Many people are very confused on just what inflation is and what it does to a country’s economy, so one Twitter user posted an epic thread to help people understand it all.
There is certainly a lot of misinformation about economic issues, but this thread is a pretty good explainer for those who just don’t get it…
We're going to use a very basic economy example to show the mechanics behind it, but I promise you this scales to the level of complexity of our real economy, warts and all.
— Redneck Geisha 📿 (@kaya_masters) September 30, 2022
Let's look at an extremely basic economy.
There are $100 in this economy, and there are 100 widgets. The only thing you can even spend money on is widgets–there's nothing else.
So, what's the value of a single widget in this economy?
One dollar.
— Redneck Geisha 📿 (@kaya_masters) September 30, 2022
That would be an inflation rate of 100%. You've doubled the cost of the goods in the economy.
Alternatively what if we found a way to double the amount of widgets in our original economy up to 200? Now each widget is only valued at $0.50. That's fantastic!
— Redneck Geisha 📿 (@kaya_masters) September 30, 2022
Let's go back to our original example of 100 widgets and $100. Now let's say we suddenly dump $100 more into the economy but *nothing else changes*. There are still 100 widgets, there's nothing new you can spend your money on.
Each widget is now valued at… $2.
— Redneck Geisha 📿 (@kaya_masters) September 30, 2022
And this is what our government does every time they turn on the money printing machine. (haha "every time"–they turned that sucker on and all they've managed to do since is increase the rate at which it spews out dollars)
— Redneck Geisha 📿 (@kaya_masters) September 30, 2022
Because the government *wants* mild-to-moderate inflation every single year. It is by design.
Did you know that inflation and deflation were tied to economic growth and downturns, and global events before the 1960s? It's only recent that we've made it a permanent fixture? Why?
— Redneck Geisha 📿 (@kaya_masters) September 30, 2022
You take out a loan from someone for an additional $25. So now, over the course of, let's say, 10 years, you have to pay back that $25. But also let's say, during that decade, more money is pumped into the economy, doubling its size to $200.
— Redneck Geisha 📿 (@kaya_masters) September 30, 2022
Inflation is by design. It's why @JimmyAkin3000 always refers to this as "Inflation that the government has caused". Because… it is. By design. To devalue the debt we hold.
It's a delicate balance, because if you devalue it too quickly, nobody will want to buy our debt again.
— Redneck Geisha 📿 (@kaya_masters) September 30, 2022
Start here and then keep digging.https://t.co/1KGWkAm9Tu
— Redneck Geisha 📿 (@kaya_masters) September 30, 2022
Anyone with even a rudimentary understanding of economics who said "we didn't see this coming!" is either lying to you, or is unqualified for their job.
— Redneck Geisha 📿 (@kaya_masters) September 30, 2022
Follow Warner Todd Huston on Facebook at: facebook.com/Warner.Todd.Huston, or Truth Social @WarnerToddHuston
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