Inflation and Deflation

[@CyanLightning]

Back in my day, a dollar was equal to a dollar.

[@frzzzzz]

I agree

[@user-tk9fm2sw5g]

Bad grammar.

[@ortherner]

agreed

[@CyanLightning]

@@user-tk9fm2sw5g Jeez, not all people are native English Speaker, also it would be infinitely useful to point where is the mistake, instead of just saying "Bad grammar"

[@user-tk9fm2sw5g]

@@CyanLightning You should say a dollar was equal to a dollar. And I do not care. Native or not grammar must be corrected. Even if I have to be exceedingly annoying

[@glennpearson9348]

Nice overview, Prof. Dave. Perhaps you'll cover some additional and related items in future episodes of this series: 1) The effects of cashless commerce on inflation/deflation; 2) The "misery index;" and 3) The effects of consumer confidence on inflation/deflation. I'm really enjoying this series! Thanks to you and your team for this great content.

[@zvxcvxcz]

Yeah, 3 seems to be the actual cause of much of our current inflation. Companies are pricing way above even their increased costs (increasing their profit margins) because lack of consumer confidence is leading consumers to accept the higher prices. That is, the expectation of inflation is leading customers to accept price increases they otherwise wouldn't even as those same companies are posting record profits.

[@glennpearson9348]

@@zvxcvxcz Indeed. This phenomenon is also sometimes explained by pricing elasticity.

[@geoffreyulreich8553]

I'm surprised you didn't cover the 'sweet spot' more thoroughly, given your science videos. Specifically, the fact that inflation, vs deflation, favors the wealthy, as do the monetary policies pursued in the US. You also don't mention the effect on the trade balance, or the links to environmental science - ie, the unrealistic expectation of always growing.

[@OrthoHoppean]

@@gmw3083 no biggie bro. Central banks will destroy economies worldwide BUT they will also fix everything! A single worldwide CBDC. Trust them they got this!

[@OrthoHoppean]

What's the last point you're making

[@geoffreyulreich8553]

@@OrthoHoppean In the US capital system, there is an assumption that there must always be growth in GDP. This is not realistic, especially if the population begins to shrink, though technology bolsters GDP growth to an extent. It's an environmentalist critique that our economy favors 'always growth' over sustainable practices. Put another way, our economics fail to capture many market 'externalities' - things not priced into the production of goods. While not all externalities are bad, may, like pollution, are. A carbon tax is one proposed way of pricing in some of these externalities, so that the full actual cost of carbon-emitting production is priced in, or captured by the market. It's the difference between capitalism as it's supposed to work per textbooks and moral justifications, and the crony capitalism we currently operate under, in which regulatory capture by corporations ensures that they can continue to make greater than economic profits by offsetting some of the costs of their production onto the population or others. Polluters object to this by claiming it will make products cost more, but the truth is it's just making a hidden cost an explicit one, which in turn affects societal demand for their products, and reduces the amount supplied. Sorry for the longwinded replay, but there's a lot of intertwined issues at play.

[@OrthoHoppean]

@@geoffreyulreich8553 Okay well I'd first like to point out that I like environmentalism. I am in favor of minimizing our environmental damage. On the other hand, I'm in favor of increasing economic growth to the highest level possible. These are not contradictory positions. Not all proponents of capitalism are built the same. The ones who obsess with aggregates like GDP (including Keynesians) have a very naive view of economics. First they believe spending drives the economy. It does not. Without savings and investment, there is no consumption. You have to produce before you consume. That aside, they focus too much on some aggregate of spending without questioning what that spending actually consists of. If the U.S. military were to grow to the point of nuking the entire world, they would see it as good because that holocaust required spending. Clearly, spending for its own sake, particularly government spending, isn't good. Real economic growth consists of producing more of what consumers demand. Only the entrepreneur can do this through the profit and loss system. Profits and losses and the price system serve as both a medium for economic growth and environmental protection. An entrepreneuer who makes profits (revenue > costs) is allocating scarce capital resources to their most desired ends. An entrepreneur wastes resources by providing a good that no one wants will be forced to downscale, restructure, or go bankrupt. They will be punished. Consider this: a copper mine must take present and future income into considerations. Too much mining will lead to a drop in price and stock value(expected income from further production). The value of mine is lowered. They have to protect the mine's value so they are dissuaded from over-mining. If a shortage is expected, less is produced until its price rises high enough to wait for when it's more urgently needed. High prices imply scarcity. Current supply will be saved and used better. Maybe it's replaced with cheaper metals where possible. New copper is mined or replacements researched. Higher prices fuels recycling campaigns. As to pollution, as societies become wealthier, their environments actually become cleaner. The reason for this being that they don't have to worry about food for the next day and now have the time to care about higher ends like the beauty of nature. I am in favor of nuclear energy when it comes to both economic growth and the environment. But the government subsidizes big oil by billions while prohibiting nuclear. That right there is a problem. I would hesitate to call carbon a pollutant like smoke from cars. Carbon is odorless and colorless. It is a necessary element for life and food for plants. You can't call that a pollutant. The thing is figuring out how much carbon is natural and how much is from human causes. And that's the hard part. The outcome of banning or restricting carbon is a deteriorating a standard of living, which affects the poorest always. I would hesitate even more to suppose that if carbon is indeed a problem, that government is the solution. The public sector is notoriously corrupt and besides that, doesn't function with the same incentives as private entities. Also, keep in mind who the biggest polluter is: ivn.us/2012/04/18/the-number-one-worst-polluter-on-earth-is-the-u-s-federal-government

[@zvxcvxcz]

