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Comment by mensetmanusman | Hacker News Reader

This micro-behavior is what accelerates inflation. Will be interesting what the next few years bring.

On the other hand, I sure won't finance the economy's stability to my detriment.

Can you say more about this? Thanks

I think the easiest way to get an intuitive feel for this is to look at the stories of hyperinflation, because they're always literally exactly the same. The only thing that changes are the catalysts. Zimbabwe [1] being the contemporary example.

The first step is some event triggers a reduction in supplies for some commonly needed good. In Zimbabwe they chose to expel white farmers and replaced them with black farmers, many of whom who had little to no experience in farming. Food production rapidly plummeted and many farms simply ended up being completely abandoned.

The second step is rising prices as a result of the first. Wheat isn't inherently worth 5 coppers. It's worth however many coppers people are willing to pay for it. If there's half as much wheat to go around as before, people are going to be willing to pay more to ensure they are the ones who get their wheat.

The third step is an entity, usually a government, trying to solve the problem by attacking the effect rather than the cause. The government of Zimbabwe saw many people were quickly becoming unable to comfortably afford food. And so they responded by giving people more money aiming to bring them closer to their previous buying power.

The fourth step is a new increase in prices. This time the supply of wheat has stayed the same, but people suddenly have more money to bid on it. So again people are willing to pay more to ensure they get their wheat.

The fifth and final step is: goto the third step.

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The end result is Zimbabwean's becoming quite capable at big figure math alongside the complete collapse of their economy. For instance we saw the introduction of the world's first $100 trillion bill. In a nutshell, giving people more money to combat inflation is like trying to put out a fire by dousing it with the only liquid you have - gas.

[1] - https://en.wikipedia.org/wiki/Hyperinflation_in_Zimbabwe

The other major factor: exporters from foreign countries don't want to exchange real goods with Zimbabwean dollars. However, all countries in the world want to exchange real goods with American dollars or Euros. That's the advantage the EU and the US have. Hence, the US can face less risks with printing money (or adding zeros in electronic account) than, say, a third world country like Zimbabwe, India, Ghana, etc.

Lets call a properly measured inflation I. Let I_z, I_usa be inflation of Zimbabwe and USA respectively. The first derivative of I increases faster in third world countries than in those countries with world reserve currency status: d(I_z)/dt >> d(I_usa)/dt. That's why the US likes to project military power, that's why the super wealthy class in the West support wars to project the power in order to control the first derivative of I.

It's simple. Inflation is driven by increasing the dollar amount for, well, everything. He is correct in saying that this is what drives inflation: If every single thing is worth 20% more, it's really just that the dollar is worth 17% less.

"Inflation" is shorthand for 'price inflation' - every single price and dollar amount goes up, and, when it happens too fast, can tear an economy apart (e.g. 1942 Berliners packing cash into wheelbarrows to go and buy bread).

EDIT: grammar

In very simple terms, if everyone is getting paid more, then all of the stores can price everything higher... and so on. It's a cycle.

It's not that they _can_ price everything higher, they _must_ price everything higher. Everyone getting paid more includes the stockers, managers, bakers, truckers, farmers, everyone involved in getting (eg.) groceries to you.

Inflation is significantly a psychological phenomenon: If people expect inflation, they want more pay, and sellers charge more without getting complaints - they just say the magic word, 'inflation', and people accept it - a psychological phenomenon. I've heard that used to justify 25%, 50% price increases (inflation is ~7% max). :D

https://www.nytimes.com/2022/02/27/business/economy/price-in...

Combine that psychological effect with our current post-truth world of disinformation campaigns, and it seems to me that people can create inflation, or create more of it.

Isn't war a psychological phenomenon? After all, some leader or a group of people think about starting a war. And it has effects in the real world. The issue: how backwards one has to go find the primal casual agent?

The pen is mightier than the sword, because the pen can move armies and nations.

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