can some1 give me their best explanation of “inflation” (dont ask) for a dummy like moi?
“Inflation is when the cost of goods and services in the marketplace all go up at once”
…the entire stock market? or the market price/share of a particular company? or a particular industry market?
is it good/bad?
and lastly, what is a website to determine the annual inflation rate for lets say the NYSE……..(or the restaurant industry to be more specific)
………..ok………….good progress
Inflation is merely an increase in money supply.
Things such as price increases are the SYMPTOMS of inflation.. not inflation itself.
Think of it as something like this….
Good X has an initial value in terms of $5.
Money supply is increased via Fed Policies.
Good X must now raise its price to $10 in order to get the same REAL value.
Annual inflation reports are found at Bureau of Labor and Statistics. It http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=CUUR0000SA0L1E&output_view=pct_12mths quotes inflation from last October to now to be 2.3%.
Inflation affects people in the short term because it takes awhile for wages to adjust to increasing inflation. That is.. inflation increases faster than the wages are able to. It is also considered a tax on your income because fiscal policy and issuing more credit (debt) devalues your dollar.
NOTE:
CPI is no longer an effective way to deal with inflation as they now exclude food and gas prices.
Another way of dealing with inflation is measuring money supply. This has become inaccurate as of lately due to M3 (a measurement) not being reported anymore by government.
A really good site for inflation novices is
http://www.inflationdata.com
happy reading
It is more like a generalization and it doesn’t really have anything to do with a stock price.
If they said that inflation is 2% more compared to last year, it means that generally all the goods available last year will cost about 2% more.
That is my simple explanation.
References :
The price of items go up! they usually test it on an average package of goods i.e gas, bread, milk etc.
Its is bad if it continues to rises as peoples wages are no longer good enuf and if it continues it can cause the currency to go to shit. eg. Argentina and Zimbabwe.
References :
Economics Student
The Austrian School of Economics defines inflation as the “increase in money supply”. The increase in prices is a consequence of inflation.
Inflation (increase in money supply) increases the prices of goods because through inflation, the value of the currency goes down. It practically debases the currency. Imagine rare baseball cards. They have high value. But if you create more baseball cards, its value will go down as it is easier for people to get these baseball cards which are not so rare anymore.
Inflation (increase in money supply) happens when central banks print money out of thin air (through injection of artificial credit, artificially lower interest rates, etc.). This is the reason why governments would like to get out of the gold standard or any type of commodity based currency because they could inflate (increase the money supply) anytime they want. If a currency is backed by gold or any commodity, it prevents the government from artificially increasing the money supply.
Inflation (increase in money supply), aside from its effect on prices, also affects people in another way. Inflation (increase in money supply) only benefits the first group of people who receive the newly printed money. The people who get the money first benefits because they get to spend the newly printed money during the time when prices has not gone up yet as the newly printed money hasn’t deeply circulated the market. Once the money trickles down to the economy, more money is now available for spending, which debases the currency thus jacking up the prices of goods. Prices of goods increase because more money is now in circulation which was printed out of thin air. The value of the currency is now lower than before. Just like baseball cards.
On the other hand, the people who don’t get the money first will then hurt because the prices of goods go up even before their salaries go up. So they will be spending more money for higher priced goods for the same level of income before they even get a salary increase.
So basically, inflation is not an increase in prices of goods. Inflation is the increase in money supply. The increase in prices of goods is a consequence of inflation.
References :
http://www.mises.org
http://www.lewrockwell.com
What Has Government Done to Our Money by Murray Rothbard
Human Action: A Treatise on Economics by Ludwig Von Mises
Crash Proof: How To Profit From The Coming Economic Collapse by Peter Schiff
Inflation is merely an increase in money supply.
Things such as price increases are the SYMPTOMS of inflation.. not inflation itself.
Think of it as something like this….
Good X has an initial value in terms of $5.
Money supply is increased via Fed Policies.
Good X must now raise its price to $10 in order to get the same REAL value.
Annual inflation reports are found at Bureau of Labor and Statistics. It http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=CUUR0000SA0L1E&output_view=pct_12mths quotes inflation from last October to now to be 2.3%.
Inflation affects people in the short term because it takes awhile for wages to adjust to increasing inflation. That is.. inflation increases faster than the wages are able to. It is also considered a tax on your income because fiscal policy and issuing more credit (debt) devalues your dollar.
NOTE:
CPI is no longer an effective way to deal with inflation as they now exclude food and gas prices.
Another way of dealing with inflation is measuring money supply. This has become inaccurate as of lately due to M3 (a measurement) not being reported anymore by government.
A really good site for inflation novices is
http://www.inflationdata.com
happy reading
References :
Simple explanation: when the price of EVERYTHING goes up.
A simple example is pizzas vs burgers.
If the price of pizzas increases and the price of burgers stays the same then there has been a change in DEMAND.
If BOTH the price of Pizzas and burgers increases then we have inflation.
The Government likes to keep inflation at around 2%, any higher and there is a risk of prices spiraling out of control, and lower and there is a risk of the economy slowing down which means unemployment.
I don’t know where you’re from but in the UK the Bank of England determines the inflation rates and the current and predicted inflation rates can be found on their website.
Its also important to note that the predicted inflation rate is predicted for 12-18 months in the future. So when its announced on the news that “the bank of england has predicted inflation to rise to 5%” they mean over the next year/year and a half it is expected to reach this level.
Another important thing to know is that inflation is only at the level at which we EXPECT it to be.
Its best described with an example.
Say the Bank of England says inflation’s 4%, the Unions say that this isn’t fair, their employees need at least a 4% pay rise to take this into account, so the companies raise their prices more to account for the greater expense being paid out, so the Bank of England states that inflation is in fact 5%, because all the prices have gone up so Unions demand higher wages again, and the companies adjust their prices in turn.
This is how inflation can spiral out of control.
References :
Studied Economics at University Level.