@@OrthoHoppean Why would you want to increase economic growth to the highest level possible? That seems silly and wasteful to me, on many levels. Spending DOES driver the economy and investment IS spending. Saving is antithetical to the economy, but that is "solved" by banks making investments using that "saved" money. Producing what consumers demand is economic growth, but I'm not sold on it being good. Somehow there is demand for cheap plastic toys with small parts that are detrimental to the environment as the plastic breaks easily and invariably is trashed and dangerous the children they are supplied to as a choking hazard. And yet they are made and sold in massive quantities. The companies that make them are glad that they break, so they can sell even more. Contrast this with the market for well made wooden toys that are meant to last forever. Economically this is less lucrative as people do not need to replace them and they can last for generations. They tend to be more bulky, but are usually designed to be safer for children and many are colored with safe dyes... whereas the plastic toy industry has used lead paint a really disturbing number of times. Should a company really aim to maximize profit or should they aim to have a sustainable amount of profit that provides a good standard of living for both the owners and their employees and does the least harm to the public? Carbon solid and black when you have pure carbon. You're talking about CO2. There is extensive evidence that it causes global warming, which shifts the environment on a massive scale and is absolutely a pollutant. There is also extensive evidence that CO2 levels have risen drastically due to human CO2 output. But even if that evidence did not exist, the previously mentioned evidence that it causes global warming is the part that matters. Whether or not it is "natural" or human caused is a quibble that doesn't change the outcome or the course of action we should take one bit. If you think the public sector is corrupt, I have some bad news for you about the private sector. It is far far worse. When we say that the US government is the biggest polluter on Earth... that site is from 2012, so I don't know if it is still even the case (might be China now), but sure. The US government is a huge sprawling entity and the pollution that gets counted for it is often mediated by contracts to private corporations. The US government doesn't actually own Boeing or Lockheed Martin or design their planes, but pollution from military planes lies squarely with the US government. Saying the US government is a big polluter doesn't seem like the argument winner you seem to think it is. It means that they are best positioned to make an impact even through changes to policy without even doing things themselves per se. Implementing more stringent requirements on their private sector contractors would be good place to start. Maybe SpaceX shouldn't get NASA contracts unless they can be more efficient. Indeed government is the only potential solution because it isn't in the best interest of any private corporation to take on the costs of reducing pollution unless they are forced into it as a cost of business and because only government has the authority to make and enforce such standards and only the government has the tax dollars to incentivize the behavior we're looking for from private corporations it deals with. Gutting EPA power has been disastrous by the way. I don't personally care whether or not the government runs the operation firsthand (e.g. USPS) or if they contract things out, but what they must do is to 1) legislate and 2) regulate, and private lobby interests have been impeding both of these necessary functions. The EPA's power to regulate has been gutted. No one fears the IRS, the SEC is a joke, and the FCC got Ajit Pai-ed. We no longer have law and order for corporations. We need a strong government to make and enforce laws in the interest of the public, and that includes laws regarding CO2 emissions. Let's clear up the myth of the government being inefficient for a moment here. Companies argue this out of both sides of their mouth. From one side they claim the government isn't effective, but from the other side they can be heard moaning that they can't compete with the government, that the government is in fact more effective due to "unfair advantages." This is why they lobby, and then their turncoats in government make stupid rules that sabotage the public endeavor. There is a prime example in healthcare, but I'm guessing you have some pre-existing biases in that area, so let's talk about taxes. Why do we need to do our own taxes? Why doesn't the government calculate them instead and we just dispute them if we think they made a mistake? There was a push for this, but the tax preparation industry lobbied against it. Eventually there was a compromise, where the tax industry needed to provide free filing options for those with lower income and relatively simple tax prep needs. They have often tried to hide these options from the public and let me tell you, TurboTax asks you to upgrade to a more costly tax prep option an obscene number of times. The fact of the matter is, the government can do your tax prep very easily, and would be if it weren't for obstruction by the absurd private sector that sprung up around tax prep back when it was less easy to automate. While we're at it, let's cover regulation a bit as well. It's generally treated as bad by the right, and they cite the Chicago economists. If we actually look back at the reasoning in their work though, what they feared was not all regulation, but regulation that stifled competition, that was put in place to favor an established player in the industry following what they refer to as "regulatory capture," i.e. when an industry manages to control it's own regulatory body (e.g. the modern SEC and FCC). But this isn't what happens with all regulations. Some regulations promote competition, e.g. phone number transfer, which gives customers much more mobility between telecom providers. Or even net neutrality, which prevented ISPs from playing favorites. In fact, it is regulatory capture of the FCC that was used to kill net neutrality and decrease competition. The solution to this quandary is really not to deregulate, rather it is to keep regulators independent of the industry they regulate. I would also point out that often those crying for deregulation were not the targets of the regulation they complain about. E.g. Tesla has been flagrant in disregarding numerous regulations that predate their existence as a company and were thus definitely not made to target them and whining about the unfairness of it all when it is in fact perfectly fair and every other automaker has been compliant.

[@benmullen295]

I'm a fan of Prof Dave, AND a fan of Mr. Beat!!! so this is basically both

[@Seth9809]

Wrote the script.

[@benmullen295]

@@Seth9809 thats what I mean! lol

[@bhgtree]

Great video Prof Dave. The downside of inflation is that people on social security and those on lowest pay are going to be hit hardest.

[@glennpearson9348]

I think he touched on fixed incomes, right?

[@ZealousWins]

​@@glennpearson9348He did, but I think @bhgtree said this to emphasize it in another way.

[@maryellen1952]

One of the best simple explanations of this subject. Too many of these videos make the subject of economics too complicated.

[@idontknowwhatnameshouldipu1864]

Wow it feels like a lesson in school, but instead its fun and really interesting to watch (thats because i am not forced to do it i do it cause i want to) Keep up with these great videos

[@Madmetalmaniac42069]

Thanks!

[@dr.orange1605]

The baseline state of a competitive market without monopolies is deflationary. Human curiosity drives technological innovation, enhancing efficiency. This, combined with consumers constantly seeking "more for less" and entrepreneurs striving to stay competitive, results in deflationary pressures on prices across all sectors. Ultimately, prices should fall to the marginal cost of production. If this premise holds true, I am compelled to question the collective conviction that monetary inflation is a necessary component for a functioning economy. To be more direct, why do we endorse a system where a certain loss in purchasing power, akin to a hidden tax, is deemed essential and undemocratically imposed upon us? Could it be that we find ourselves entangled in a conflicting paradigm? One where the exponential growth of technology, promising efficiency and deflation, clashes with the perceived need for inflation to stave off economic downturns, especially in the face of seemingly unsustainable levels of debt.

