. The gov is not interested in capping how much corporation can raise their prices. At least if you make them match the cost of living, you significantly reduce poverty and its side effects (crime, the burden on the health system, etc.). It would be a government that actually works for the people.
Inflation is a way to steal money from your bank account.
That's why you don't put all your savings into a bank account but into stocks
Invest in assets and you won't have this problem.
no one is trying to steal your money. If you don't like banks use cash
@@hewitc Using cash doesnt help, your money is worth LESS, its not stealing how you think it is, you lose value while the people who "steal" are gaining value.
@@vipu6821 So how exactly are banks stealing? Or was that someone else's gripe? They provide a service for fees.
"Inflation is good" but also having inflation-indexed wages is bad because that just drives up cost or something. So the whole system relies on workers being paid less and less while expecting them to spend more and more. And then we have the shrinkflation and everything on top of that because if the prices would keep creeping up a few percent a year people would lose their minds...
Wages are going up faster then inflation
Wages have outpaced inflation for decades, now.
i got an ad for this video on this video..
How do we spend less on food or rent? Inflation is great for commodities but not for basic needs. I don't know about older generations but as a gen z young adult, most people I know already have too many days at the end of their money. I'm already skipping meals, but I'm considering alternate day fasting to save money.
2% is our 10 day inflation in Turkey 😢
I use the lira in my tires.
Still, 2% inflation is incredibly high over just a decade.
@@MBarberfan4life10-day, not 10-year.
Be thankful you are not Argentina ? ??
So by the logic that these economists are talking about, thats even better because it gives people even bigger reason to spend right? RIGHT?! Why wait people to spend their money every few months when you can make them spend every week! Inflation is so good we all love it yes give it to us!
This video was predicated on the notion that people spend more when prices are up and spend less when prices are down. Think about that for a minute.
That’s not the idea. The idea is that people spend more now if they think they’ll have comparatively less to spend in the future due to inflation. As such, a small amount of inflation is good for the economy as it spurs people to spend rather than save.
The deflationary spiral is people seeing prices fall, then waiting as they think they’ll get fall even lower in the future. This does happen (Japan is a good example) and it leads to stagnation as people hold off on spending if there’s not an incentive to.
The basic idea is that punitive measures (losing value in your savings) work better than positive measures (giving people more purchasing power) to spur behavior.
I thought the same thing like, they can't be seriously that slow
Can't believe what I just watched. Is this real life?
@@nothere2994 Do people really do that? That's the idea, sure, but that does really happen, or is that just another dubious economics notion? I guess if you're buying a car, or a really expensive appliance, maybe. I know I wouldn't do that. I would be pleasantly surprised, and take advantage and buy whatever I wanted to buy, in fact I'd pounce. The idea that the typical consumer response to surprisingly lower prices that would be bucking the inexorable tendency towards higher prices, would be to sit back and not buy, and gamble that they'd go even lower seems absurd. So I just don't believe that. That is not what consumers do when prices are cheaper. It beggars belief, quite frankly....
It's also predicated upon the idea that employers pay more when they have higher profits, and only cut costs when profits slump. The businesses that do that are outperformed by the ruthless ones that do otherwise.
I would add a couple more points, just observations, feel free to point out mistakes:
1-inflation reduces the impact of the debt, both for people buying houses but mostly for states, as debts remain the same while it's impact is reduced in time, it's the point of the car in the cycle but looked from the opposite point of view it makes more sense. I ask 100k to buy a house now, I give them back in 30 years, knowing that in 20 years I'll potentially earn double the amount of money I earn now.
2- inflation grows the purchesing power of the single countries/states, more inflation means more cash available to spend, it evens out internally, but externally if country A grew more than country B, A can buy more stuff from B now. That is what leads to move jobs to poorer countries too.
3 - it's debatable, but more moneys going around it does lead to better products. Electric cars or renewable energies would be harder to make to a lower scale. It obviusly rely on the world economy not being equally distributed. Computer Processors factories are coming out all over the world now, that is a consequence of countries being rich enough now.
That's not the reason. The reason is it's a fiat currency system and so they just print money.
I wasn't taught any of this in school. That deflation chart doesn't make any logical sense to me. I'm also curious about why going below 0% is a challenge. I'm uninformed about economics
It is possible to go below zero. Japan, Switzerland, Sweden, Danemark and the Euro zone all did it. This is missing from the video, but the mechanism is the same, lowering interest rate encourage spending.
its a challenge because governments being net debtors have an interest in stealing from you, so they spend more than they tax which means there's an ever increasing amount of currency in circulation
@@elijahschnake3863thats not how thst works, if the us spent 9000000099t dollars tommorow they would have to borrow it as the fed doesn't just give them money
@@elijahschnake3863thst not how the gov works
@@JZTechEngineeringin an ideal setting maybe. in a setting where most governments run massive debts which they want to inflate away, that is absolutely correct.
greed and lack of taxation of the richest
I feel like you forgot to mention that if wages don't go up while inflation is still high then that's what leads to the most dramatic impact on everyday purchases. Especially when you consider the Virtuous Inflation Cycle; you'd expect wages to go up, but adjusted for inflation wages have stayed stagnant.
