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==Effects of inflation== |
==Effects of inflation== |
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| + | ===Profit of money creators=== |
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Increases in the money supply initiate an exchange of something for nothing. They divert real funding away from those, that generate wealth towards the holders of the newly created money. The general increases in prices, which follow, are a symptom of the erosion of money's purchasing power.<ref name="Shostak_inflation" /> |
Increases in the money supply initiate an exchange of something for nothing. They divert real funding away from those, that generate wealth towards the holders of the newly created money. The general increases in prices, which follow, are a symptom of the erosion of money's purchasing power.<ref name="Shostak_inflation" /> |
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| + | ===Rising prices=== |
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| + | The increase in the money supply will create a new level of [[price]]s, but it will not be the old level of prices, multiplied in all relations and quantities. |
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| + | New money will change the spending habits of people. Also, some of them will make gains and losses and will alter their spending habits accordingly. Therefore, all prices will not increase uniformly. Some prices will rise more than others, therefore, some people will be permanent gainers, and some permanent losers, from the inflation.<ref name="Rothbard_inflation" /> |
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'''Inflation''' is the process of issuing [[money]] beyond any increase in the stock of specie.<ref name="Rothbard_inflation" /> |
'''Inflation''' is the process of issuing [[money]] beyond any increase in the stock of specie.<ref name="Rothbard_inflation" /> |
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Revision as of 22:20, 1 June 2009
Inflation is a general increase in the money supply.[1]
Definition of inflation
There is a certain confusion about the meaning of this term. In the popular definition, inflation is an ongoing rise in the general level of prices.[2]
Prices do not stay constant, they are always rising and declining. An increase in the money supply - inflation, properly defined - has a tendency to raise them in general.[3] It is also impossible to establish an average of prices of different goods and services.[1]
Effects of inflation
- See also: For and against paper money
Profit of money creators
Increases in the money supply initiate an exchange of something for nothing. They divert real funding away from those, that generate wealth towards the holders of the newly created money. The general increases in prices, which follow, are a symptom of the erosion of money's purchasing power.[1]
Rising prices
The increase in the money supply will create a new level of prices, but it will not be the old level of prices, multiplied in all relations and quantities.
New money will change the spending habits of people. Also, some of them will make gains and losses and will alter their spending habits accordingly. Therefore, all prices will not increase uniformly. Some prices will rise more than others, therefore, some people will be permanent gainers, and some permanent losers, from the inflation.[3]
See also
- Wikipedia page on Inflation
- Inflation from The Concise Encyclopedia of Economics
- What You Should Know About Inflation, Henry Hazlitt
References
- ↑ 1.0 1.1 1.2 Frank Shostak. "Defining Inflation", Mises Institute, posted on 2002-06-03, referenced 2009-05-26.
- ↑ Lawrence H. White. "Inflation", The Concise Encyclopedia of Economics, referenced 2009-05-26.
- ↑ 3.0 3.1 Murray N. Rothbard. "11. Binary Intervention: Inflation and Business Cycles", Chapter 12—The Economics of Violent Intervention in the Market, Man, Economy and State, online version, referenced 2009-05-26.