[@snoozy04]

Best explanation on the internet.

[@alexthomas5633]

I noticed a lot more keyframed animations in this episode. Great work!

[@ytube777]

Wouldn't no inflation and no deflation be ideal? It's not really clear why 2-3% inflation is ideal... other than just because economists say so.

[@4dragons632]

I agree with this. The reason why 2-3% is considered 'ideal' is so that billionaires can become multi billionaires by finding something to invest in which grows their fortune at a rate of 5%. In the world of finance it's all about what banks and billionaires want to invest in.

[@ProfessorDaveExplains]

So that people invest. That was mentioned.

[@alexalbuquerquerodriguesal108]

There's several reasons for that, one that 0% inflation is a extremelly thin equilibrium, any impact can generate deflation which is much to worst overturn than mild inflation and in some cases worst than hyperinflation to control (just look at Japan for example, they're literally decades trying to fix that economy and the Olympics were the best hope thanks to the boom on commerce and investment that comes from tourism, real shame that because of the Covid, there was real chance for Japan but maybe there's still hope); another reason is that It encourages productive investment over financial investment, because of inflation the gains of capital from financial investments tends to be lower compared to productive ones, narrowing down the gain/risk factor, financial investments tends to be more attractive to anyone that has some capital to invest because they're much safer than long-term investments on productive sector so if they become more profitable, they'll become the optimal choice for every investor (It doesn't need to be a millionaire, that's also a fact to small investors that use to invest on small businesses). Of course this is very simplified, the second reason have many other factors to take into account like financing capacity of the economy, growth expectations and many more, as well as the fact that It doesn't have a sole explanation for everything in economics, mainly for inflation and growth models.

[@FarnhamJ07]

It's way deeper than just making people invest. The fractional reserve banking system at the core of our monetary system would collapse without long term inflation. To make a long story short, banks are allowed to 'loan' more money than they actually have. They (legally!) create money out of thin air whenever people take out loans, so long as they follow various rules. >90% of the money supply exists only as private bank credit through this "money multiplier" effect. Unfortunately, this process creates only the principal - not the interest that will inevitably be owed, too. Ergo, if more money isn't poofed into existence, exponentially, some people will inevitably default on their loans, mortgages, &c. I highly recommend giving it a Google; it's lunacy, in my opinion. I wish Prof. Dave would mention it in this series; it isn't hard to mathematically prove this system is impossible to continue forever. Infinite growth is not possible in a finite world!

[@AdamVassGal]

You are correct. Not manipulating inflation assuming a foundation of 0% would be ideal. Natural inflation will ramp up in times of economic growth and deflation will naturally occur during contractionary periods. Both inflation and deflation are good for the economy when they occur without government intervention.

[@TheOneGreat]

Sounds more like propaganda. As a non-billionaire I prefer no inflation.

[@maxinesenior596]

Of course, the pricing of medicine as shown at 1:07 is LARGELY based on pharmaceutical companies going out of control with their greed, NOT inflation or Supply and Demand. It's just because they can that they put such a heavy price tag on letting people live.

[@Rose_Harmonic]

Put another way, they know the demand curve is a vertical line.

[@maxinesenior596]

@@Rose_Harmonic and supply is effectively infinite.

[@Rose_Harmonic]

@@maxinesenior596 That is so. Have you heard about the guys working to develop a free open source insulin recipe? Heroes

[@maxinesenior596]

@@Rose_Harmonic absolute legends

[@LuizOtavio-gq6dk]

If you take a look, it does come down to supply and demand. 1- Making more money: You're increasing the supply, therefore, as the “demand” is the same, the value goes down. 2- More people wanting stuff = more demand 3- More money in order to produce = decrease on supply

[@Supertoddy96]

But heres the thing for america, there was already such a stupid low supply of money that was also allocated improperly and hence any financial problems people have been facing up until literally now people put a weird value of a dollar when the government and media are pushing a supply and demand model on money in means to control populations rather than people actually caring about having the most amount of money possible especially when prices wont change drastically after doubling the money supply in the past 10 years but also prices for everything not doubling which means people were more and more suppressed with money then than they are now (so to speak not literally), where its so much easier to raise 10,000$ now as it was 10 years ago, but it has such similar buying power to back then which it might even be cheaper to go take a vacation to greece if you wanted to now than 10 (give it even 15 years granted the recession) year ago

[@ajinkyakamate421]

2nd and 3rd point also depends on 1st point. And cause of point 1 i.e money supply is federal reserve/government and banks who work according to fed regulations, nothing else, no other entity in US is responsible for USD creation. Only Fed and banks who are sanctioned by the fed can create new dollars through debt. So eash dollar in your hand/bank is created by fed. But when the money supply is increased for which fed/government is single handedly responsible, everyone other than government is blamed for it like this video does. It sure says government spending/increase in money supply is a part but quickly whitewhashes it by saying its not the main cause and very effectively blames it on other things. Look at the comments majority of people think that fed is not responsible for it or atleast not the major factor for inflation. Also the point about no recession or panic after feds creation, yeah but he fails to mention that all those panics and recessions were quickly resolved and markets quickly got better and had growth. But after creation of fed, yeah according to official sources we had few recessions but, because of Inflation USD is losing its purchasing power year by year, devaluating peoples saving year by year. Inflation hurts lower and middle income people the most because they can't just get loan for million like rich people can do. Imagine you have 1kg rice, and it will give just for sake of argument gives 4000 calories, but we have inflation i.e loss or purchasing power, in this case loss of calories we can get out of it reduced. Even with low 2% inflation each month, Each kg of rice will give 2% less calories every month/quarterly/year. Now you have kept 10kg rice as emergency supply, and after 10 years you open that rice bag but it has lost half its caloric value, how would you feel? By weight the rice will be 10kg but it will give only 2000 calories per kg instead of 4000 kg. This is what inflation does to low and middle income people. But videos like this make gives us impresion that inflation is not such a bad thing, low inflation is okay, and government/fed is not responsible or not a major factor for inflation is very dangerous.

