HN Theater @HNTheaterMonth

Milton Friedman - Money and Inflation - https://www.youtube.com/watch?v=B_nGEj8wIP0

I think is under rated talk which explains complex stuff in layman terms.

I watched this video from Friedman just a couple of days ago and found it insightful on the topic of inflation: https://youtu.be/B_nGEj8wIP0

- Militarisation. Countries are spending a lot of defence.

- The move towards reverting globalisation(with rising unemployment, countries are looking inwards)

- Inflation (this is not going to end in the near future; inflation is the result of quantitative easing that was done multiple times. Here is a good explanation of that: https://www.youtube.com/watch?v=B_nGEj8wIP0)

- Differences among citizens of different countries are becoming prominent (the reason is the same as point #2 above)

⬐ aortega

I'm an old Argentinan and lived through many inflation and hyperinflation cycles already.

The cause is trivial: Governments are given the 'infinite money' machine and they abuse it. They abuse it like if they were primary school kids, thinking printing money to pay for stuff is a valid solution, its unbelievable but they truly did this for decades.

Then you think, if this is true, do they print money to pay themselves and become millionaires? answer is incredible: Yes, they do exactly that, and if you visit the house of any politician in Venezuela or Argentina, you see that they live like Silicon Valley Billionaries, next to the slums they have created. If they need money for anything they just add it in the budget and at the end of they year they just print it! I know it seems crazy but they do exactly this, since 1970. The results are obvious.

In our case is a little more sinister because its not enough to print money, they have to make all other money illegal, or else people would just stop using the fake currency. TLDR: They did exactly that, any currency except the one they print is illegal.

USA did this in the pandemic, and now you have the consequences. You can't print money from nothing, its that simple.

⬐ teeray

> they have to make all other money illegal, or else people would just stop using the fake currency

See: efforts to ban crypto

⬐ xadhominemx

The money supply-driven inflation you saw in Argentina is nothing like what developed nations are seeing now. Prices are spiking because real demand for semiconductors, slots at ports, oil, etc is outstripping supply, causing prices to go up. It’s possible that the situation will devolve into a wage-price stagflationary cycles similar to what Argentina and other emerging markets have experienced over the decades, but that is not what is happening now.

⬐ walkhour

You are simply stating something without backing it by any evidence.

How exactly do you know all the money pumped during the pandemic hasn't contributed to the price spikes and that the sole reason is real demand for semiconductors, oil, ... .

⬐ xadhominemx

There is no controversy regarding shortages of semiconductors, logistics capacity, and more recently oil and gas. It’s hard to imagine anyone could be unaware of these issues.

⬐ walkhour

I'm not denying this, I think supply side shortages tend to produce inflation. Please see my response again. But to clarify, you said:

> The money supply-driven inflation you saw in Argentina is nothing like what developed nations are seeing now. Prices are spiking because real demand for semiconductors, slots at ports, oil, etc is outstripping supply, causing prices to go up

How do you know the money pumped into the economy hasn't contributed(I'm not saying it's the sole cause) to the price spikes?

⬐ xadhominemx

Because money supply had the big upward adjustment in 1H2020 and inflation kicked in in 2H21 (same time as the supply shortages), and wage growth is not very high. Money supply growth probably has some impact on deflation not happening two years ago.

⬐ aortega

>money supply had the big upward adjustment in 1H2020 and inflation kicked in in 2H21

Inflation is not an instant phenomenon, it takes time from the point of money generation, to money distribution, to inflation. Money don't travel at the speed of light, and that delay you see is exactly what you would expect.

⬐ cm2187

…pretty much the lag Friedman mentions in the video.

And no, the money printing didn’t happen just in H1 2020, it has happened continuously since the start of the pandemic and the fed is still printing a ton more money right now despite being alarmed about inflation.

https://www.federalreserve.gov/monetarypolicy/bst_recenttren...

⬐ walkhour

The sum of the money supply in 2H2020 and 1H2021 is similar to the money supply in 1H2020, so I don't think the fact that inflation kicked in 2H2021 makes your case. Also note the money supply was higher in 2H2020 and 1H2021 than in the semesters previous to 1H2020. Besides there's no contradiction in inflation lagging an increase in money supply.

In addition, wage growth not being high doesn't prove money supply didn't contribute to inflation. Inflation and wage stagnation can happen.

> Money supply growth probably has some impact on deflation not happening two years ago

Similarly to my first comment, this needs to be backed, you're simply stating it.

⬐ aortega

I'm not and economist, but I think its quite obvious that there is a difference between a localized price spike from a particular asset, another is all assets increasing in price uniformly. The second is not all assets becoming scarce at the same time, but the devaluation of the currency used to measure the assets' price.

⬐ xadhominemx

No, what’s happening now is that real demand is higher than supply across many supply chains. If it was just money supply, there wouldn’t be widespread shortages across virtually every supply chain.

⬐ leereeves

It doesn't have to be one or the other. It's quite possible to have inflation along with the shortages that are causing price spikes for particular products, like GPUs and cars.

⬐ xadhominemx

Inflation starting showing up when the supply shortages arose, well after the major waves deficit-funded stimulus ended.

⬐ aortega

You can't explain inflation as the widespread shortage of everything at the same time.

⬐ xadhominemx

Aggregate demand is very high due to 1) global shift of consumer spend from services to goods, 2) global fiscal stimulus, 3) wealth effect from booming asset valuations (though this should be fading). Global supply is lower than it should be due to 1) low levels of capital investment over the past 3-5 years in several key industries (eg, semiconductors, US shale oil) for idiosyncratic reasons, 2) COVID-related reduction of port and air-transit capacity, 3) overall low levels of commercials capital investment in 2020 due to COVID-related financial prudence, 4) impact of the Ukraine invasion on oil and gas supply

⬐ aortega

It might be. But also its the same excuse our government gives for prices increases: it's always 'external factors' and never 'we just printed a huge bunch of pesos'. What I think is happening is that there are virtual price-controls and if you implement price-controls to fight inflation, there is only one outcome since it first was done by the Hammurabi code 4000 years ago in Babylon: shortages.

⬐ aortega

You can't explain inflation as the widespread shortage of everything at the same time.

⬐ berns

Exactly, just like Biden accusing the meat oligopolies for price hikes. Hey, lets pour another billion to solve the problem. And corporate greed and all that nonsense. It's a carbon copy. Yet many believe it.

⬐ xadhominemx

Ok I’m not sure what the excuses the Argentinian government made in the 80’s, but the current widespread shortages are real and they are causing prices to go up.

⬐ systemvoltage

> USA did this in the pandemic, and now you have the consequences. You can't print money from nothing, its that simple.

When it was going on, you couldn't speak against it. Every single comment on HN or otherwise, that brought up inflation was being casted as right-wing or consipiratory, and therefore flagged. If you tried to speak about inflation just in last year, March 2021, you wouldn't be able to on HN.

Why did we do this?

⬐ WaxProlix

Here's a search for comments with 'inflation' in them between feb and may of '21.

https://hn.algolia.com/?dateEnd=1621296000&dateRange=custom&...

There seem to be plenty of comments discussing inflation in the first ~10 pages which are not flagged/dead/downvoted to oblivion.

Was there maybe some other reason the posts you're thinking of could have been cast as right-wing or conspiratorial?

⬐ systemvoltage

It was very difficult to say anything. I’m surprised you found some exceptions, I was just going by the memory. I distinctly remember it was such a struggle to express.

Even the mildest comments about inflation were straight out flagged as it was against helping the struggling lower-middle class. I think HN is still better, it was far worse anywhere else (Reddit).

⬐ aortega

I think its explainable because back then you were in the part of fuck around, and now you are in the part of find out.

⬐ systemvoltage

I reluctantly admit, I laughed pretty hard at this.

⬐ ephbit

> The cause is trivial: Governments are given the 'infinite money' machine and they abuse it. They abuse it like if they were primary school kids, thinking printing money to pay for stuff is a valid solution, its unbelievable but they truly did this for decades.

Primary school kids? I disagree. As I wrote above, they know exactly what they're doing.

It's just the easiest way for politicians, as long as citizens don't demand honest policies.

Honest policies means: ressources can only be allocated once. So because they're scarce, politicians (would ideally) have to decide where to cut allocation and where to increase. But cutting allocation gets them bad rep, so they avoid it.

So instead they borrow/print money and spend it as they promise prior to elections. Which does exactly the same thing under the hood. Printing money allocates _less_ ressources to everything _but_ those things where the printed money goes. It just dilutes the value, so the amount by which the whole pool was diluted can be freely allocated.

It's relatively easy to do. Currently, because people have difficulties arguing against it and there's a deeply ingrained culture that justifies it, there's not much opposition.

That's why they do it.

⬐ Jerry2

I'm reminded of this article from 2020 [1]:

>The United States printed more money in June than in the first two centuries after its founding. Last month the U.S. budget deficit — $864 billion — was larger than the total debt incurred from 1776 through the end of 1979.

and this is a good graph of our money supply (M1) [2]

The inflation is here to stay. And it will only get worse. Fed's recent 25-basis point rate hike won't do anything to curtail the inflation.