I'm not convinced. I think the important thing to look at is purchasing power. If you get a wage raise but it only compensates for the increased prices, what's the point?
Also, I'm not sure people think "hmm, this car will cost more next year, I should buy it now" with low inflation at 2%. It sounds like a logical thing, but one that only someone with economic knowledge thinks about. Especially if you expect your wage to grow.
Also, commodity like cars, TVs, or washing machine prices are supposed to go down with time as they newer models come out and older ones go "obsolete", aren't they?
I'm not an expert so correct me if I'm wrong.
Rising prices don't hurt everyone, they make the billionaires richer. And that's the goal of the system.
Falling prices hurt everyone when it’s deflationary though in the system… so yeah ur point doesn’t make sense
actually some billionaires get poorer. If they are no longer in business and have retired their capital becomes worth less.
@@raquetdude except it doesn't when companies can maintain profit. but the shareholders get less dividends so why would they ever want that.
It’s make believe so greed can exist.
Greed exists without the necessity of inflation or financial systems, I fact it is the opposite. They exist because of the inherent greed of people.
Will you give me your home for free? You aren't greedy are you?
@@aolson1111 Yes people are greedy, thats why we should not be using money that is controlled by people, because we know greedy people will use it for their own benefit. You think some small company boss is greedy when they try to do some little tricks to gain 2% more money? Wait until you find out would bankers and government get little tingles to try do little tricks too to gain also 2% or more.
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That’s something great to be understood, thank you so much!
Overall they pretty much did under the gold standard. They fluctuated but generally remained the same average over the long term. Fiat is a disease costing us greatly.
The gold standard just experienced the same problems they laid out. No control over money supply means deflationary spirals. How is fiat the problem when the gold standard experiences these problems?
@@daviddavidson6278 Gold standard self regulates, no need to 'control' the money supply. You're a Keynesian fiat thinker, your frame of thinking is all distorted like a fish that doesn't know it's in water.
@@michael2275 gold standard doesn’t self regulate, what’s the difference between a GS system where the amount of gold doubles and a USD system where the amount of USD doubles.
@@daviddavidson6278 Gold consistently has had 1-3% inflation through history naturally regulated by geology and advancement of technology. Also, if more gold is found the spending power goes to the miner who has costs so must sell not a government that monetizes it's debt money into existence by the central bank at will and inevitably abuses it causing huge inequality like now. You're totally a fish that can't see the water lol.
Inflation is just hidden taxation. The government ends up with more money (by printing) while devaluing your money. This is the same as just taking more money away from you via tax.
In theory your government isn’t trying to devalue your money, they are all competing with other countries trying to devalue each others.
Not really. But if you want to view it that way then it is a 2% tax in order to avoid companies arbitrarily imposing a 5% hike b/c 2qtr reports missed target Profit levels.
It is a net good, in this version of Capitalism.
Not only is it a hidden tax, it's the governments way of spending without restraint. They can rack up massive national debt and then dilute that debt by inflation, effectively lessening the real cost of that debt.
A little inflation is a good thing..
Emphasis on "little".. here inflation is reaching 10%
Inflation is an invisible tax. It's the digital version of coin shaving 🤦♂
You should have mentioned that Inflation is also a means of counties getting rid of their overboarding debts. So in the end we still have to pay the price for all that government spending via this "hidden tax". Inflation serves the interest of everyone who owns hard assets or can access capital via cheap credit. But it mostly hurts those at the lower end of society. These again are the people who depend on social spending the most. Guess who they are electing? Politicians who promise increased spending and pile up even more debt.
There is an alternative to this inflationary debt based system. It is called Austrian economics and hard money. Societies and empires who used and maintained hard money (mostly Gold) throughout history could thrive. Those who overspend (for example on war) and debased their currency declined over time. It is our choice and if you look into history and pay attention to the signs you can see where this monetary system is going...
In other words, the central bank intentionally devalues the only accepted legal tender to encourage short term consumerism? And to protect the value of that sole legal tender, one needs to lodge it in deposit account in a bank that is regulated by that central bank, in order to accumulate interest to offset the inflation caused by that same central bank.