[@hydromic2518]

@@ajinkyakamate421While the government can increase inflation through increased spending this only really occurs when supply cannot meet demand. If more money is put into the economy for people to spend with but companies can’t produce more goods or services as quickly we will see inflation. Another factor is productivity, which has been really low. It’s the efficiency of production. If productivity is improved it means we can produce more for the same amount as before and thus we are able to decrease the disparity between supply and demand. Savings would only decline if they aren’t being invested into something else. If savings are invested into Bonds, stocks, a house, etc they will most often increase at a faster rate than inflation. This can be a disadvantage for those of lower incomes because they might not be aware or be able to invest in these things but if we make it easier then inflation would be no problem

[@pepperVenge]

In the 1920's and 30's, an old feller I talked to back in 2003, said he bought a used Ford Model T for $30, and sold it for $30. I then later learned that a Brand New car in the 30's would cost you $100. My great grand parents bought my house back in the 1950's for $16,000. Today, its worth $355,000.

[@repositoryforresponses4131]

Literally just finished the previous video in this series, imagine my surprise! Thanks for continuing to create, the lessons here have been fun.

[@seojumbo589]

Good video again thank you.

[@db3536]

Good video thanks

[@lil-rose]

I've always have trouble to understand economy theory, thanks profesor Dave for explaining it :)

[@otuboahgideon2005]

Great explanation. will be glad if you make more emphasis on deflation on its own.

[@quinny-bn4jw]

I am commenting #BringBackDislikes on every unique KZbin video that I watch for the rest of 2024, regardless of if I actually dislike the video or not. This is video 1817.

[@MoralGovernment]

Inflation is not inevitable. Before the federal reserve we had deflation, which was a good thing, because prices decreased as technology improved.

[@Seth9809]

Are you really young or just really ill informed? Japan has had decades of Deflation and it has murdered their economy. Before Covid, The EU had been freaking out and suffering from the effects of low inflation year after year.

[@MoralGovernment]

@@Seth9809 They have many problems with their economy, mostly because their fractional reserve banks are doing everything they can do cause inflation, and it's killing their economy. Prices going down is a good thing, especially when it is coupled with full employment and steady incomes. That is what should happen when the economy becomes more efficient due to technology. I'm not young or ill informed, you're just misinformed by a system that wants to continue fleecing the people.

[@raymondfrye5017]

​@@MoralGovernment Sheared like sheep? Blimey! Like Merinos in Australia.

[@Soapy-chan_old]

I have a huge problem with Inflation, in particular the third cause. A company pays their workers more money, which causes a price increase, which means other workers can not afford it anymore, and thus need a higher wage from their company (which they can enforce through strikes and stuff) and then this company also has to raise their prices, and it's just a stupid circle. Also the most important thing with this is, that most workers won't get more money at all, and like he mentioned, social security doesn't cover higher prices either. This system is inherently flawed and needs a reworking.

[@snewp_e2139]

It ain’t getting reworked anytime soon, inflation will stick around for decades to come

[@claian12]

What really fucks with this cycle is when those initial workers need a wage increase to afford already increasing prices. Prices are increasing regardless of any wage increases, so one inflation cause leads to another, and ultimately leads to economic collapse if there's no major intervention.

[@Soapy-chan_old]

@@claian12 Yeah exactly

[@LuizOtavio-gq6dk]

That's the thing about Fiat currencies, they always have a limited life-span.

[@aetherkid]

Yeah, capitalism is inherently flawed on a foundational level

[@sodelsolo7261]

best intro ever

[@johnmichaelbnuez5444]

What can you say about gold standard?

[@BENGAL_ASPIRES]

awsome sir

[@massimookissed1023]

That Zimbabwean inflation rate was +15.6% per day (!)

[@snakeywakey3893]

Really puts in to perspective how much that is.

[@sengmanyyavongchit5032]

Perfect video 👍👍

[@superbuddy2493]

Nice

[@95TurboSol]

Inflation wouldn't be a problem if wages tracked 1/1 with it, but it never seems to do so. People were so happy to get "free" money from the stimulus packages but have no idea they are paying for it in lost purchasing power and lagging wages, you're becoming poorer by the day.

[@sufianaldib9469]

"Allah condemns exploitation, and He blesses charities. Allah does not love any disbelieving sinner." Quran 2:276 Islam fights both inflation and poverty Islam bring peace and mercy to society

[@volo870]

Since when Prof. Dave is an economist? I mean he mocked chemists for being wrong about evolution. Why then does he poke his nose into similarly alien area of economics?

[@ProfessorDaveExplains]

Um, I exposed a charlatan and apologist named James Tour who was lying through his teeth about origin of life research. And then over here this is me hiring an economics teacher to write introductory level economics tutorials for me. What do those things have to do with each other? Like, at all?

[@volo870]

@@ProfessorDaveExplains First of all, please accept my gratitude for reading comments. Your credit to the scriptwriter Matthew Beat was not as obvious - it was buried among a bunch of other links in the video annotation. I had to look for it, and then I had to google his background as American History and Economics Teacher in Kansas. Asking for professional assistance is admirable. What school of economic thought do you and Mr. Beat plan to educate? You see, while I admire your knowledge of exact sciences, that is chemistry, biochemistry and physics, you have to remember that economics (along with geopolitics and theory of law) is not an exact science! You have to abide to a certain school of thought, which is not might not be universally true (like in exact sciences), but at least coherent. While exploring the basics of economics (like inflation) the lack of adherence to a particular school of economic thought doesn't really matter. But when you dig deeper - trying to mix and mash fundamentally different approaches to economics (as exact science practitioner would do) you shall dig you into the similar radicalistic hole as James Tour. So, do you plan to explore economics any deeper than middle school level? If so - what flavor of economics do you plan to popularize? You have to make up your mind at the very beginning.

[@ProfessorDaveExplains]

It wasn't "buried", it's in the description section immediately after the summary of the video. That you didn't think to look there isn't my problem. And while you say exploring the basics of economics "doesn't really matter", there are millions of young students taking high school economics classes that would beg to differ. Economics isn't taught in middle school, so stop trying to exaggerate the level of depth here. It's basic information for those looking for basic information, whether students or inquisitive laypeople. I don't know what will eventually be covered, so watch out for that in the future.