[1] https://blog.panteracapital.com/two-centuries-of-debt-in-one...

[2] https://fred.stlouisfed.org/series/M1SL

⬐ jdhn

The Fed is 100% stuck, and they know it. The idea that raising rates 25 bps multiple times this year will do anything to inflation is laughable, and the fact that their quantitative tightening is just letting MBS's run off the balance sheet naturally instead of selling them won't do anything towards bringing housing prices down, or even steadying them.

⬐ shostack

Is this what the initial signs of hyperinflation look like? Are we at risk of seeing that? Paired with geopolitical movements to try and replace the dollar as reserve currency, that feels like it could reach a rather bad tipping point, especially if the US finds itself in a position where it cannot just print its way out.

⬐ md_

No.

The “famous” cases of hyperinflation—Weimar Germany, Argentina, etc—all come with extraordinary political instability as well. I’m not an economist, but it seems to me safe to say that hyperinflation is as much a political phenomenon as it is a monetary one.

Now, it’s certainly possible that the US is facing such political risks, what with efforts to disenfranchise large groups of people, entrenched rule-by-minority, and one of the two major parties expressing strong support for anti-democratic ideologies. (See https://carnegieendowment.org/publications/86352, for example.)

But when people express concerns about hyperinflation—without mentioning the political component—it’s a bit like having a suspicious growth on your shoulder, and worrying that the diagnosis might come back that you’re not going to be able to walk around shirtless anymore.

⬐ slowmovintarget

There's no article at that link. I did find the article here: https://www.smerconish.com/exclusive-content/how-can-america...

⬐ md_

Ugh. Thanks! :)

⬐ MiroF

The deficit is not printing money, because the money is borrowed.

⬐ md_

In May 2020, the definition of M1 changed to include savings accounts that were previously excluded. If you look at the “old” series it’s _much_ less alarming: https://fredblog.stlouisfed.org/2021/05/savings-are-now-more....

Federal debt isn’t really directly related to what you are concerned about, since there’s no monetarist argument that issuing more debt itself is inflationary. (If it were, then private debt would also be inflationary, which is nonsensical!) The only reason debt would be inflationary is if it’s bought by the Fed, printing money. But a) we already covered that, with money supply (not as scary as it looks!) and b) the % of debt held by the Fed has only increased slightly (https://fredblog.stlouisfed.org/2017/03/the-depth-and-breadt...).

⬐ flembat

Inflation is a stealth tax, imposed via central banks.

⬐ larrydag

"The real tax on the American people is what government spends" -M. Friedman

⬐ sfe22

And the hurdles it creates. The government may spend $100k on a bureaucrat that causes individuals and companies to spend millions to overcome.

⬐ xyzzyz

Indeed. The real tax is not just what government spends, but also the deadweight loss of forced reallocation.

⬐ gwmnxnp_516a

The definition of what is inflation depends on the economic school of thought. In the case of the Austrian and Chicago economic school of thought inflation is the increase of money supply caused by the central bank that allegedly results in systematic and non temporary increase of CPI consumer price index and money loss of value. There are school of economics, such as Keynesian that argues that a limited and controlled inflation is a good thing for increasing market liquidity, avoiding deflation and promoting a full employment policy. On the other hand some economists believe that some inflation is also good for weakening the currency, boosting the exports and reducing the imports. Inflation becomes problematic when it is used for financing uncontrolled government spending like in Argentina, Turkey and Lebanon as making money out of thin air is the easiest way to a government to raise money since raising taxes can result in massive opposition; taking loans denominated in foreign currency may requires good credit rating and reasonable credibility; austerity measures, such as cutting government spending, unreasonable subsidies or unreasonable government employees wages may also result in political clashes.

The raise of money supply is not be the only cause of CPI and raise of cost of living as supply and demand problems around the world may also increase the CPI. For instance, we also should remember that we have faced several unexpected black swans, such as the pandemic; supply chain shutdown around the world, specially in Asia, that the West has become too dependent on; massive flooding in China what prompted the country to hoard grains; massive droughts in USA (California) and south of Brazil, both countries accounts for great deal of the world's food production; and finally the current war in Europe reduced the amount of natural gas, crude oil supply, fertilizers and wheat in the global market. Both countries involved in the current war accounts for about 1/3 of the world wheat production. Too much foreign dependency can also affect the CPI, since any currency devaluation against the dollar increases the price of everything if the country does not produces enough food to cover its needs like Lebanon.

⬐ lamontcg

Inflation is stealth debt relief.

⬐ int_19h

It is, but that largely benefits the middle class (which has much better access to debt), not people living paycheck-to-paycheck.

⬐ lamontcg

People living paycheck-to-paycheck get larger paychecks out of an actual wage-price spiral so they're ultimately no worse off or better off. It is almost right there in the name.

What doesn't work for them is when there's massive asset bubbles like we've had for 30 years, but their wages are held flat.

⬐ moltke

Right. Inflation makes your rent go up which for most working people is already significantly higher than their taxes.

⬐ neffy

Not really. It has three different causes:

1) Excessive lending and consequent increases in the money supply by commercial banks. 2) Governments printing money without any regulatory compensation to prevent 1 3) Shortages in goods and supplied measured by the CPI, such as food.

Right now we have 2 and 3, and some countries will probably have 1 as well..

⬐ hitovst

The debasing of fiat currency is a "stealth" redistribution of wealth, regardless of the pretenses for it.

⬐ smt88

By that definition, every price change is a redistribution of wealth (which is technically true).

The question is whether it's intentional, and it's impossible to imagine the people in charge of every world government would be enraging their citizens by creating inflation.

Simpler: people saved money during the pandemic at the same time as supply chains were disrupted, leading to high prices.

Every government in the world has the same problem.

⬐ HWR_14

How is it redistributing wealth? From who to who?

⬐ brazzy

From creditors to debtors.

⬐ Geee

Simply put, from the poor to the rich. It's a major cause of wealth centralization.

⬐ cloutchaser

From whoever is furthest to money creation to whoever is closest.

Ever wonder why record stock buybacks and record ceo pay are happening right when QE is happening?

Why stock markets and PE ratios are at record highs? Why there are record amounts being invested by VCs? Why commodity prices have been rising?

It’s not because of evil capitalism. It’s because those people are closest to where money creation happens. The 1% aren’t getting richer because of the exploitative nature of capitalism, but because they have access to new money.

⬐ _0ffh

>From whoever is furthest to money creation to whoever is closest.

Precisely! You might also want to mention that there's a name for that, the Cantillon Effect.

[Ed. Fixed spelling according to sparkie's correction.]

⬐ sparkie

Cantillon has 1 i in it.

⬐ _0ffh

Right, thanks! I actually did check first, but adamsmith.org encouraged me in my mistake (first hit on duckduckgo, same typo "Cantillion").

⬐ kevin_thibedeau

To those controlling interest rates from those who don't have any access to low risk investments.

⬐ JumpCrisscross

> from those who don't have any access to low risk investments

Treasuries, the lowest-risk dollar investment, are the first to lose value with inflation. And everyone has access to Series I bonds.

⬐ howinteresting

Redistribution from creditors to debtors is good. And it's not that stealth given we're talking about it.

⬐ davnn

It doesn‘t look like it as it appears that inflation is contributing to wealth inequality. Do you have any sources for your claims?

⬐ macinjosh

Inflation makes saving money a losing proposition because it literally rots away in your bank account. How is some one supposed to save for college, a house or to start a business if they are constantly losing money?

Meanwhile rich people don't care because their immense wealth lets them ride out inflation easily. In fact, in some situations it may be to their advantage because the value of other assets they hold (real estate, metals, art, etc) often increase in value during inflation.

⬐ sokoloff

You save for things that are 5+ years away by investing at least a portion of it in equities. Investments for goals that are 20+ years away should be over 80% in equities, IMO.

⬐ epicureanideal

In other words, the only remaining way to “save money” is to buy assets largely owned by the rich and further drive up the inflated values of those assets.

⬐ xyzzyz

Equities are not largely owned by the rich. They are mostly owned by pension funds. The "rich" do not own majority of the assets (though, of course, they own very disproportionate amounts of them, relative to their numbers, as that's what the word "rich" means).

⬐ int_19h

And then whenever any policy that would reduce the profits from stock trading is floated, it's shouted down on the basis that "it'll hurt your retirement". A very cunning trap.

⬐ epicureanideal

Exactly. It’s how any corrupt system is maintained. A dictator puts some inner circle of favored people under him, and then a larger layer but still small as a percentage beneath that, and so on all the way down, so that every layer has an incentive to support him and suppress the layers beneath. Add to that disproportionate influence through control of the military, police, and or media and even a 1/5 or less population can suppress the rest. Obviously our economy isn’t run that way but the same principle applies. We align the incentives of each person to act or vote in ways that benefit the already rich.

⬐ epicureanideal

Hmm, this article seems to say they are.

"The wealthiest 10% of Americans own a record 89% of all U.S. stocks"

https://www.cnbc.com/2021/10/18/the-wealthiest-10percent-of-...

Somewhere I read that the top 1% owns about 50% of stocks.

