20221129 : inflation

-
I keep hearing the word "inflation" a hundred times everyday.. 

what is it?

A meal has the same value it did last year, as now, as next year. A meal is an example, but everything in the world I think - nothing changes in value.

Yes it costed less last year, costing something now and very very likely it will cost more next year.

What is really happening is that the meal is not changing value (and becoming expensive), instead money is losing value and a meal is becoming expensive...

The truth is the value of goods change. But I feel the intrinsic change of value is very minimal compared to increase in value because of price increase due to drop in money value.

I know - there are probably tons and tons written about this and millions of books, but "inflation" is something I struggle to get my head around.

Why do we have inflation? Why is money losing value?

I am not very sure about this, but feel the main reason is because we have printed so much of it. I mean - anybody knows , having more of something will automatically reduce its worth. Why would it be different for money. Need more money -just print it (we don't even have to print it anymore, just add it in financial databases!)

In simplistic terms, my understanding is that we are not creating money, we are borrowing it. Borrowing it from whom? Again very simply, my understanding is it it being borrowed from future generations. All this "black magic" I have not fully understood and is a whole science I am sure.

For a moment, let us assume it is not possible to make more money. Having a gold standard may have been very close but even with that, you could create more money if you mined more gold. 

Imagine a complete freeze. All the countries came together and agreed to make no more money! 

What would happen?

The population is increasing and so called middle class is growing. So demand for everything will grow...
But money is fixed. There is no more to go around. It has to get spread thinner..

So folks can't pay more for things. Things have to be priced lesser if people have to buy.

What does that mean...?

Will goods be priced lesser next year than now? Will money be able to purchase more next year? Will it become more valuable over time to encourage saving it instead of spending.? Isn't that how it should be - what I earned today becomes more valuable over time. 

So what is inflation! Is it just an automatically created problem by us for us? Why do we need it? Why do we live with it?

Aaarghhh! I just can't get my head around "inflation"!

Comments

Post a Comment

Popular posts from this blog

20231208 : Privilege...

-
  Before my stroke, I had enough and more work to do - both on the work front and home front. I had reasonably ok health, reasonably good eating habits, reasonably good physical activities. Money is not enough for anybody, but it was reasonably ok as well. The only thing I had very less of (almost none) was time! Free time specifically. I keep sharing video recommendations to many folks regularly - most of them,  long talk show formats (1½ - 2 hours sometimes). Very interesting and informative pieces in my opinion. In today's world filled with over information and disinformation, it is almost impossible to understand most things if we don't spend the time and either read and research ourselves (which is a very far shot) or spend time going through secondary sources who have done it for us and can present it in an unbiased way.  Without it, it is very easy in today's world to get biased, subscribe to misconceptions, get misled, manipulated, etc.  However, often I get the res
Read more

20240124 : balancing the equations...

-
It is fascinating to read and understand how muscles work. For all my life, (since I had not given it any thought earlier), I simply had assumed a muscle is 1 muscle. Ex, if we say bicep muscle, it was one muscle in my mind (I don't know why I imagined so, but so it was). The truth is very far from it . Each muscle is made up of hundreds of strands (maybe thousands). And the best part (I have practically understood, not backed by any medical stuff) - is that each strand is connected separately to the brain and not as one.  For mechanical enthusiasts, each strand works like a sort of rack and pinion arrangement, operated by a chemical reaction, triggered by the brain. Each strand has two separate connections to the brain - one to work the rack and pinion arrangement each way (to contract the muscle strand and the other to release it or relax the muscle strand). In short, that's how it achieves any movement. By selecting the set of muscle strands to activate (how many most probab
Read more

20240402 : Transducers...

-
Transducers Came across this word recently when I was reading something. Hadn't come across it for a while. Its a word and concept I learnt in my electronics course (either in 12th or my 1st year engineering course I am not very sure now) A transducer, very plainly speaking, is something which helps bridging the analog world with the digital world.  For example, take the very simple digital thermometer in our homes. They can't directly measure temperature in digital form. They have a transducer inside which converts the temperature from a analog/ real world scale to a digital world scale so it can be displayed. Generally speaking, we can say it helps bridge the real world with the digital world. When I had my stroke and I was told I will struggle for balance, I was not able to understand why. My understanding (based on my school learning) was that balance is maintained by the inner ears. Of course we were not told how and I never bothered to ask. I just knew balance was maintai
Read more