[@volo870]

​@@ProfessorDaveExplains I said (cite): "While exploring the basics of economics (like inflation) the lack of adherence to a particular school of economic thought doesn't really matter". I stand on my words - explanations of the basic economic notions are the same regardless of school of thought - i.e. at this level the "school of economic thought doesn't really matter". If you plan to dig a bit deeper, please disclose (in video, not in fine print) the origins of models and interpretations that you teach. We REALLY don't want to see your channel turning into another PragerU. Economics were taught in my school since 8-9th grade, but I might be privileged. In my country there is a notion of "universal" school education - we have to obtain a certain level in all subjects: precise sciences, humanitarian sciences as well as literature. My school was among the best in the whole of the country.

[@ProfessorDaveExplains]

You're attempting to lecture me on things I haven't done yet. When I cite information, I reference its origin. That has been the case in this series and will continue to be the case for all of my content.

[@UnconventionalReasoning]

The fourth cause of inflation was missing: 4. Producers raise prices to increase profits because they can. This is most likely in a semi-monopolistic industry, which the US has in media, agriculture, animal agriculture, transportation, banking, consumer credit, technology, ...

[@joshheslin8713]

Nice video Prof. I'm curious about the FED's triple QE 1-3 increase over the last few years in comparison to the "healthy inflation" that you mention here for an ecomony. Would love to hear your take. Cheers

[@shadowmax889]

There can be a 4th cause. When political decisions destroys the production of a country, (like nationalizing thousands of acres of land and thousands of private business rendering them unproductive with subsequent collapse of the economy) and the lack of products drive the prizes up

[@dynamic9016]

Very interesting information.

[@nienke7713]

1. the government spends more than it raises in taxes, thus needs to go into debt which artificially puts more money into circulation, and causes the money to lose value, therefore, by not properly taxing for their spending, the government essentially creates a hidden fixed-rate tax (which tends to hit poorer people disproportionally hard, compared to progressive tax rates which put the higher burden on the rich who are more capable of handling it). What political parties tend to want to reduce taxes (even though they don't necessarily spend less)? More capitalist parties, of course, because they have the interest of rich capitalists at heart. 2. the amount of money everyone has goes up, and the rich capitalists exploit it by asking more money, for products their companies produce, thus increasing their own wealth, whilst keeping the rest of us down and unable to ever climb up the economic ladder unless we manage to pull others down and/or step on other's heads 3. Costs go up, and the rich capitalists don't want to reduce their millions of profits by a couple thousands, so instead they raise the prices of their products so they can keep getting richer whilst keeping the rest of us down. Our economies grow, but the rich are the only ones who truly benefit from it, the rest of us just exist to do the work and buy the products of our own labour, which makes the rich even richer.

[@cygnustsp]

Keynes vs Friedman, still battling it out today. One of my favorite movies SLC Punk! when they're buying acid in 1985 "this shits getting expensive".."hey man, inflation"

[@JTGaut17]

Same with Keynes vs Hayek...but even moreso Keynes vs Mises.

[@JP-JustSayin]

@@JTGaut17

[@MilitaryPoliceG795]

Professor Dave can you do one on your assessment of crypto including El Salvador’s adoption?

[@swedmiroswedmiro1352]

Crypto is not a currency. It lacks all the functions that a currency has. The beliefs of crypto currency proponents is on flat earth level of lunacy.

[@raytheboss4650]

i was literally studying economics for my exam lol thx

[@defaultlogos2976]

How did it go?

[@raytheboss4650]

@@defaultlogos2976 19/20 W

[@defaultlogos2976]

@@raytheboss4650 Nice, what specialization are you aiming towards?

[@raytheboss4650]

@@defaultlogos2976 dont understand that question :/ but if your asking for my career, idk im in 9th grade

[@defaultlogos2976]

@@raytheboss4650 Oh, I thought economics was your degree and you were in college

[@_Feyd-Rautha]

Damn, I JUST got the intro jingle unstuck from my head…but this topic is just too relevant not to click and I would never disrespect the science by muting. Here’s to another 24!

[@bowenjudd1028]

Welcome to 2100, where gas prices are 100 dollars per gallon, this is what you get for ruining the environment.

[@GodDragonLich]

No, this is what you get for allowing Nixon to remove the Gold Standard. The U.S. Dollar is worthless due to the fact that it is no longer backed by Gold.

[@bowenjudd1028]

@@GodDragonLich, he also declared war on drugs. We lost.

[@NoName-bh4pf]

Have you done Calculus III videos?

[@ProfessorDaveExplains]

yep check my calculus playlist

[@NoName-bh4pf]

@@ProfessorDaveExplains Thank you, kind sir.

[@zvxcvxcz]