⬐ sokoloff

Said differently: investing in ways similar to how the rich invest seems like a generally sound strategy, all else being equal. (They don't keep much money in passbook savings accounts.)

⬐ epicureanideal

Sure, but really the reason we should invest like the rich isn’t that it’s sound for rational economic reasons, but that the rich will use their influence on politics to ensure their investments do not decline as much as they would without interventions.

⬐ sparkie

Those who can afford to put 80% of their savings away for 20 years are those who are least vulnerable to the effects of inflation.

The people most affected are those who have most of their assets in cash or cash equivalents. The low and minimum wage earners who can't afford to invest in stocks. Those who are attempting to enter the property ladder who need to save a deposit for a mortgage and see that their savings are declining by 7.5%/year.

At an inflation rate of 7.8%, it takes only 9 years for the price of everything to double. That minimum wage earner now has had half of his hard work amount to nothing, but the house he wanted to buy is now twice as expensive.

⬐ sparkie

That's precisely it. Inflation distributes wealth from those who have cash-backed savings, earn fixed wages, or have property leased under fixed rents, to the privileged who gain earliest access to the newly produced money.

When the stock of money is increased, it gets to be spent at face value that the money has at that time by those who are first to receive it. As the new money works its way through the economy, prices rise in response to the increased availability of this 'easy money'. The end result is that the people who are last to receive the new money get to spend it after the price of everything has already increased. If they already had savings prior to the increase in the supply, their savings now buy less than they would have prior to the supply increase. Since in most cases, people laboured to obtain this money, their time of labour is effectively being pilfered by those who have the ability to produce new money.

It is known as the Cantillon Effect, after Richard Cantillon described it in his Essay on economic theory[1]. Although it was known long prior to Cantillon's explanation, his is the earliest work which explains the process by which this happens.

Where Cantillon says "Mr. Locke lays it down as a fundamental maxim that the quantity of goods in proportion to the quantity of money is a regulator of market prices," I believe he is referring to 'Further considerations concerning raising the value of money,' a letter by John Locke[2].

[1]:https://mises.org/library/essay-economic-theory-0 [Part 2, Chapter 6].

[2]:https://avalon.law.yale.edu/17th_century/locke01.asp

⬐ Spooky23

Most people have none of these things.

The core argument of a reactionary anti-inflation position always pretends that money doesn’t matter in real terms. “Your debt is worth less, but…”

So when a few years of 7% inflation doesn’t trigger hyperinflation, but does reduce the real value of my debt by 40%, that’s good for the debtor, bad for the creditor.

We’ve seen the results of decades of monetary policy that ignored factors like unemployment and soley focused on inflation. That is, a plutocracy where almost a third of GDP is medical care, transportation, and military spending. Time for something else.

⬐ throw0101a

> The debasing of fiat currency is a "stealth" redistribution of wealth, regardless of the pretenses for it.

The "debasing of fiat currency" reduces debt burdens, and I would think that middle- and low-income folks are probably more likely to have debt (student loans, mortgages). A low-inflation or even deflationary environment is probably a worse thing for the non-rich.

⬐ WalterBright

> reduces debt burdens

Not really, because inflation causes interest rates to go up correspondingly.

⬐ gizmo686

Which is not relevant to most consumer debt, where the interest rate is set at the start and locked in for the life of the loan.

⬐ WalterBright

Fixed rate debts interest are set to accommodate the current inflation rate plus higher values to accommodate the risk of inflation increasing.

Lenders are not fools when it comes to inflation.

⬐ loeg

Quite a lot of consumer debt is variable rate (credit cards, ARMs, ...), or nominally fixed rate, but rolls over somewhat frequently (car loans, mortgages as people move or refinance, pay later spending, etc).

⬐ gruez

>and low-income folks are probably more likely to have debt (student loans, mortgages).

Source? For student loans at least, the amount of debt held is positively correlated with household income, not negatively like you suggest. https://www.urban.org/sites/default/files/styles/optimized_d...

⬐ throw0101a

The theory at least:

> If wages increase with inflation, and if the borrower already owed money before the inflation occurred, the inflation benefits the borrower. This is because the borrower still owes the same amount of money, but now they more money in their paycheck to pay off the debt. This results in less interest for the lender if the borrower uses the extra money to pay off their debt early.

* https://www.investopedia.com/ask/answers/111414/does-inflati...

(The article mentions some benefits to lenders too.)

⬐ kaashif

Stimulating aggregate demand past output with monetary policy is one way inflation can happen, and central banks do have control over that. That can be considered a stealth tax by central banks.

But sometimes output actually does decrease and that isn't due to central banks.

The price of gas in Europe, for example, increased because there was a cold winter, a lack of wind, a recent issue with the supply due to Russia's attack on Ukraine. Not all increases in demand are due to central banks, and not all inflation is due to changes in demand.

⬐ stevebmark

Required reading: "Shock Doctrine" - the repeated disastrous implementation of Friedman's ideas, and the Chicago school of economics / the "Chicago Boys," often to stop inflation. See also the "Berkeley Mafia."

⬐ Geee

Another effect of inflation is that people are forced to invest and take on risk, in order to not lose their savings. I think this has a major effect on workforce productivity and mental health. Everyone has to watch markets and worry about their savings. Active investing is like having an extra job.

I don't think that inflation can be 'cured' in the current monetary system. Like he said, there is a cure, but there is no will. It is impossible for a society to resist the temptation of creating more money.

⬐ pid-1

I've lived in Brazil during a few moments of inflation and it's actually the opposite.

Our central bank will hike basic interest to control rising prices. That makes treasury bonds very attractive investments, while slowing down the rest of the economy.

⬐ Tarsul

the elephant in the room (that is really overlooked in these discussions) is that a lot of the current inflation is not coming from money policies but rather from supply side issues. E.g. gas and oil due to the ukraine war (also wheat, nickel etc.), less microchips from china due to its handling of covid (lockdowns) and the change in consumerism due to covid which resulted in more demand for things like bicycles, office hardware for home office, baking machines etc. etc.

So why is this supply side aspect often overlooked? Not so much because it is not known but rather because a lot of crisis handling in the last decades came through to the central banks and thus monetary policy. However, this can only be one aspect. We need more classical invention from governments wrt taxes, subventions etc. So, basically, what nearly every economic problem is about: inequality and reallocation of resources.

⬐ xadhominemx

It’s a combination of supply side issues and demand which remains heavily tilted towards goods (vs services)

⬐ sjmm1989

> is that a lot of the current inflation is not coming from money policies but rather from supply side issues.

The caveat to this argument is that supply side issues only affect certain portions of the economy. Printing money affects all of it, no matter what. This is why it's often the sole thing looked at, because while supply side issues do cause problems, they can be avoided entirely by finding a new supplier.

You can't however, avoid the money that was already printed. You can try to get the politicians to avoid the printer, but good luck.

So in regards to me for instance, supply issues with many of the grains out there just doesn't affect me. Why? I don't use them. I have no need for them anymore for the most part. Anything they might contribute towards my lifestyle is so insignificant that I can literally say I don't need grains.

So that means when there is shortages of these grains and the rest of you are clamoring for them; I won't be. And when the prices of these grains go up and you are all having to pay for them; I won't be.

Therefore, the inflation to costs of grains, doesn't affectt me. At least, not directly. Indirectly it may affect me, like an employer deciding they don't need that many employees when they have to pay X amount more for the bread that often just gets thrown away due to mold.

Yes, that scenario could actually happen in a real world situation. If food stuffs are becoming more expensive, the boss is going to cut costs in other ways, or find new ways to gain more money. Possibly both.

So. Supply side isn't false, but it's not the end all and be all like you saying with your complaining about inequality and reallocation of resources.

The reality is that up until very recently; there was no need to readjust our supply lines. It has nothing to do with whatever fantastical idea you have cooking up in your head there, because ultimately I am correct in saying that you all don't need to have everything. Not every single thing that exists on this planet, needs to be yours. Or anyone's for that matter. This is part of why I brought up grains. They are an item that lots of people use; but not everyone actually technically needs it. There are ways to get around using those grains, or avoiding them entirely without issue.

So a question to you would be this. If I am not getting my 'fair share' of grain, am I being made unequal? How so? I don't use them. Perhaps I could trade them with someone who does, sure. But perhaps they don't have something I want. Trade it for money you say? Okay, sure; but your society is automatically delegitimized on the grounds of equality then; since you can never truly make people equal through money. Someone will always be able to hold onto more of it than others can. Unless you make that illegal... which would make you the problem in the eyes of everyone who holds any sort of money.

See. It's not about 'supply lines'.

It's simply just about people being people and thinking they need to have everything at every god damn moment in time, and nothing less.

Here's the truth of it.

NONE OF YOU NEED:

1. Avocadoes. These are supporting Cartels now down south, so you shouldn't be buying them from there anymore anyways, if you are a logical person that is... (I know this one might trigger some people, but that's kinda the point. You don't actually need this food in many countries it doesn't grow naturally in. There are other foods folks.)

