Hacker News Reader

Comment by photonbucket | Hacker News Reader

In my mind, there is where inflation really comes from. For every wage paid that wasn't useful, the resulting product becomes more expensive / less profitable. If we were able to optimize out all the waste we'd probably have deflation while computers and business processes keep getting more efficient

View on HN

...no.

Inflation is actually very simple: More money is added to the system than value produced. That is, money is printed faster than value is created through labor. Stop and think for a second. How do we have trillions of USD? Banks create money. And they're doing it faster than ever before.

Now you can absolutely have price gouging at the same time, but the two are independent of each other, even though combined the affects are worse for the price gouged.

I think OP is saying that the creation of high paying useless job is causing the bulk of the money that exist in the system to not mean much. Which is why we have inflation, because the increase in the amount of money does not scale with the amount of "value". Imagine if government is spending half of the money printed to people staring at walls. This would naturally double the inflation because it requires double the amount of money to produce the same amount of "value".

So the government is pumping money, but is not getting the desired signal, so it pumps more money.

Only if those people are actually required to stare at walls for that money. Because having received money, they will want to spend it on stuff, which creates demand. Only when that demand can't be met because people are required to stare at walls instead of creating value, do prices go up and cause inflation.

So there's another reason to replace welfare with UBI. Seems every discussion leads to that these days.

Price gouging can also be inflation. Inflation is simply measured by how much prices go up. If companies just raise prices to reap more profits because nobody is stopping them, as seems to be the case right now, that's still inflation.

Of course this kind of inflation should be fought by competition, but you have to have companies actually willing to compete on price.

I mean waste is probably a source of inflation but lots of it just comes from unrestrained profit-seeking behavior. If a company believes it can raise its prices without impacting sales, it will do that. That's why so many massive corporations posted record-breaking profits during the recent bouts of inflation.

Government shutdowns that made it more difficult or impossible to shop outside of big stores or online would be as big or bigger issue here.

It wouldn't explain simultaneous mass layoffs.

Except that generalized deflation is one of the largest and widespread economic disasters that can be brought about; you are disincentivizing immediate consumption to on the basis of future larger consumption, you're disincentivizing investing in the economy instead of just holding capital - both things that will make a economy stop working in the long term.

It's the reason why most central banks really want some minimal level of inflation going on at all times.

Reply on news.ycombinator.com