Some difficulties with the CPI is that it is often manipulated, e.g. milk subsidies can keep milk prices low and artificially deflate the CPI. There is also the 4th cause of inflation, the expectation of inflation. This 4th cause is what is allowing companies to currently get away with large price increases that are not commensurate with their cost increase (3), nor with supply (1) or demand (2). This data is public via their earnings calls in which they must communicate honestly with their investors. So many companies have been using the pubic expectation of increased demand and short supply, and thus the public expectation of inflation, in order to excuse large pricing increases and reap record profits. I'm not saying there has been 0 real inflation, but that a good chunk of it has been artificial as prices have been raised voluntarily by companies profiteering well beyond their cost increases, in other words, they are increasing not just their price, but their profit margins. Consider GPUs. Supposedly they're scarce, and yet I can hop on eBay and get one from a scalper today. They don't seem to be scarce, they're readily available even from no-name companies and individuals. Their production has not slowed in any major way. TSMC reports no scarcity, but they did report that some of their customers downstream of them in the supply chain are hording chips, and so that they would be giving less supply to those companies going forward and more to those that were actually shipping downstream. The myth of GPU scarcity has driven scarcity in retail locations as scalpers snap them up in the hopes of profiteering. At the same time, there has been a proliferation of "system builders" offering prebuilt computers with these same GPUs, some of which are only a few hundred more than buying the GPU all by itself. Clearly they are getting a large number of GPUs at prices far lower than what we see with the scalpers or their business model wouldn't be feasible, aka they're also depleting retail shelves in the hopes of profiteering just like the scalpers. Have there been supply issues? Yes, but they have been far more minor than the scalpers would have us believe. There have been enough GPUs available, just not to such excess that they could absorb the additional pressures of the profiteer demand in the middle. It's like this: there are 10 GPUs and 10 people, if everyone buys one, then everything is fine. But 1 person bought 8 of them and is now charging double MSRP... It's not that there aren't enough GPUs, it's that there isn't a huge excess to flood the market and keep the price low. That is, e.g. if there were 100 GPUs and 10 people and the scalper could still only afford 8, then he can't corner the market and the price stays low. Is there a demand issue? There was some at first while tons of people were home with nothing to do because of COVID, but most people are back to work now. And while demand was high, it hasn't been so high that GPUs were ever unavailable. There has not been a single day where one couldn't find a 3080 on eBay at a silly price that people were not willing to pay. Have there been increased cost issues? Not much, Nvidia and AMD have NOT increased MSRP and costs to retailers for their shipments seem to have been stable. So we can only conclude that the illusion of scarcity is driving high costs moreso than actual scarcity, with even the big players like Best Buy now coming up with inventive ways to stiff customers as stock approaches market flooding levels by requiring special account status in order to buy the cards being sold at MSRP (an account status that costs like an extra 200? bucks or so).

[@j.d.martin6678]

Any plans to address modern monetary theory?

[@buggsie2you]

I'm hoping this is the foundation for a series. I love the simple and generalized presentation, but a follow up with more detail of each of the 3 "causes of inflation" is needed in order for me to feel comfortable with Dave's understanding of the material. Specifically, aggregate demand (when used to describe inflation/deflation) is considerably more complicated than the video implies. It's interesting that a term originating from demand-side and supply-side economics didn't include even a passing mention of the supply side in this video. I would assume that's because Dave's planning another video where he explains this correlation. Or maybe it's just meant to get the conversation started in the comments? In case Dave doesn't get to it in a future vid, aggregate demand is the total demand for a certain amount of goods in a market. This applies to every good ever produced and is separate from inflation or deflation. Deflation may happen when supply outstrips demand, and inflation may happen when the opposite occurs. Inflation may happen either because demand increases OR supply decreases. The "OR" may seem like an unimportant distinction to make, but this specific distinction is incredibly important in any speculative market. Consider the Beanie Baby™. Or any collectables for that matter, the value of a collectable is determined by it's supply more than demand. Of course there is a bottom floor, you need at least one person that wants an item for there to be any value, but supply is the more weighted factor in this situation. Beanie Babies ™ are a silly thing to mention though, so let's consider another more practical speculative market, oil. Demand in this market fluctuates a moderate amount from day to day and year to year, but prices in this market are generally set by supply forces. Organizations like OPEC attempt to manipulate supply in order to effect the market value of the good they produce, and it works. It works exceptionally well on commodities and almost as well on luxury goods. This phenomenon has earned the moniker "manufactured scarcity" and it's important to remember that it not only exists, but is one of the largest driving forces in the amount you pay for almost anything. In fact, its presence is far more impactful on the price you pay as a consumer than the cost to produce and deliver a product or good is in almost every situation. It applies to the clothes you wear, the car you drive, the food you eat, the device You're reading this on, almost everything. There's a lot to discuss here and I hope dave continues the conversation. Great vid🤌

[@this_is_patrick]

Somewhat unrelated: I dislike how people talk about prices "back in the good old days" without also mentioning the minimum or median wage. Like, sure, one lb. of bread costs $0.1 back in 1945, but they somehow forget to mention that minimum wage was $0.4 per hour and the median yearly income (of urban families) was $2,600. They always make it out as if the average Joe had always earned five digit salaries.

[@slickestrick4117]

I got this a lot as a kid "Back in my day going to the theatre cost $0.25!" Yea but you also made $3.00/hr back then Grandpa

[@ivanestrada3468]

Thinking that 2-3% inflation is ideal is something the Austrian School of Economics can challenge. So ,the investor is making money at the same time that the poor retired man is loosing money. No net gain. Economics is such a fascinating subject. I am no expert but I definitely thing everyone should study Austrian Theory of economics and understand it. They offer a very interesting perspective. Just so we can all say we looked at if from different angles and then decide what is closer to the truth

[@wasteyourtimereadingthiswi6125]

i remember how rich af i was in the 1990s. After 18 years... AND iTS GONE

[@johndoh1000]

You forgot to mention that inflation can occur when companies raise prices when they don't spend more to produce the same amount of goods. This is what can happen in monopolies, of which we don't necessarily have affecting our current economy right now, but we do have oligopolies that engage in price leadership where the three or four companies that do in fact hold the majority of their market share decide to raise their prices just because profit [at the expense of their consumers] is good [for the stock market and their shareholders].

[@Ilander86]

A very important wrinkle for talking about inflation: Inflation happens when too much money chases too few goods, and can be caused by...well, too much money OR too few goods. Increasing commodity supply decreases inflation. Another name for "increasing commodity supply" is "increased productivity." Basically, more productivity works to balance inflation, so if you're creating net-new dollars for your economy, but they're being spent on real productivity, then inflation is either slowed or completely checked by this effect. That's why some governmental spending is inflationary, and some isn't.

[@j.ascension7]

We need more bang for the buck

[@stirlingblackwood]

He didn't really talk about the causes of deflation.

[@blackholedividedbyzero]

Just reverse the process of inflation and you will get it.

[@christiangrn9642]

Hey Dave

[@aeronmarvelous3393]

Good video

[@universeusa]

Thanks 🙏👏👏👏👏👍

[@Maurcusj777]

I hate how the definition of "inflation" has been changed from describing an increase in the money supply to an increase in prices more generally. The second is merely a symptom of the first.