Hmm 🤔
Breaking news, inflation still happens without a central bank
@@spe3dy744 Systematically targeted inflation? I don't think so. If the supply of a certain good becomes more scarce, or the price of the good is below what the market is willing to pay for it without reducing demand, then obviously it's price will increase. But that's not intentionally targeted inflation or the systematic devaluation of a currency. This form of continuously targeted inflation is unique to fiat currencies which invariably have a central bank.
@@ronanmurphy98 What you described is how inflation happens in fiat and non-fiat currencies, the central bank is just there to make sure it doesn't get out of hand.
Sort of, but that's not the driving force. In the US, all the incentives point to investment. Whether it's the stock market, real estate, or starting a business, the US economy rewards investment in the US. Inflation is a way of simultaneously discourage the hoarding of cash, and encourage asset owning. They want Americans to invest in "the system" and all the "carrots" pave the way.
@@spe3dy744 you said something wrong I will correct you! In all seriousness it depends on what the alternative system is. Like, any type of money is only worth what people think it is, man.
Here's a better cycle: wages don't grow, prices don't grow, profits remain stable, everyone's happy.
Except the government and central bank
Except people don’t always buy consistent amounts, which lead to inconsistent revenue, which leads to inconsistent pricing reacting yo that inconsistency,
Which is why if everything is zero, you will have some areas or times of deflation or inflation, only the average can be zero. And since we don’t have many tools to drag things out of a deflationary spiral, it can easily go out of control.
But then, how will the government grow and obtain more power and spend more?
population increases so there will be more consumers thus more ptofit.
@@sivispacemparabellum5160 how do you have a unified currency across a region without a government backing it up?
Sure, have a private institution do it, they’ll just do the same things and the jobs of the government
"Ya, that's annoying," perfect summary.
0% inflation means increasing the money supply at the same rate as the increase in real productivity. We absolutely can have 0% inflation, in fact prices were stable in the US from 1796 to 1912 ($1 was worth slightly more in 1912 than in 1796). The reason prices can't stay the same since the 20th century is that we got enslaved by bankers :(
Sad we're taught math/physics formulas we'll never use or read ancient literature not to care about again. But no financial literacy!
We teach thst
Inflation is actually taught in basic econ class in college.
@@phoenix5054 College. Their argument is that this should be more basic than college, I guess. Personal financial literacy of macroeconomics of your nation's GDP in relation to Intl Trade Deficits in re the most recent Tariffs imposed by adversarial States as well as violation of trade agreements w/ long-time allies and how that relates to one's capability of purchasing pasta on spaghetti night, ugh jeez weren't you people even learning to read?!
@@Hollywood041I'm not American so I actually don't know if you have basic and mandatory Econ class in high school. But from where I came from, we do.
They managed to do an entire video about inflation without mentioning that it comes from the government expanding the money supply to pay for all the deficit spending....impressive.
This is exactly right. Liberals can't admit that because it would spell doom for large government spending programs. It's much easier to blame it on "greedy corporations".
Bingo!
Exactly
The annoying thing is, while the graphics you use tell a story of wage growth mostly keeping up with inflation, when inflation overtakes wage growth, it happens by A LOT. And when wage growth takes over, it’s by a minuscule amount. Our wages relative to inflation have rarely if ever reached back up to what they once were. Cooperate greed and deregulation allows companies to take advantage of the consumer and mask pure profit price hikes as caused by inflation, when that math just doesn’t check out. And because the average American is in such a tough spot for money, we can’t refuse purchases or refuse jobs that don’t make enough, because we’re backed into a corner.
Not a single word about money printing, by far the main cause? If the whole system is 1 coin = 1 apple, and you print 1 more coin, it becomes 2 coins = 1 apple. Suddenly, your coin is worth 50% and the other 50% goes to the one who printed it. At the moment when governments spend the freshly printed money, it’s still worth the same; inflation happens when the system absorbs it and adjusts to more money for the same number of goods, some time later. Thus, inflation is taxation without legislation.
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I think what you, and the people you put in the video, meant to say was: “a little inflation is a good thing, in a capitalist economy where everyone’s goal is constant growth”
(Which btw won’t be possible in most places a couple decades from now when there are climate wars and mass human deaths from weather events every other week.
If we keep going with growth and capitalism that is.)
6:30 Not even close to true. There are hundreds of billions of dollars that are sent to the Federal Reserve every night that the banks use - it's called the Overnight window. If the Fed simply charged a fee (aka negative interest rates) instead of giving the banks free money every night, then the banks would have to lend to someone else making a return.
You can easily fight deflation by printing money and distributing it to everybody via UBI. Maybe McMansions might still go low in price but essentials will have enough consumers.