2. A wide variety of specialty grains. These are often ridiculously expensive to transport and ship around, because even when processed this stuff gets heavy. Most of the cost attached to these things is all the processing done to them. This is still yet ignoring some main grains like wheat, oats, barley and even rice or corn. (Yes, these last two are technically grains.) Even if we only ever used the mainstays, and avoided all the 'special' ones, we would still be spending far too much money on keeping this supply chain running as it does. Meanwhile, every town and city could have their own local farms churning out the actual amounts of grain and flour that people actually need. With a cap and trade system attached to this, you can effectively keep these items price values normalized. Thus increasing the affordability for anyone who might want these things.

3. Imported foods in general, though not all. This one is tricky, but much like the specialty grains and avocadoes; there are plenty of foods that we don't really actually need to import. We could grow them here instead via interesting methods to replicate the climate they want. (Where ever 'here' is for you, etc.) Basically all the same things apply. The more these things are travelling or being processed to get to your mouth; the more they are going to cost.

And notice I haven't even began starting to talk about Meat yet? There is a reason for that. It's the same reason you use for your own comment. Veggies and other non-meat products are often overlooked by people who focus too fiercely on meat. Those same people often don't realize that many of the products we feed these animals, are NOT the same products we feed ourselves. We don't give them the best cobs of corn. We don't give them the nicest grains and greens. We give them sileage instead. (rotted/fermented grains/greens) We give them the cobs of corn that people won't buy. We give them everything we won't use, because it turns what is still food to them but waste to us into more food for us.

But they ignore all of that, due to their own biases. And it takes people like me who see both sides of this issue for what they are, and call you all out on it.

So, Tarsul.

It's not a allocation problem. It's not even an equality problem. Yes we could do better on those things; but they aren't the source of the problem. The fact of the matter is that when you increase the total amount of money flowing through the system, you get a variety of effects that have to do with it.

1. The greedy see a way to get more money. They charge more, since there is more. If supply happens to be lower than demand, then they make even more money through doing this. But they do this regardless. In normal times, we often just call this 'passing on the buck'. That term applies to a few situations really.

2. Governments often give that printed money to all the wrong people in the hopes that it will trickle down through economic activity. And in some regards they are correct. It will trickle down, somewhat. But trickle is definitely the right word in regards to the speed of which it changes hands. It's slow, because as I said earlier about money; those who have it will generally find ways to keep it longer. Longer than they should be, or ever should have been able to since it wasn't properly earned, but given.

3. Since that money isn't free even when printed; it affects the total worth of our dollar to boot. Between the automatic inflationary effects felt, and the interest the government will need to pay back to the banks they printed it through; this just increases the speed of which that inflation occurs.

Between lowering the worth of the dollar in general, plus the increase of money supply overall thus lowering the worth of the dollar even further; supply side issues are just not that big a concern when it comes to dealing with inflation. The only time they truly become a concern is when legitimate demand overpowers supply. Note I say legitimate, and not just demand. The key difference here being the point of much of what I have said up til now about supply side issues.

We just don't actually need many of those things people want. Like it or not, there are other options. Sometimes better options.

In regards to global supply lines, there are other options if governments were willing to make use of them. But they generally aren't. And then there comes the final point to this all...

Governments aren't in charge of absolutely everything, and that's probably a good thing; but right now it's not so much. Why? Because the private companies that don't want to change appropriately are being the hold backs in regards to supply lines. And that right there is the only reason your comment has any validity whatsoever. Literally.

Businesses of all sorts need to get their act together, or step out of the system entirely. Governments need to get their act together as well, or risk being forced out of the system entirely. The both of them together bungling everything the way they do, is why we are inflating our currencies, but Government has more control over things than businesses usually do; so they get the immediate blame. Always.

⬐ ephbit

I completely agree.

> Businesses of all sorts need to get their act together, or step out of the system entirely.

Governments can enforce this. But whether they do, depends upon (in democratic countries) people/voters wanting them to enforce.

> The both of them together bungling everything the way they do, is why we are inflating our currencies, but Government has more control over things than businesses usually do;

As I see it, there's a lid on how much governments can do. It's their voters. Voters have conflicting opinions (within an individual person) and are not honest to themselves about or aware of their priorities.

Example: voters (as employees) want a big pay check from a big corp near them .. on the other hand they want protection from the environment being polluted. What do they want more, probably the former.

⬐ walkhour

It's funny that you think supply shortages are being overlooked. It seems to me a whole camp of economists thinks it's the sole cause of inflation.

And then there's another whole camp that thinks pumping money into the economy is the sole cause, or at least orders of magnitude more important than any other cause.

⬐ Barrera

Friedman mentions Germany post-WWI as an example of extreme inflation. The German hyperinflation is often cited as a contributing cause for the rise of Hitler. However, Germany was well into deflation, to the tune of -9%, by the time that Hitler became Chancellor. The German hyperinflation turned out to be... transitory, lasting just 2 years from 1921 to 1923:

https://en.wikipedia.org/wiki/Hyperinflation_in_the_Weimar_R...

Credit for ending the hyperinflation is usually given to the introduction of the "Rentenmark," a currency "backed" by land.

https://en.wikipedia.org/wiki/Rentenmark

Yet this idea has not been challenged to the extent that it should be. How does the introduction of another currency scheme cure inflation? And in such a dramatic manner? Is it possible that inflation, rather than being a monetary phenomenon as Friedman famously asserted, is actually a psychological phenomenon?

⬐ md_

I'm far from an expert, but my understanding was that Weimar Germany did cause hyperinflation by printing Deutschmarks. But there's a really interesting point here:

They printed Marks to buy foreign currency with which to pay off war debt.

So, yeah, if you just run the printing presses on the Mark to buy, say, GBP, then the Mark will indeed lose value vs the Pound.

Critically, this scenario can't happen if all your debt obligations are denominated in your own currency, as in the US. The scenario where the USD experiences hyperinflation because the Fed has to crank out ever more money to pay off Treasury obligations simply cannot happen, but it's a fairy tale used, as best as I can tell, to scare gullible daytime TV viewers into buying American Liberty Coins.

⬐ lamontcg

As an actual contrarian, I'm pretty certain the Fed is going to slam on the brakes hard in the next coming few years and we will switch rapidly to deflation/depression.

The wage increases are going to cause exactly this kind of panic and the Fed will be forced to act. They're reacting somewhat slowly right now due to the pandemic/war. As soon as we have those kinds of stresses in the rear view window though they're going to start to hammer on the brakes.

Be careful what you all wish for. I think its going to eventually be worse than 2008.

⬐ rini17

No inflation - strictly unchanging amount of money in circulation - means your income would be going up and down depending to economical situation. Would you accept that?

⬐ larrydag

At 11:00 there is a chart of the U.S. money supply (with CPI). Here is the current money supply (M2) chart produced by the Fed.

https://fred.stlouisfed.org/series/M2SL

⬐ baxtr

Note, that they changed the definition in May 2020…

⬐ throw0101a

There were technical changes to definitions:

* https://fredblog.stlouisfed.org/2021/05/savings-are-now-more...

⬐ pgwhalen

Thank you for this. However, this article is talking about moving savings deposits from M2 to M1, and the graph of the commenter you are replying to is one of M2. Therefore, the graph would not look different had the definition change not happened, correct? Because M2 includes M1 by definition.

⬐ shimonabi

Inflation is not good, obviously.

The cure in the past was to basically destroy some of the jobs so that people won't be in a position to bargain for a higher pay.

There is an ongoing argument if the cure is worse than the disease.

⬐ whatever1

7% inflation is orders of magnitute better than 40% unemployment. Specially if you are the US and everyone is begging to buy your freshly printed dollars.

⬐ Farfignoggen

As far as supply of parts relates to inflationary tendencies and in Intel's case that lack of Chip Making capacity is directly related to Intel's decision to pursue Share Buybacks instead of investing in new Chip Fab Capacity and Chip Fab Process Node R&D. So the entire semiconductor Industry needs to be analyzed for Proper Investment in Chip Fabrication capacity relative to Share Buybacks and how that affected the current Chip Supply-Chain/Inflation rates. So in circa 2014 Intel Mothballed its Fab 42 Chip Fab at the Building Shell stage sans any of the equipment purchases which Intel deferred to pursue a share buyback strategy. So this corporate policy needs to be accounted for as a policy that has exacerbated the inflationary tendencies of many products' supply downstream of Intel/Other semiconductor suppliers.

Now the Pure Play Foundries(TSMC, GlobalFounderies, Others) need to be analyzed as well for any similar behavior but TSMC's in Taiwan and less beholden to a strict fiduciary requirement to Increase Shareholder value at the cost of all else(Investment towards the Future).

So these industries influence on the overall supply chain of consumer products is rather more leveraged now than it ever was in the past what with the supply of every new device, including Planes, Trains, and Automobiles, so dependent on the supply of Chips(Microprocessors and ancillary Devices). Look to the recent auto industry/other chip supply chain woes and that's more than just money supply related this new high inflation cycle where every product includes some form of microprocessor chip and related components like VRM(Voltage Regulator Modules) and other components without which any microprocessor will not be able to function.