[@localblackman427]

So most of inflation is maintaining corporate profits for shareholders and lifestyle creeps at the expense of the worker

[@renalsonaysami5963]

Give evidence for and explain the formation of the elements after the big bang.

[@ProfessorDaveExplains]

You're gonna wanna visit my astronomy tutorials, bud.

[@mxy7582]

Joined on the same hour as making this comment. Interesting

[@akallio9000]

Two to three percent inflation is good? Because investors will profit? How about the money wasted in the meantime until they cash in? And the profit is only on paper anyway!

[@hy-roller7771]

This is totally off topic, but I've been hearing a lot about ontological mathematics & it seems to be totally false. However, I lack the mathematical background to know for sure & it seems to be gaining popularity. I can't find anyone reputable talking about it, so that makes me doubt it's validity too. Anyway, sorry for the novel, but I love your vids and easily understandable explanations. Thanx

[@alexalbuquerquerodriguesal108]

"What is Ontological Mathematics? Ontological mathematics is the science of the future that proves the shocking truth that the world is not material but a collective dream [...]" (according to iamhyperian) yeah, seens like horse sh** to me, wouldn't pay much attention to these people if I were you, seens like It's nothing but some good ol' mental masturbation as my teacher on History of Economic Thought used to say.

[@billyte1265]

Changes in aggregate demand and supply shocks can't change average price inflation over time. Only monetary inflation can change average price inflation over time. So while yes, there are other ways that inflation happens, they're not really important in anything other than the short term (a matter of months).

[@estycki]

I remember when I was a kid in the 90s, I could go to McDonald’s with a $5 bill to get a whole meal. One day I walked in and it was over $5. That’s when I learned about inflation.

[@bowenjudd1028]

Venezuela: Hi America, how are you doing. America: Hi Venezuela, we're good. Venezuela: Could I ask you for a loan? America: Sure. Venezuela: Thank you, remember that not everything is a race, I learned that the hard way. America: Okay. Also America when COVID hits: GAS GAS GAS

[@BerzerkaDurk]

Also Venezuela: *solves the problem of children starving in hospitals by making it illegal for doctors to list starvation as a cause of death*

[@Logan753-g1v]

The true definition of inflation is an expansion of the supply of currency. Rising prices are merely a symptom.

[@user-kokemaru]

thanks. 0213

[@bananafoneable]

How did we go from 5 dollar footlong to, 6 inch for 6 bucks?

[@martinl3710]

What is the result of it all? The problem is, that the Richer People and Companies cant get enough. There should be a maximum growthlimit installed by the government, so that it is no longer worth for the big Companies to earn more and more and more in difference to the working People.

[@GodDragonLich]

Yeah no, the issue is the power we gave the government to begin with. When has giving the government more power ever worked out for the common man?

[@buggsie2you]

@@GodDragonLich I'm not saying Martin's got a great solution here, but are you serious? What do you mean when you say "power"?

[@jamesrobsonza7752]

Inflation is actually a bit more nuanced than this. There are 2 types of inflation, price inflation and currency inflation. Price inflation is the modern concept of rising prices caused by the decrease in purchasing power of currency. Currency inflation is caused by the increase in the amount of currency and can lead to price inflation, it is caused by printing money and similar practises that add money to the economy. If the nation's productivity grows by 10% every year (aka 10% more goods are produced every year) but currency is not printed, then in a perfect free market prices of goods would drop by (1 - 100/110) every year as the amount of money in the economy is chasing more products. (Laws of supply and demand). This is bad for businesses and reduces tax burdens which is bad for government. So banks print money so that the amount of money remains relative to the amount of products avaliable for purchase. This money is usually given to the government with the banks taking a portion of it. This is part of why during a recession (a decrease in general productivity and purchasing) prices rise as quickly as they do and why a recession can destroy a country as it cripples the economy and deprives the government of both printed money and tax revenue. Continuing to print money in a recession leads to hyperinflation of prices.

[@chickyhaga]

1:47 Look in detroit

[@robf6389]

Not a bad explanation Dave, it might've been good if you'd mentioned stagflation too. 😉

[@allanrichardson3135]

The stagflation of the 1970s (which I lived through) is a good example, but the causes have been grossly misrepresented by political pundits, partly because of the geopolitics of one commodity: petroleum. For decades before 1973, American consumers and the American economy enjoyed a very cheap supply of petroleum products used primarily as fuels to get energy, and also as raw material to make many products, from plastics to pharmaceuticals. Taking the automotive industry as an example, we didn’t care if our cars (or the trucks carrying the products we bought, or the Ingredients to make them) were inefficient, because the price of gasoline (as a marker for all kinds of petroleum products) was: 25 CENTS per gallon (regular). This was because companies in the countries with the most prosperous economies had control over the largest sources of petroleum, even though they were located in poor countries. Then in the early 1970s, a group of those countries, mostly Arab and Muslim (and a few others, such as Venezuela) got together to form a cartel named OPEC (Organization of Petroleum Exporting Countries), and in 1973 they SHUT OFF the supply of oil to advanced economies, including (and especially!) the United States. Gasoline and other petroleum products became very difficult to find at ANY price. The federal government was forced to ration those products for several months. There were lines to buy gasoline (some cars burned a full tank waiting in line to buy more). Some wealthier people paid unemployed people to take their cars and stand in line! When the embargo was lifted, the lowest price for gasoline was: $1.25 per gallon (5 x as much)! Well, when you can’t get (or afford) as much fuel for your car, what do you do? First, you stop making unnecessary trips (a good idea anyway), so fewer shopping trips, fewer trips to eat out, etc. In fact, eliminate everything except work - assuming you still HAVE a job (if you were in retail or restaurant work you might not). If you lived TOO far from work, your paycheck might not COVER the cost of gasoline to commute to work. But if you could, you would look to replace your car with a more efficient one. There were a few problems: for one, thanks to the decades of cheap gas, most cars made in the US were inefficient, and the few smaller ones were poorly made. So you look for a FOREIGN car, since gas prices in Europe and Asia had been high since the end of WWII, so they knew how to make efficient small cars. But the makers of those cars had to start building a sales and repair network, and lobby for smaller tariffs, in order to send more cars to us. And (supply and demand) those cars cost more. Then you had to find a loan to buy a new VW or Fiat or … HONDA(?), and good luck getting a good trade on that Chevy or Ford! So with more people looking to buy new cars, interest rates went up. Meanwhile, businesses were also trying to adapt to the QUINTUPLING of a vital ingredient in their products or services (and a vital component of their delivery expenses). Some businesses also started researching (a few decades late, because supply and demand doesn’t reward spending today’s money to make profits in the DISTANT future). And once the more efficient products DID hit the market, especially with durable goods like cars, a few years are needed to replace the old products (fleet turnover). And this required financing, thus more demand on banks and higher rates, pricing out consumers wishing to upgrade their cars, houses, or just to endure loss of income. This process led to stagflation: fewer people had jobs, people with jobs had less (even in pre-stagflation dollars) to spend, and yet prices kept going up because making, selling, and distributing products was more expensive, due to the higher cost of ONE ingredient. And by the way, when economists explain cost push inflation, they ALWAYS seem to blame the cost push on WORKERS GETTING RAISES, and NEVER on raw materials and consumables costing more. But I digress. At any rate, the stagflation that began in 1973 took about a decade to readjust the economy, and meanwhile Nixon was forced to resign, Ford struggled with the problem and with voters’ disappointment with his party, Carter also struggled with the stagflation and could not solve it (because TIME was necessary to fix it), Reagan blamed it ALL on liberal spending and got elected, and the economy continued fixing itself. Then his party began to engineer the impoverishment of the middle class, which has continued to the present. And that is ONE example of stagflation, which is STILL not completely fixed because we are still running primarily on oil!

