What's the fundamental issue with inflation or hyperinflation?
Let's say that a loaf of bread cost something like 4 trillion X and the equivalent of that in the US is 1 USD.
1 USD = 4 trillion X
Why is this considered in and of itself? Isn't the ratio still being maintained?
Is the issue practical (i.e. physically printing the money) or is it theoretical?
its a combo of available money supply and the faith people have in it. if the former fails, expect a loss of faith, and hyperinflation ensues
USD is still a reserve currency, so the market is big enough to absorb the extra money creation. Its not perfect tho. Loss of faith could happen at any time, same with any currency
>>1314632
Going to the most fundamental issue, what does "a loss of faith" lead to?
Available money supply is understandable, it's the practical issue I was referring to. Correct? So if they keep printing more money to save that issue, it just ends up devaluing the money and thus creates a vicious circle. Correct?
>>1314648
most economists think inflation is good because it "drives growth".
Loss of faith happens when everyone panics because of a glut in the money supply.
Economists are trying to find the "sweet spot" on their inflation targets and avoid deflation (bad for growth), or hyperinflation (chaos)
>>1314693
And why is a loss of faith problematic? How does it practically cause an issue?
>>1314704
because you lose all your savings in a hyperinflation scenario. The money you make this morning, may not be worth much in the afternoon, and thats basically you getting robbed of your monetary value
>>1314710
Therefore?
When you say "loss of faith", are you referring to the people's state of mind or is it a catchphrase for some economical idea?
>>1314723
>Therefore?
How is losing your savings to hyperinflation not problematic?
im referring to people's state of mind. The economy is composed of people. If they dont trust the currency, it has no value.
>>1314723
he means
inflation > loss of faith (the only value a currency has is in the end determined by the people) > hyperinflation > your savings are fucked.
>>1314723
What are you trying to get to.
These hyper inflation situations can only really occur in banana republic type of countries where the process to maintain currency and a liquid market don't exist.
I have to assume because you are on the internet that you at least live in an almost stable country that isn't going through major upheaval, but if you look for example at venezuela or most african countries, their economy is tied to only a few major industries.
When the industry starts to crumble, the entirety of their currency and income source goes out the window. Money is inherently a representation of the power of that country's bank and when the bank has a large chance to lose all the money in it, the currency goes away.
You can't maintain a ratio in a market where no one wants your product. I certainly wouldn't invest in Africa right now, so I don't care how much the bank of swaziland wants to sell me their currency.
On a macro scale, I just described global faith. On a micro scale it comes down to depression era where people were buying gold and burying it in their backyards. Both of these things a very real and happens when small countries can't establish a strong process.
Usually when they are puppet regiemes or came about out of force.
>>1314734
For example: if the brexit were to happen, the euro would probably go down globally, leading to inflation (import is more expensive), once people panic lose faith in the euro and start selling it like mad the effect continues. Government/bank either has to print more money or go bankrupt.
>>1314624
The fundamental problem with inflation is that it isn't distributed evenly, what Murray Rothbard called the angel Gabriel model. So the government inflates the money supply by buying up government bonds. The people who get the new money first all go buy diapers or something. The price of diapers goes up. Everyone in the country has to pay more for diapers. Then the diapers manufacturers use their artificial income to buy batteries, now everyone has to pay more for batteries. So on