The entire economy is rather more beholden to the chip supplies and chip production capacity issue and that of Corporate Policy in the US especially but also the rest of the world. I mentioned Intel because Intel still retains its own chip fabs while AMD has become like others a fabless semiconductor company. But AMD currently has just announced a second round of share buybacks and how will that affect AMD's investments in its future is yet to be seen. But this entire process of share buybacks at the cost of investments in the future needs to be examined and from a perspective of how that's helped exacerbate the current round of inflationary tendencies via the supply of a very vital product in the world's economy the Microprocessor/Ancillary components.

⬐ lvl102

There is natural inflation from productivity and innovations especially in service dominant economy.

⬐ next_xibalba

Productivity is deflationary, not inflationary, by definition.

⬐ lvl102

What definition is that?

⬐ quadrangle

You're confused here. Price inflation specifically means the same products have a higher price. If you have more money and more productivity so you can buy more with the more money, that's not inflation.

Inflation is short for "price inflation" not "money supply inflation" and not a synonym for "economic growth"

⬐ lvl102

I am not confused about anything but thanks for the discussion.

⬐ sparkie

The original meaning of inflation literally referred to an increase in the stock of money (in excess of any new value created). It has been manipulated over the years to refer to 'price increases', which are the effect of the inflation.

https://www.clevelandfed.org/newsroom-and-events/publication...

⬐ quadrangle

Your link doesn't contradict the price-inflation view.

> its original meaning - a rise in the general price level caused by an imbalance between the quantity of money and trade needs

and in the PDF:

> an inflating currency has but one origin — the central bank— and one solution— a less expansive money growth rate

This is inherently problematic because there's no clear self-contained reason that inflating currency is a problem that needs a solution. If it failed to lead to price inflation or other effects, then it doesn't matter.

> A good’s real price, or value, was defined as the effort required to produce it

Well, people have and do talk like that, but it's dumb. That definition fits "cost" not "price".

But anyway, I don't need to be picky. Sure, I accept that "inflation in money supply" is not only reasonable use of the metaphor of inflation but is indeed historically how it was used. And as the paper accepts, the definition has changed. That's how the world works.

I still suspect that even 100-150 years ago, if inflation in the money supply didn't have any affect on prices, people would not have said the same things about it. All the quotes seem to assume that money supply inflation leads to price increase.

As to the use today, it's unarguable. See https://www.dol.gov/general/topic/statistics/inflation

> Inflation can be defined as the overall general upward price movement of goods and services in an economy.

That simply is the definition today. And I think it was always the implication anyway.

⬐ sparkie

The link I selected was just the first thing that came up when I looked for a citation. I knew as a matter of fact that it was the case before making the search, purely from having read the work of actual economists, who have for decades, and still to this day, use the word inflation to mean the increase in the supply of money.

It has always been used in this way by the Austrian school of economics. Most prominently, in Human Action[1] (1940), perhaps the best book on economics to exist. Mises makes a deliberate effort to encourage his readers to use the term properly. Here are some ways he describes inflation (1949 English translation):

"In the course of a monetary expansion (inflation) the first reaction is not only that the prices of some of them rise more quickly and more steeply than others. It may also occur that some fall at first as they are for the most part demanded by those groups whose interests are hurt."

"From this point of view the term inflation was applied to signify cash-induced changes resulting in a drop in purchasing power"

"The terms inflationism and deflationism, inflationist and deflationist, signify the political programs aiming at inflation and deflation in the sense of big cash-induced changes in purchasing power."

"What many people today call inflation or deflation is no longer the great increase or decrease in the supply of money, but its inexorable consequences, the general tendency toward a rise or a fall in commodity prices and wage rates. This innovation is by no means harmless. It plays an important role in fomenting the popular tendencies toward inflationism."

"The second mischief is that those engaged in futile and hopeless attempts to fight the inevitable consequences of inflation - the rise in prices - are disguising their endeavors as a fight against inflation. While merely fighting symptoms, they pretend to fight the root causes of the evil. Because they do not comprehend the causal relation between the increase in the quantity of money on the one hand and the rise in prices on the other, they practically make things worse."

"It is obvious that this new-fangled connotation of the terms inflation and deflation is utterly confusing and misleading and must be unconditionally rejected."

[1]:https://mises.org/library/human-action-0

⬐ quadrangle

I think the reason for the semantics comes from the assertion that increasing the money supply always correlates (usually argued as causes) price increases. In one of your quotes "inexorable consequence".

Are there examples of people talking about money supply inflation where they aren't bringing up price at all?

I mean, the argument that I'm making is that nobody cares at all about money supply in itself, they only care about the consequences. So, it makes sense that the language evolved to focus on the actual issue that matters.

The assertion that the connotation is "utterly confusing and misleading" seems quite hyperbolic. And the assertions about "inexorable consequence" and so on are similarly extreme in their overconfidence.

At any rate, given that price index and such is very clearly the case now (as in the government link I posted earlier), I will stick to my assertion that today it does mean price increases. But I am willing to qualify that and acknowledge that it's not a universal or historically consistent meaning.

⬐ systemvoltage

Unrelated: I just want to mention the clarity of enunciation of people of this era. They spoke with this wonderful crystalline voice that is so pleasant to hear. Similar can be heard in Bell Labs demonstrations and other 1950-1980 clips. I think part of it is the audio processing and low-pass filtering, but I think the accent and our discipline of the language has changed dramatically. In America, many kids today cannot go longer in a sentence without uttering 'like' and 'um'.

⬐ shakezula

This is a phenomenon the world over, not just Americans, and not just young ones. It’s kind of ridiculous actually to suggest that filler words are unique to American kids.

⬐ systemvoltage

Oh I wasn't speaking as Americans exclusively. I agree with you, just that I am in America so I can speak for what I can see.

⬐ sleightofmind

Former California governor Pete Wilson practically refused to say, "uh." So much so that I used to listen to him just to see if I could catch him at it. My successes were few. He would simply pause, mid-sentence if necessary, to phrase his thoughts precisely. He was governor from 1991 to 1999 and his precise manner of speaking was noticeable even in his era.

⬐ systemvoltage

I think we have a cultural malaise. But obviously, based on how badly my comment has been downvoted, many disagree.

I am convinced that spoken American English has degraded and regressed over the years.

⬐ sleightofmind

I'm with you.

⬐ creata

> In America, many kids today cannot go longer in a sentence without uttering 'like' and 'um'.

You seem to be comparing children to professional speakers. Why?

⬐ gadflyinyoureye

That is because we’ve debased education in America. Since the Federal government took over education, America’s ranking has fallen year after year internationally.

⬐ JaimeThompson

That the federal government hasn't taken over education is a bit of a hole in your argument.

⬐ MisterBastahrd

Given that this guy stopped being a serious economist sometime in the early 70s and started being an ideologue who made his fortune giving speeches, it's no wonder that he'd be pretty good at public speaking given that's basically what his career was until his death. I think part of the reason for the clarity is that because these folks grew up without great audio production, they were forced to enunciate as clearly as possible, both on the radio and on stage. It's also why it's hard for me to watch old films and take the characters seriously. Nobody actually talked like that.

⬐ WillDaSilva

Another contributing factor is likely that back then most recorded voices you heard were from professional speakers/performers. Nowadays anyone can easily record their voice. Not only does this mean that many more amateurs will do so, but also that it has become a more casual affair - people don't generally put as much care into it.

⬐ savant_penguin

The overall takeaway is that there is no free lunch.

Many countries in Latin America went that way. Namely Venezuela and more recently Argentina. Chile could be the next in the way.

When politicians say that 3 trillion dollar bills cost zero they should pay a political cost for this absolutely dangerous lie. Unfortunately they get away with this insanity. The idea that you can take 3 trillion dollars in goods and services without producing anything in return without impact is ridiculous and frankly childish. It's as if these people lost touch with reality and forgot that it takes time, effort and resources to produce anything of value.

⬐ gizmo686

Or, the economy is a very complicated system, and you can get emergent behavior that is counter-intuitive given the micro behaviour.

In particular, most recessions in the modern economy are caused by a demand disruption. It is not that we lost our ability to produce stuff, we had to stop producing stuff because we couldn't consume it faster. This (normally) isn't caused because people want to consume less, but rather because they had reduced ability to acquire goods (generally because they have less money than they previously did). That is to say, it is not a problem about our ability to produce goods, or even consume goods. It is a problem with our ability to allocate goods. At a high level, this really is a problem that you should be able to just through money at. Decide who you want the surplus goods to go to and throw money at them until consumption matches productive capacity. Of course, reality has a lot of pesky details to work out since, as I mentioned, the economy is incredibly complicated.

This is not to say that you can just inject unlimited money into the economy without causing any issues. But the effects of injecting money into the economy are dependent on how they are injected. Other ways of injecting money into the economy might increase productive capacity, which would have a deflationary effect that may act as a counter balance to the inflationary one. Other ones may quarantine the money in a part of the economy where they have minimal effect on the rest of the economy. For instance, if the treasury department sells bonds on the open market, the federal reserves prints money to buy those bonds, then the treasury department uses that money to pay interest on bonds held by the federal reserve; did anything really happen?

Ultimatly, economics is too complicated to try and solve from first principles. You need your thinking to be backed by empirical evidence. Prior to Covid, the Fed was trying to cause inflation by dumping money into the economy, but discovered that the economy simply doesn't work that way.

