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Comment by wing-_-nuts | Hacker News Reader

'the deficit' isn't really driving inflation, as evidenced by japan's huge deficit and relatively low inflation. If you want to talk about what's going to cause inflation in the future? It will almost certainly be some combination of tariffs and a lack of workers due to deportation. I'm not supporting industries that thrive off exploiting the undocumented, I'm merely stating the fact that deporting them will raise inflation.

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What if I told you that we exploit cheap immigrant labor in order to avoid inflation while continuing to print money? It’s an equation.

the inflation of 2020-2024 (some by trump 45) is somehow the result of trump 47?

>If you want to talk about what's going to cause inflation in the future?

Providing this little snippet of context again in case you wish to improve your reading comprehension

The 2020 inflation was the result of 2019 deficits. After that, the deficits were due to Biden.

> The 2020 inflation was the result of 2019 deficits.

There was no inflation in 2020, the year that COVID hit. Many places experienced a month or two of deflation due to shutdowns. Remember when oil price went negative?

* https://www.cbc.ca/news/business/oil-negative-price-1.553899...

Inflation didn't start going up until 2021, and some of that was due to base effects:

* https://www.investopedia.com/terms/b/base-effect.asp

* https://blog.ons.gov.uk/2021/05/19/beware-base-effects/

> The 2020 inflation was the result of 2019 deficits. After that, the deficits were due to Biden.

Double check your timeline, Biden did not become president until 2021 so you cannot lay the 2020 deficit on him.

The single highest deficit year was Trump's FY 2020 with a deficit of $3.3 trillion. It came down the next year (FY 2021) which can either be credited to Biden or shared between Biden and Trump since it spans both their terms.

Fair enough. I was a year off.

the comment above was about policies yet to come leading to inflation that's already here.

The fact that every dollar that is printed MUST be paid back to the Federal Reserve Bank with interest means that every dollar printed is worth less than it's face value. This is the original and primary source of inflation. All debt biassed currencies have this, not as a defect, but as a feature. If you own the bank you can do some money magic and get filthy rich. The Federal reserve Over the last 100 years the dollar has lost something like 96% of it's value.

It's old and quite corny but this video gives the cliff notes on how the FED works

https://youtu.be/mII9NZ8MMVM

> It's old and quite corny but this video gives the cliff notes on how the FED works

This is nothing like how the Fed, or banks, work: depositor's money is not given out to people who get loans. Tobin called this the "Old View" in 1963:

* https://elischolar.library.yale.edu/cowles-discussion-paper-...

It's beyond old now:

* https://www.bankofengland.co.uk/explainers/how-is-money-crea...

* https://www.bankofengland.co.uk/-/media/boe/files/quarterly-...

* https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1905625

* https://rationalreminder.ca/podcast/132

Modern banking systems allow the banks themselves to 'print' dollars - by originating loans. The Fed (and central banks elsewhere) steer this money creation process through various mechanisms. However it is NOT the case that 'every dollar must be paid back to the Fed'.

The reason for this expanding money supply is to facilitate an expanding economy.

You are right, part of every dollar must be paid back. If there is any interest on a loan then you need to pay back more than 100% the original cost.

Our FED operates the same way, the government must pay back the FED's loans, and these loans have interest. When the US was printing greenbacks without the FED there was no one to "pay them back to". This is how the USA operated before 1913.

Inflation existed before 1913. What was different was that inflationary periods were counterbalanced by periods of deflation.

There's a reason why the Federal Reserve has two primary missions--stable prices and maximum employment. Deflationary periods cause massive unemployment and declines in investment, so they really want to avoid deflationary periods. Ask any economically literate historian about the devastation deflation causes at the individual level; it's far, far worse than inflation at nominally comparable levels. This is why the Fed is biased toward inflation. 20th (post-Bretton Woods) and 21st century inflationary periods haven't been any worse than the 19th century or early, but we have avoided severe deflationary periods, and that's absolutely worth the small long-term inflation. It's also arguably kept prices more stable, but confounders (technology, etc) make comparisons with the 19th century industrial revolution complicated--the emergence and rapid evolution (to this day) of the commodification of goods and services.

> it's far, far worse than inflation at nominally comparable levels.

I haven't seen any evidence for that.

> This is why the Fed is biased toward inflation.

The Fed is biased toward inflation because that way the government can spend more without raising taxes.

Try reading, Lords of Finance: The Bankers Who Broke the World. It won the 2010 Pulitzer Prize for History, among other accolades. I certainly enjoyed it, though I read it on the heels of the 2008 financial crisis, which may have made it feel especially salient.

I don't know about the merits of that book, but the Pulitzer Prize means nothing at all. They've given out that prize for hoaxes and other nonsense.

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