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kennethh | 2 years ago
IMF: Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.
Milton Friedman (famous Economists) “Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”
My take is that if more money is produced they will chase the same amount of good until the prices increase enough to accommodate the new money.
Carl Barks described inflation in the best way in his 1950 Donald Duck classic: "A Financial Fable"
randomdata|2 years ago
More or less. Money is debt – an IOU, a promise to delver something in the future. Another way to look at it is: Inflation occurs when the promises made cannot be delivered on in full.
There is still a human element to consider, though. For example, where the promise is held can be a factor. Promise Jeff Bezos one billion high fives and you'll be fine as there isn't enough time in the day for him to collect on them all anyway. As far as anyone knows the promise is good, it just hasn't be called. Promise one billion different people one high five, though, and now you've got a problem. It is now you who doesn't have enough time in the day to deliver on them all. Once you have proven you cannot deliver, then it is known that the promises aren't worth as much as when they were made.
In both cases you have created one billion new 'high five bucks', but high five buck inflation is apt to only occur in the latter case. In other words, creating more money doesn't necessarily lead to inflation, but it is, indeed, necessary for there to be relatively more money (promises made) than output (promises delivered) to see inflation occur.