Edit: It is also worth noting that Covid caused an economic shock that is significantly different from the typical shocks we have experience with. If your approach to economics is rooted on empirical evidence, then you would expect to perform worse in such a situation, because you simply do not have as relevent of data to inform you decision making.

It is also worth noting that, unlike most economic crises, Covid was not primarily a breakdown in our ability to allocate goods. It looked like it was going to be, but that Governments did what this post suggests and injected money directly to people who lost their fiscal ability to consume.

⬐ lucianbr

> if the treasury department sells bonds on the open market, the federal reserves prints money to buy those bonds, then the treasury department uses that money to pay interest on bonds held by the federal reserve; did anything really happen?

I'm sure the treasury and the fed don't go to all that trouble to achieve precisely nothing. And I'm also sure that they have not found a way to achieve some positive result with zero downside or side-effects. That only happens in bedtime stories.

⬐ gizmo686

They didn't achieve precisely nothing; when the treasury initially sold the bond to the fed, the achieved printing money for the treasury department to distribute to the rest of the government. [0]. The slightly convoluted mechanism that printing happened in imposes an ongoing book-keeping burden I described; but the cost of that additional bookkeeping is marginal at worst, as they need to do all that work anyway in order to:

* Continue funding the budget deficit. (Unless they switch to the fed giving money directly to the treasury) * Sell government debt as a service to the global economy. (This is a distinct function from selling government debt to fund the government). * Control the economy by manipulating interest rates

Why go through all the political and bureaucratic trouble of setting up a new mechanism of giving the treasury printed money, when the mechanism we have works just fine.

I do see some political benifits to this approach: the debt boogyman would be move closer to the much more meaningful number that is "debt the US government owes to everyone who is not the US government" [1]; And the debt ceiling stops being a economic catastrophe that, for some reason, we debate imposing on ourselves every year or so.

Granted, the political effect of this lack of a boogyman may be a net increase of printing, which does have an inflationary effect. Although, after the past two years, I'm not sure that this is the case any more. The discussion around government spending has not been focusing on the debt recently, but the money supply. Changing the way the government reports its debt does nothing to change the effect of deficit spending on the money supply.

[0] In a way this is still nothing, as that is just setting numbers in a database nowadays. You have to go through a lot of layers of bookkeeping before any of this actually does anything.

[1] To actually get this, you also need to exclude debt owed to other parts of the Government, such as the Social Security trust fund

⬐ t0bia_s

> Covid was not primarily a breakdown in our ability to allocate goods. It looked like it was going to be, but that Governments did what this post suggests and injected money directly to people who lost their fiscal ability to consume.

Lockdowns was most expensive thing that ever happened to economy. No mention about sponsoring of big pharma and then donating massive advertisement of vaccines, masks, antibacterial gels, etc.

- https://sites.krieger.jhu.edu/iae/files/2022/01/A-Literature...

⬐ savant_penguin

If you want empirical evidence I suggest you skip to about 10 min in the video and look at the relationship of the money supply to the inflation rate. All different countries with different explanations for their demise but in all cases it's pretty clear that inflation is strongly related to the money supply.

"if the treasury department sells bonds on the open market, the federal reserves prints money to buy those bonds, then the treasury department uses that money to pay interest on bonds held by the federal reserve; did anything really happen?"

Yes, something did happen, that money created out of nowhere will go somewhere and increase prices. Given that all Americans share the same currency they are on the hook to pay for the interest. And that will either be paid in taxes or inflation

⬐ gizmo686

He is measuring "quantity of money per unit of output". Those units and ratio are doing a lot of work, to the point where I have no idea what the graph actually represents.

I don't mean this in a "how should I interperat that" way. I literally mean I do not understand what is being measured. I cannot reproduce his result using my understanding of those terms:

https://fred.stlouisfed.org/graph/?g=NbZe

> Yes, something did happen, that money created out of nowhere will go somewhere and increase prices.

I intended for that example to be a comically obvious one, that is only a thing because of the accounting that results from the treasury and central bank being distinct entities. If they were the same entity, nothing would change, except for how the accounting was done. The combined entity would have simply printed money instead of printing money and debt to itself, and it never would have bothered record any money being created to service the interest on that debt.

Consider a more absurd example. The government prints money and stores it next to its gold in Fort Knox. Other than the costs of mechanically printing, transporting, and storing the bills, does this actually change anything?

In reality, most money falls somewhere short of this extreme, but still does not spread uniformly to all sectors of the economy.

⬐ kkfx

IMVHO many countries haven't learned a thing: a country must be as much independent as possible. Witch means, since we do not eat oil, having oil might be good, selling it might bring richness but you can't develop only oil, you MUST use produced richness to incentive all the others production you need from food to housing to defense, health etc. Having naturals resources in general it's the same. A State must satisfy it's own basic needs inside it's own borders or it's already doomed. Anything else should be treated as a nice surplus to get more local things.

Autarchy alone is not easy to sustain of course, but tending to it is, and must be done.

⬐ ransom1538

There is a very good paper on this can't find. However, tl;dr; basically if you are a country with a huge rare resource say oil, these people with dividends from oil will just import all other things they need: wheat, wood, iron, etc. So it quickly becomes useless to produce say wheat - since it is imported quickly from countries unable to produce oil. That is why you end up with countries that are petro-states. The people wheat in a petro-state cannot compete with countries trying to obtain oil.

⬐ ephbit

> The idea that you can take 3 trillion dollars in goods and services without producing anything in return without impact is ridiculous and frankly childish. It's as if these people lost touch with reality and forgot that it takes time, effort and resources to produce anything of value.

Lost touch with reality? Not at all. Yes, limitlessly printing money is flawed politics. But they're 100 % aware of what they're doing.

It's pretty simple.

Printing money is just the currently most popular (amoung politicians) way of governments to make sure they can finance their budgets.

Budgeting - deciding what to spend money on - is one of the most important ways in which governments implement their election programmes.

There's different ways in which governments can finance new/increased/additional expenses:

1. raise taxes

2. cut other spending

3. take on more debt

Taking on more debt - aka printing money - is just the option that leads to (currently) the lowest level of opposition amoung citizens. So it's everything but surprising that politicians choose this way ... as I wrote, they know exactly what and why they're doing it.

⬐ disambiguation

Yes, but the more explicit take away is at 9:18

"There has never in history been an inflation that was not accompanied by a rapid increase in the quantity of money. There has never in history been a rapid increase in the quantity of money without an inflation."

⬐ platz

the supply of money in an economy has nothing to do with how long it takes to do something.

⬐ newbamboo

Seems unlikely to me that money supply and its relation to credit/debt would have no impact on productivity. Maybe that’s not what you’re saying?

⬐ adamc

True, but if you want to buy something of value, those things do take effort. Pumping in more money doesn't create value.

⬐ snek_case

In fact it does the opposite, it dilutes the existing value.

⬐ scsilver

You can cancel debts of the past and borrow for the future. If you happen to unlock a new level of productivity by doing so, you could possibly get your lunch for free based on the future productivity catching up to your spending.

⬐ hurhevdg

It still won’t be free for at least two reasons: 1. By the time you must repay the debt you will need to curb your consumption to less than the future production’s capacity. 2. During the initial borrowing phase you will increase consumption relative to other participants, curtailing their utility.

⬐ gruez

>You can cancel debts of the past and borrow for the future

who's going to lend you money "for the future" if you've just shown that you will arbitrarily "cancel debts of the past"?

⬐ scsilver

The fed is effectively doing this right now with low interest rates. Diluting old debts (pay off early 2000s mortgage with modern wages) and cheapening the cost of new ones, (borrow at 4% when inflation is running around 5%). We all buy into it for one reason or another but the ultimate thing underpinning this dynamic is that capital trusts the US the most amongst all other debtors.

⬐ syshum

The winds are shifting on that... The fed actions are a large part of why.

It is extremely arrogant to believe that the world will continue to allow the USD to be manipulated by the fed with no action by other nations.

It is a denial of history, combined with a Normalcy bias that have people falsely believing the USD will always be king

⬐ scsilver

Personally I would love to see other nations and organizations get to the level of trust the US has with creditors. Alternatives are being sought, but the the same time, I'm not seeing any particular institution taking the lead.

⬐ xyzzyz

"Debt" means that someone deferred their consumption in the past, and gave their claim on production to you, so that you will repay them with increased claim on production in future.

What you propose here amounts to the following: renege on the past claim to past debtors, and tell them that not only you won't give them extra production, but in fact the claim on production that they voluntarily decided to defer and give to you, is now gone forever. At the same time, since you cannot actually borrow resources from the future, any more than you can irrigate your plants today with next month's rain, what your "borrowing for the future" means is that you'll ask people to voluntarily defer their consumption, and instead pass on their claim on production to you, with you promising them to repay them with an increased claim on production in future. Let's hope that your new debtors don't feel discouraged by you just reneging on that promise to others, and believe that this time it will be different!

