Is inflation caused by people buying more or prices going up?

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FormulaNova said..

Tequila ! said..

FormulaNova said..

Paradox said..

Tequila ! said..

The original creator of this thread is wrong in the title of the thread due the fact of the two main reasons (disrupted offer + QE) are ignorantly omitted.

The question in the title is certainly misinformed. Higher prices are causes by high demand and low supply.

Both are symptoms of inflation, not causes.

I forget sometimes that some people here are retarded and cannot extrapolate simple things to understand the intent. Maybe I should have written something about 'inflation figures' or 'measured inflation' but I sort of assumed that people would understand what I was getting at.

If people buy 'more' then it increases demand. If prices are pushed up, and its an inelastic demand, then costs go up, leading to higher inflation figures.

Try to explain that to me in relation to whatever you were trying to correct me on. High school economics was so long ago for me.

Please try not to use crayons.

FormulaNuevas stimulated inflation.

Get the thread title correct next time Mr. Professor.

What's the name of that effect where people are smart and then realise how much they don't know about a particular area? Yeah, you don't have that. (Well, it's the opposite of that and I think you might actually have it, but what do I know?)

In Economics, increased money supply does not always lead to inflation. In a depressed economy it will tend to increase savings and decrease spending. You can try and stimulate the economy all you want by pumping tonnes of money in, but if the person in the street thinks that they are going to lose their job tomorrow or that their house is at risk, they will save and not spend outside of what they have to.

So the question stands; are people buying more or are prices going up?

To make it simple for someone recently arrived from America that saw inflation that was higher than here but then retracted it when someone else argued otherwise, if there is a bunch of extra money injected into the economy, are people buying more things or are the prices of the things they are buying going up?

If we look at it simply, if 23% of the basket of goods and services is 'housing' then these tend to be an inelastic demand. It sounds like higher interest rates then push this up, making a bit of a feedback loop. But it is not necessarily an inelastic demand either.

If health care and other services are also inelastic, then it must be the prices of these going up as well that is leading to higher rates of inflation.

If food and clothing demand is not going up, and its just prices that are going up, then this adds to these increases in the rate of inflation.

Nah, who needs to understand that crap; "It's just the government printing money"... Bloody government!

Your posts are too long sorry. Only your male lover reads all of it.

I didnt post here literally for months, but been reading sometimes.

After all your recent crap I said F it lets give this Biden a bit of love. You know inflation? yes your support to some gov actions created and inflated it (no surprise saw many clueless here in WA w the same attitude, thinking been isolated from the rest of the world wouldnt have any single consequences).

I will retreat to my silence until I see you stepping out of line again. Be warned.

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Brent in Qld said..
^^ the wonder of social media is we get the witness people publically basking in the vanity of their own opinions. ..

I don't need social media to that.

Hell, the Carantoc doesn't even need to do it in public.

I can sit on the end my bed, rock to and fro, and giggle to myself just think about how awesome I am.

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Harrow said..

psychojoe said..

Paradox said...

Companies "pocketed" none of it,

Are you sure?
Sorry for the Guardian article, it was the first that came up. There was plenty of job keeper theft.
www.theguardian.com/australia-news/2021/aug/31/harvey-norman-repays-6m-of-the-22m-it-claimed-in-jobkeeper-after-record-profits

I've a friend that runs a small business in allied health. Sure, her revenue fell by the required amount to claim job keeper for her business, but the amount she had to shell out for staff wages fell to almost zero, thanks to most of her staff being part-time and the $750 per week covering their pay. Think about it, 30% drop in revenue, 80% reduction in staff costs. She made an absolute killing from it.

So did her staff, that were typically earning around $300-$500 a week before COVID, but then got the $750 per week from job keeper.

Yeah, I was talking to the owner of a ski shop and he had something similar. He said it was good because skiers want to buy their ski gear even if they can't go skiing straght away and in some ways bought more.

Still, I can't imagine what would have happened if there was no job keeper and the government insisted on lockdowns.

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Harrow said..

FormulaNova said..
Yeah, I was talking to the owner of a ski shop and he had something similar. He said it was good because skiers want to buy their ski gear even if they can't go skiing straght away and in some ways bought more.

Still, I can't imagine what would have happened if there was no job keeper and the government insisted on lockdowns.

Yep, you can argue all day about how it might have been done better in theory, but they needed something that could be done quickly and was not overly complicated to administer. That means finding something simple that kind of found a middle ground and reduced the number of business that went under. There would always be winner and losers and if you came up with a scheme that saved every business, it would have cost even more.

Yeah agreed. You don't have the time to develop a perfect or close to perfect system and speed is more important than getting it 100% or even 75% right.

Anyone that has worked in government or big companies will know how long it takes to roll out something complicated as everyone wants to have their say.

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D3 said..
Honest question here.
How much does the lack of people available to work affect inflation?
I'm aware that most industries have been impacted by lack of staff and being unable to hire people, I imagine small businesses are less able to absorb these impacts than larger business.

For example I hear how low the unemployment rate is (small pool of potential hires) and how all this infrastructure spending will create more jobs. But looking on seek, there is already over 25000 jobs advertised ( I know it's inaccurate but it's an example) in WA alone, and there has been for over a year.

To me that demonstrates that demand has outstripped supply, and I can't see how increasing demand is going to have a positive impact?

In theory a shortage of workers should result in them asking for more pay and adding to the cost of the services they provide. I don't know if this is happening, but I remember a friend telling me a year ago that his daughter was making much more money as a waitress than she used to. I don't know if this was from more hours or being paid correctly, or being paid more.

I think the student workers from overseas probably left a lot of vacancies in service industry jobs. Supposedly this is where the new intake is replacing this pool of people so things should be back to normal soon.

I can only really talk about IT as that's the industry I work in, but the jobs you see on Seek are very misleading. Often the same job is advertised by many agencies, and there is only the one opening, and it may or may not be a real one. Often companies put these out to see what is out there.

The IT industry has been hit hard by companies claiming that they can't find suitable staff locally, which seems to be because they don't want to do any training and expect the latest and greatest skills, for a bargain price.

Maybe this same problem applies to other industries? Are people out there asking for fully qualified welders with 15 years experience for $22 an hour and saying that 'they can't get suitable staff locally'?

Where have all these jobs come from to make the unemployment rate so low? My best guess is its that the short term workers were all forced to leave and this led to more locals being employed more fully. This will probably change when the migrants return. After all, there are probably no new industries here, so why would there be more demand for staff? If the migrants coming in are at least 50% workers, then there is going to be more supply of workers per capita.