[@Sorenzo]

It sounds a lot like we want inflation and we don't want deflation simply because investors are too stupid to understand that prices going down doesn't reduce the value of their investment because even if the numbers of dollars they earn is slightly reduced, those dollars will be worth more. I find it ridiculous that we're locked into permanent inflation as a policy because "big number good, small number bad!"

[@d2nd21st]

5:25 that's when stupidity show up

[@gdb524]

I know this video is about the theory, but do we have any actual evidence that wage increases have ever caused significant inflation? How do wage increases stack against increases in corporate profit in the past decades? What about corporate tax benefits which make taxes more expensive for everyone else. Does that cause inflation?

[@belligerent-irony]

Oh okay... that's why my 3 dollar bag of chips costs 8 dollars now.

[@Ryan-ii8xo]

Why does prof. dave only respond to negative comments?

[@ProfessorDaveExplains]

They're the ones that need a good talking to.

[@Mettle_DAD]

I hate how our system seems to b constructed as such that when the working class does well it causes inflation. However if the owner class does well they just expand and pocket the rest. And that would be fine if it drove us all forward at an even rate. But they pocket so very very much. And that gap keeps growing.

[@williamnichols429]

You're confusing cause and effect. Rising prices are the result of inflation. Inflation is the increase in the supply of money and/or credit in relation to the amount of goods and services available for purchase. More dollars chasing a fixed amount of goods and services drives the price up.

[@OrthoHoppean]

Inflation is not good whatsoever. Inflation is not normal but a consequence of central bank monetary policy that redistributes wealth from the poor and middle classes to government, the banks, and corporations. A healthy economy is one that experiences price deflation from productivity improvements while maintaining monetary equilibrium (neither a too large or too small money supply relative to the demand to hold cash balances at the current price level).

[@leroyjenkins1032]

id argue deflation is actually a good thing. At least better than inflation. Adaptations could be made to deflation just as they could inflation.

[@hydromic2518]

The problem with deflation is that businesses react negatively to it and thus people lose jobs or have their wages cut which means the economy slows down and stops growing

[@leroyjenkins1032]

@@hydromic2518 Slowing down is a good thing for individuals. Slows the excessive need for people to be constantly spending money.

[@hydromic2518]

@@leroyjenkins1032 yeah it is good sometimes but it’s not good if people lose their jobs and have no other form of income when it happens. I just hope one day we get rid of money since we are reaching post scarcity soon

[@hydroidtech892]

this is pretty relavent

[@jasonruzicka7954]

I wish I had you as my teacher in school :|

[@gablethemum2622]

First

[@tomfrances5254]

Do we "need" inflation? What if we had money with a fixed supply that could not be produced or printed by governments? In that cause in which the money supply was fixed and production in an economy increased, wouldn't purchasing power increase over time?

[@raymondfrye5017]

No. Because the available money supply will be hoarded by the rich.

[@DE23]

So this is why it feels like the tooth fairy rips off kids nowadays. 50¢ for a tooth is what most parents give.

[@ZealousWins]

I wish we were able to spend a quarter on a soda. I would love us to go back to rhose times.

[@WarMachine550]

Sixty bucks?? Man, i remember when a dime bag cost a dime.

[@casey6556]

I like your content and this is well-produced, but housing seems to me a very poor choice when it comes to discussing prices changing due to inflation. Housing prices in countries like Canada and the US have MASSIVELY outpaced inflation for a variety of reasons, including deliberately limiting supply while demand continues to grow.

[@longspicyone730]

Dave I created a KZbin account just to ask if I travelled at the speed of light would the law of conservation of motion aply to the light

[@Jdjdjdjjdj1997]

Professor how can I contact you i sended you a email but didn't get a response there is something that must be debunked

[@bgiv2010]

Wait... Is number 2 the reason we can't have nice things?

[@TON-vz3pe]

Is Inflation caused by Greed?

[@truthboom]

sounds the same as investment

[@kamsidaniella1422]

He finally had a hair cut 😭😂

[@Gv_paradisecity171]

2020 inflation 📈 2024📉deflation 2025 time to buy again🚀🚀🚀🚀

[@purpledreams_21]

the second reason of inflation...is it the reason why govt doesnt want to increase our wages bcos we will buy more stuff wedemand thus rising inflation rates?

[@R53Hole]

Deflation is delicious.

[@pedroyuuhi]

Japan can def tell you that inflation is a good thing

[@exildahlikumba7059]

♥️👍