⬐ ransom1538

I think it is more evil than that. You can print 100 billion of your currency and hand it to your crony friends. Boom they are all multi-billionares now. Everyone else (not your friends) gets screwed immediately. It's stealing but it looks like it isn't. That is why gold is critical (or some other unit not easy to create).

⬐ stevebmark

Interesting mentioning Latin America and Chile here, Friedman was a big fan of Pinochet in Chile, as Pinochet implemented Friedman's ideas by torturing, killing, and disappearing thousands, all under the guise of of stopping inflation.

⬐ rmbyrro

> Pinochet implemented Friedman's ideas by torturing, killing, and disappearing thousands

Source for Friedman's suggestions to "torture, kill, and disappear thousands"?

⬐ smnrchrds

From the video:

"In the famous case of Chile with Mr. Allende in power, he produced an inflation which was one of the major factors that caused the economic catastrophe that led to the replacement of his government by a military dictatorship."

It seems like Friedman in myopically focusing on economics of Chile, while the real reason for the coup was something entirely different. The real lesson here is not to take history lessons from economists.

⬐ WalterBright

Pinochet certainly did not implement Friedman's ideas.

⬐ stevebmark

https://genius.com/Milton-friedman-letter-to-president-augus...

⬐ WalterBright

Remarkable how that letter is twisted into being a "big fan" of Pinochet and endorsing his violent behavior.

⬐ stevebmark

It's remarkable how many of the "Chicago Boys" who helped deregulate the Chilean economy as part of Pinochet's dictatorship studied directly under Milton Friedman. It's remarkable Friedman referred to the whole ordeal as the "Chilean Miracle." I have no belief that Friedman ever directly endorsed the violence his policies often thrive in. Friedman did intentionally take advantage of crises, and pushed others to do the same, to enforce his unpopular ideas. It's remarkable that he got chummy with the dictator who bombed his own country, supported by the CIA. It's remarkable the CIA, out of fear of socialism spreading in Chile and the US losing its investments there (aka, wanting free market policies), supported the junta, and the Chicago Boys.

> Committee witnesses maintain that some of the Chicago boys received CIA funds for such research efforts as a 300-page economic blueprint that was given to military leaders before the coup.

To say that Friedman didn't endorse the violent behavior directly is a technicality.

⬐ WalterBright

All Friedman did was give Pinochet some advice on how to improve the Chilean economy, as you can see in the only evidence you've provided - the letter to Pinochet. The rest of those inferences are unfounded.

⬐ disambiguation

next you're going to tell me socialism is bad because of the Nazis!

kidding aside, Chile has one of the most successful south american economies to date, and it's mainly thanks to their monetary discipline as advocated by the Chicago school.

⬐ stevebmark

The largest company in Chile is the copper mining company Codelco, which is the largest copper producer in the world. It's 100% state owned. There's also the state owned energy and oil company ENAP. Pinochet's Friedman experiment failed so strongly that Pinochet was forced to nationalize parts of the financial sector.

Kidding aside, Friedman and Pinochet did not bolster Chile's economy.

⬐ disambiguation

Chile today has the 2nd largest GDP in south america and is comparable in economic freedom to South Korea.

Consider their cousin Venezuela that also has nationalized resource industries but has otherwise promoted policies contrary to Friedman's advice. As a result they have economic conditions comparable to North Korea.

To say Chile's economic success is only due to nationalization of industry is inconsistent with the outcome.

⬐ newacount

i'm pretty sure he killed them because they were socialists, not to stop inflation

> Chilean economy did very well, but more importantly, in the end the central government, the military junta, was replaced by a democratic society. So the really important thing about the Chilean business is that free markets did work their way in bringing about a free society.

- genocidal fascist milton friedman

⬐ drno123

I think we need to separate Pinochet’s dictatorship from Pinochet’s economic policies. Economic growth of Chile (and as a result of that, improved living conditions for its citizens) are the result of Pinochet’s economic policies. He could have implemented those without killing his political opponents.

⬐ stevebmark

Dictatorship and suppression of democracy, and Friedman's free market economic policies, are inextricably linked. Pinochet could not have implemented his free market ideas without oppression, because there will always be more poor people than rich, and poor people will always vote for worker protections, price controls, stable jobs and housing. This is openly part of Friedman's plan: His policies are best implemented when a country is in a time of crisis, when the population is worn down and can't resist. The increase in poverty, slums, and the country's stadium turned into a torture center, don't feel like improved living conditions to me, nor worth the price of stopping inflation (which Pinochet did).

⬐ drno123

To be honest, I do not see any difference in torture done by Castro’s leftists from the torture done by Pinochet’s “rightists”. At least after Pinochet Chile was left a prosperous country, while under Castro, people were risking their lives while to get away from Cuba into US.

⬐ stevebmark

I personally don't have enough economic experience to definitively say if Friedman's far right free market ideas are inherently bad (except for the super elite), nor can I definitively say left ideas of socialism and government infrastructure inherently better. The significant difference I see is that democracies tend not to produce free market economies, and Friedman is open about his policies taking advantage of crises to help enforce them and foist them on an otherwise willing country.

⬐ disambiguation

not sure why you're getting downvoted, it's a good parallel

however, i'm gonna push back on the idea that people were fleeing cuba because of castro's economics versus the US sanctions that crippled the economy

⬐ beaconstudios

Democratic socialism isn't based on "free lunch", that's neither the argument forwarded nor a good argument against it. To take the example I'm most familiar with (Allende's Chile), the point was to put the value produced by the economy in the hands of the workers and to run the economy democratically. If anybody's trying to get a free lunch, it's rentiers who extract profit from other people's labour.

The reason Allende's Chile collapsed was due to US intervention - first, putting them under economic sanction, then funding far-right resistance groups and protests, then eventually just saying "fuck it" and backing a military coup. Nothing to do with free lunches or inflation.

⬐ int_19h

Democratic socialism of statist variety inevitably needs to centralize economic decision making, since otherwise the market "interferes". I can't think of any country that has ever tried it with good results.

(Democratic socialism doesn't have to be of the statist variety, of course, but that's a whole separate conversation that has little to do with Allende.)

⬐ beaconstudios

I can think of two examples that worked fairly well: Allende and Morales. It's debatable to what degree they were democratic socialism or social democracy (given they both exist on a fairly ambiguous spectrum) but both nationalised various industries and promoted social justice and growth of cooperatives.

I suppose you could say there's central economic decision making in the form of regulation and nationalisation, but this contrasts with the kind of economic planning that's been proven to be disastrous in Marxist-Leninist countries.

Hopefully Gabriel Boric will prove to be another successful example.

⬐ quadrangle

Better to just say that you can't make free lunches out of money. The standard can't-eat-money point.

There ARE such things as free lunches, and the "no free lunch" quip is a meme that serves as propaganda for the idea that everything in life should have a price (and if it doesn't, it means the price is hidden). That's just not true. Some things in life are abundant and need no pricing and have nothing hidden.

https://ia902809.us.archive.org/2/items/NinasAdventuresFree/...

⬐ WalterBright

Name something that has no cost, explicit or hidden.

⬐ thehappypm

Breathing air ?

⬐ WalterBright

There's a significant cost we pay to keep the air clean enough to breathe.

⬐ quadrangle

This was not true for almost all of human history. So, are you just saying "there's no LONGER such a thing as a free lunch"?

⬐ WalterBright

There are a lot of compromises in our body design to support breathing air. One is the risk of aspirating food, which kills lots of people.

⬐ quadrangle

Does "no free lunch" mean that if lunch is normally $10 and today it's $0, it's because someone is paying the price some other way (like it's externalized)?

Or does "no free lunch" mean the drastically broader (and perhaps unfalsifiable) claim everything in the world has ramifications?

Maybe it depends on the context.

But like if someone who enjoys doing programming happens to find and fixe a bug in some software and then everyone can get the bugfix with the next update and the update was going to happen anyway, then the bugfix can be free. It can be 100% improvement, no compromise, no cost, nothing externalized. If you want to argue otherwise, you end up with the same form of argument that is the same logic as the reductio ad absurdem point that we had to have all the costs of the world existing in order for that programmer to be there and do the bugfix.

⬐ WalterBright

Even free bug fixes come with a risk of introducing other bugs.

⬐ quadrangle

Yeah, but eating lunch always comes with some risks. At some point, that's not within the frame of saying "no free lunch".

⬐ syshum

Animals including humans take in oxygen and exhale Co2 a green house gas.

I propose we tax all humans for their breathing

⬐ ralfd

We used the atmosphere as a free dump for CO2 and look where that brought us. See also smog and other air pollution.

⬐ e2le

Breathing air and burning fossil fuels in industrial processes are two different things. Humans are not producing CO2 on those scales that we should worry about attaching costs to the use of such an abundant resource. What are we going do? Incentivise people to hold their breath?

⬐ ralfd

> That's just not true. Some things in life are abundant and need no pricing and have nothing hidden.

Citation needed. What are such things?

⬐ e2le

Air is abundant enough that humans need not consider it's costs when taking their next breath.

⬐ p1esk

The cost of breathing polluted air in big cities is your health.

⬐ e2le

Polluted air, not air.

⬐ p1esk

If you are in a big city the air is polluted air.

