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Comment by itsoktocry | Hacker News Reader

>but for me there should be two types of inflations 1. a dilution of money

Outside of the fact that "some people say" (generally anti-fed types) that inflation is an increase in the money supply, why is it you think that?

In economics inflation has a specific definition: a general rise in the price level. It can be caused by all kinds of things. A rapid rise in the money supply is one. A breakdown in available supply is another.

>Let say a central bank injects a lot of new money, then all prices will be higher, but salary will be higher too

Maybe, maybe not. There's economic theory around the stickiness of wages; they don't react as quickly as the prices of goods. And that's understandable. It's easy to raise wages, but difficult to reduce them.

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The old Milton Friedman quote is still true, as far as we know:

> “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”

What has changed it that "the quantity of money" has become much harder to figure out.

> all prices will be higher, but salary will be higher too

Salaries are the price of labor. As other prices go up, there is no particular reason these prices wouldn't do the same.

If non-labor prices rise before salaries, salary increases would need to compensate for the already paid higher prices.

Encyclopedia Britanica defines inflation as: inflation, in economics, collective increases in the supply of money, in money incomes, or in prices.

The first definition was the one used for centuries and the one that should still be used unless you are trying to confuse cause for effect.

> It can be caused by all kinds of things.

In theory water can run uphill. Sometimes it even does. But as a matter of overwhelming practice it is obvious that if the general price of goods is rising it is the government doing something. Otherwise there is nearly nothing that could cause a correlated rise of the price of everything. Eg, in this case the most likely culprit is wilfully shutting down the global economy and handing out money to everyone which is even worse, economically speaking, than their usual handout tactics to very wealthy people.

Maybe something like sustained moves in the oil price or coal price could do it. But the western governments have an official policy of annual inflation and the only tool they have is money printing, because it isn't like they invest in oil wells.

PS Maybe demographics, more mouths & higher prices. Here are Estonia's demographics - https://en.wikipedia.org/wiki/Demographics_of_Estonia. Looking at it, a change in the labour force that major could be a big contributor.

>In theory water can run uphill. Sometimes it even does. But as a matter of overwhelming practice it is obvious that if the general price of goods is rising it is the government doing something. Otherwise there is nearly nothing that could cause a correlated rise of the price of everything.

This caused general inflation of nearly everything https://en.wikipedia.org/wiki/1970s_energy_crisis

There is never a perfectly correlated rise in the price of everything no matter what happens. Some prices are stickier than others.

Ah the 70s energy crisis. I remember it like it was ... half a century ago. In fact I don't remember it because I'm younger than 80. I wasn't even alive.

Most people on this forum weren't even alive then. And we now live in an era where governments are inexplicably opposed to any of the easy options to secure energy. We should have been going nuclear in the 80s, 90s, 00s, 10s and now the 20s.

So while I'm happy to say that if we have an energy crisis that will cause inflation it isn't like we didn't see it coming 30-40 years in advance. The anti-fuel drive of the last decade hasn't helped any either. And I still blame regulatory interference.

> The anti-fuel drive of the last decade hasn't helped any either.

So either you're denying the claims that CO2 is causing climate change/catastrophe or you simply don't care about the future of civilisation/nature.

Which of these is it for you?

What, you can only think of 2 options?

It doesn't matter what effect CO2 is having on the climate, the future of civilisation will be more rosy if we maximise the availability of fossil fuels short term while transitioning to something more workable long term - like nuclear. Even renewable might work these days although it doesn't have the enviable technical profile of nuclear power.

The oil crisis coincided with US inflation, but was not the cause:

https://www.investopedia.com/articles/economics/09/1970s-gre...

TLDR quote:

> The Great Inflation was blamed on oil prices, currency speculators, greedy businessmen, and avaricious union leaders. However, it is clear that monetary policies that financed massive budget deficits and were supported by political leaders were the cause.

Yes, I know about Milton Friedman's quote that inflation is always and everywhere a monetary phenomenon. He was oh so very wrong about most things:

https://evonomics.com/the-truth-about-inflation-why-milton-f...

This would be interesting to discuss, but I just don't have the time... :(

> In economics inflation has a specific definition: a general rise in the price level. It can be caused by all kinds of things.

When the prices of all goods and services go up, it is the thing you measure them against that is going down. If there were no currency, there would be no inflation, only changes in relative prices.

I would argue that goods prices also don’t display the same elasticity going down as they do going up. Whether they are less sticky I don’t know but will definitely look into relevant literature.

Few sellers into a market like the price going down, and labour prices are famously downwards inelastic, but price wars are a thing and many markets have an expectation that prices will go down, e.g., cloud computing costs in recent years. It's a mistake to try to completely detach your understanding of inflation from the commercial imperatives in specific markets.

I would venture that sellers overwhelmingly prefer stable prices to increasing prices. Rising prices require adjustment, which requires resources, and makes you the focus of customers' ire for what amounted to trying to keep things running the same. Meanwhile, any seller raising prices is setting up for a short- or long-term substitution effect away from their products.

Increasing prices in a market means increased turnover for those who sell into that market. You can easily find examples where increasing prices are worse for sellers than price stability, e.g., if increased costs eat up more than the new income or if the price increases happen in the context of a shrinking market, but as a rule price increases show that the market favours sellers over buyers.

> Outside of the fact that "some people say" (generally anti-fed types) that inflation is an increase in the money supply, why is it you think that?

Because for much of our existence, trade has been facilitated by commodity-based currencies which would inflate when new deposits of the commodity were found.

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