⬐ quadrangle

Yes, and we can force "no free lunch" to be true if we use enough nuclear bombs to wipe out life on earth or something.

But like clean air is/was analogous to the abundant fruit tree in the comic I posted. And it TURNED INTO polluted air through people ruining it just like the fruit BECAME non-free when Og claimed it and made others work to get any.

"No free lunch" is an aphorism used by people who don't want to let there be free lunches. It's not inherently true.

⬐ quadrangle

If you want to just be contrarian, you'll say that it's not "free" if you have to CHEW your lunch.

Either "free" is effectively meaningless or our world is full of free things. Uncompromised free things. Sunlight, air, water, fruit on wild plants…

I mean this is just nature. You know why Birds of Paradise have unbelievably fancy plumage? It's partly sexual selection, but the reason they can afford to spend 99% of their time doing bizarre dances and pruning their plumes and setting up their special dance areas is because their FOOD IS FREE basically. They live in an abundant ecosystem where it's trivial enough for them to get food. It just grows or is around, and when they want to eat, they just go eat. If that's not "free" then you're just denying the concept of "free".

I mean, let's go further, if truly, literally nothing is "free" than the word "free" has no meaning.

⬐ thinkloop

Animals spend their entire existence hunting and gathering food. If you consider that free because there is no merchant in the middle, then yes, everything is totally free. But then who's making the term meaningless? Free is lying on the couch while someone provides you food. Not free is working the farm, or gathering the berries, or hunting the elk.

⬐ leereeves

> https://ia902809.us.archive.org/2/items/NinasAdventuresFree/...

"Food is a manifestation of our local fertility goddess"?

Here in the real world, food is produced by work. A lot of work - growing, transporting, preparing, and selling food accounts for about 10% of American employment.

⬐ quadrangle

Even though the comic is a comic, it's not about actual fertility goddesses making food, it's about prehistoric people making up ideas like that while they expressed their gratitude for the abundance of nature.

Look, I'm a REAL person. You know how I get apples in apple season? I walk to a park near my house where there are decades-old apple trees. I don't know who planted them. Nobody today does anything to care for them. They just do what trees do. And the majority of the apples fall on the ground because nobody picked them. And I walk over to the park and I pick apples and eat them.

Oh, but I had to WALK there you say. And I had to WORK to have a home in this town. And we have to have a working society in order to pay the City to keep the park from being sold to a developer who would cut down all the trees. Or that I have to do the work of EATING the apple, like chewing it and so on.

I mean, this is just endless.

It's quite simple: Either "no such thing as a free lunch" is falsifiable and I've falsified it with real evidence OR it's unfalsifiable because you'll claim that any tangential aspect of existence that can be called "work" makes the apple not free. Either way, the aphorism is no good.

"Too good to be true" is a better aphorism because it isn't used to imply that everything good always has a catch. It doesn't say "Anything great is too good to be true", it just asserts that things that seem great can be too good to be true (they have some catch). And that's useful because we should think about all the catches and context of things. But that doesn't mean we should become cynics who just deny that anything great is ever possible.

⬐ leereeves

That's a literal interpretation, but it's an expression, not a scientific law. People often say something like "That never happens" about things that are simply very rare.

Seeing the rather literal tone of the conversation, I responded with an equally literal interpretation of the comic. Of course I know that the "local fertility goddess" is a figurative expression for the abundance of nature, but "no such thing as a free lunch" is also figurative, and "the pot calling the kettle black" isn't actually about a talking pot.

⬐ quadrangle

I was NOT doing a literal interp. That would mean getting hung up on what counts as "lunch" and not recognizing that it's a metaphor. That's not what I was doing. Everything I've posted is about critiquing what I see as the implications and ramifications and arguments of the metaphor, recognizing it as the aphorism that it is.

⬐ leereeves

It's a literal interp of "there's no such thing", whereas I interpret it as hyperbole, much like "nobody does that anymore" or "I looked everywhere...".

Yes, there are a few free lunches. That doesn't make it bad expression, just not a literal one.

"The idea that everything in life should have a price", as you said, is hyperbole too. There are lots of things that no one is trying to put a price on, but let's not go down that road.

> Some things in life are abundant and need no pricing and have nothing hidden.

Yes, but food isn't one of them in a world with 7 billion people. Compared to the population, food isn't abundant, and managing to feed so many people is one of the greatest human achievements; it's all thanks to the work of hundreds of millions of people, not nature's abundance.

⬐ beaconstudios

I mean, food literally grows on trees. The comic is obviously set in prehistory when we didn't cultivate our food.

Also, even though farming requires labour today, why should the person who "owns" the land be the one who gets to keep all the value?

⬐ kmill

Sometimes I think about what it were like if land rights were structured as limited-term exclusive-use licenses. The licences are offered in recognition of the fact that it takes time and money to develop the land, so the licensee, by taking on this risk, should be allowed to try to earn back that value and then some. But after a certain point exclusive use seems to be an excessive reward, so the term should be limited somehow -- I haven't been able to think up a good way this part should work. In many cases, there's a natural limit to land ownership (we only live so long), but corporate land ownership is able to extend normally limited licenses into perpetuity...

⬐ beaconstudios

philosophers have been thinking about more fair ways to manage resource ownership for quite some time. Mutualists, for example, have a construct similar to what you're describing called a usufruct where land rights are granted directly to the person or group working the land (ie, you cannot own land you do not work), and you only have the right to use and profit from the land, without any right to destroy it.

⬐ quadrangle

I read that many ancient farming societies used lottery to rotate which farmers used which plots each year.

You know, there's an unfair advantage if you get access to the best land and then that grows you the best crops and then profit and so on. So, everyone gets chances to farm different plots.

I agree with you about the problems with corporate land ownership.

⬐ causality0

why should the person who "owns" the land be the one who gets to keep all the value?

They don't. Farming profits are razer thin. That value goes to the person who owns the land, the people who work the land, the people that ship the product, the manufacturers of equipment, shop owners, the list goes on.

⬐ leereeves

Even in prehistory, feeding people required a lot of work, that work just took the form of hunting, gathering, and migration, and later cooking and making tools to make hunting and gathering easier.

> why should the person who "owns" the land be the one who gets to keep all the value?

They aren't? Many people divide the value in the final product.

The person who owns the land pays other people for farm equipment, fertilizer, weed killers, pest control, harvesting, etc, then they sell the product to other people who add value in various ways and each sells for a higher price.

⬐ beaconstudios

The point is that the person who owns the land gets to set the pay of the workers. So somebody who doesn't really have to do any labour themselves gets to choose the fraction of the reward (in reality, a set fee ie a salary) that goes to the people who are actually doing the work. If they're the ones producing all the value by mixing their labour with the land (which the land owner didn't create), then they should be the ones who divide the profits.

⬐ leereeves

> The point is that the person who owns the land gets to set the pay of the workers.

If that were true, the less compassionite owners would set the pay to zero, so it's obviously more complicated than that.

⬐ beaconstudios

Just because they get to set the pay, doesn't mean their choice is a totally independent one.

⬐ leereeves

I guess we have different definitions of "set". The word I would use is "negotiate".

⬐ beaconstudios

Sure, that's fair.

Regardless, my issue is that the people who do the actual work do not get to determine how profits get distributed - power is held over them by the owner (who is only the owner by virtue of state enforcement of property rights), and this leads to accumulation of wealth and power in the hands of a select few. IE, capitalism.

⬐ tomp

Ownership incentivises longtermism.

When noone owns the land, this happens:

https://en.m.wikipedia.org/wiki/Deforestation_of_the_Amazon_...

⬐ beaconstudios

No, when you make something a free-for-all, that happens. Conservation areas exist.

⬐ gruez

>Also, even though farming requires labour today, why should the person who "owns" the land be the one who gets to keep all the value?

That's what https://en.wikipedia.org/wiki/Georgism is supposed to fix

⬐ iratewizard

Free and abundant has a cost too. The time it takes to sort through the free and abundant in order to find what you need. The time to learn that free thing and find it isn't a good fit. The backdrop to life is a complex resource management game and you're constantly spending the one thing you can't buy back.

⬐ quadrangle

Look the world I live in, my reality is one where sorting through stuff is indeed a HUGE problem, but it's not caused strictly by things being free and abundant.

We have tons of examples of noise and bulk that needs curation that is the cause of people working to make yet more stuff when its not needed. People flood the market with junk trying to capture some of the value. There are tons of duplicate apps or websites each trying to get their money or attention-to-ads. But the greatest free-and-abundant stuff like Wikipedia with no limits and restrictions — that has the capacity to reduce the trends of people making duplicate stuff.

I mean, there's lots of examples of excessive production which takes more to sort through which is caused by things being locked-down. Whereas if the best stuff were just free, there would be less incentive for anyone to make and market duplicate products.

But I agree with your "complex resource management game" framing, I'm just saying that free and abundant is not the problem. One problem is that we aren't just having the best free and abundant stuff so that we can stop all the noise and duplication.

Watch this video after watching the video linked in the original post: https://www.youtube.com/watch?v=B_nGEj8wIP0

⬐ m33k44

With so much QE done over the last decades, I am wondering, after watching this video, what is going to happen to inflation!