Friday, August 16, 2024

Inflation, explained

 

I'm still laughing at this tweet, courtesy of A Nod To The Gods.



I'm sure math teachers will object, but I still say that's funny.



Peter


12 comments:

  1. Unfortunately, many people conflate a reduced rate of increase with a decrease...

    I love his example. It really helps explain the difference.
    Jonathan

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  2. The gov. list of what make's inflation is not the average person's list. What has been left off was mind boggling.

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    Replies
    1. You are absolutely correct. The price for mind-boggling is up 87% since 2020. Unheard of for a democracy.

      Delete
  3. That is probably the 'best' explanation I've seen!!!

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  4. That's actually an excellent explanation by analogy.

    Of course, there are likely many people who still won't get it...

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  5. While that's funny, the reality is worse because it is a cumulative percent measurement. Remember, inflation is a percent, so the dollar amount of the increase varies with t he base. So taking the same example but in percent: I weigh 100 pounds, and I gain 5%. That's 5 pounds. Then I gain 11%. That's 11.5 pounds. Then I gain 9%, which is 10.5 pounds; and then 6%, which is 7.6 pounds. So now I weigh 134.7 pounds. Now let's say I gain 4% the final year. Even though that is lower than the first year's 5 percent, the actual numerical increase is greater at 5.38, because 4 percent of 134.7 is MORE than 5% of 100. That's what's happening to your grocery bill. Not only are these "lower" rates of inflation on top of all the other increases, they are often larger in dollars because the base has increased.
    Hope that helps.
    Cjf

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  6. It's funny because it's exactly right. Exactly what they're saying.

    When they say "inflation is 7%", they mean the rate of increase. If the rate of increase goes down, prices are still going up. If the rate goes to zero, everything still costs more than it did before the inflation started. We need deflation for prices to go down.

    And they're talking about price and rent controls, which the communist Vietnamese have said was the most stupid thing they ever did. Even a liberal loonie economist like Paul Krugman says those controls inevitably lead to lower quality and lower quantities available.

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  7. How dare he fat shame!!

    Big is beautiful!!

    Note: This is sarcasm.

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  8. Just goes to show you don't have to be an "expert" to show good sense and understanding. -A BonaFide Math Teacher

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  9. Inflation is a disingenuous term. What inflation really is is currency debasement. We have excessive $$$$ meaning that the $$$ you have is worth less and therefore can purchase less.

    Currency is subject to the same immutable laws of supply and demand as everything else.

    Between .gov spending and fractional reserve banking $$$ supply has far exceeded demand - with the collapse of the Petro dollar and the rise of systems other than SWIFT it will get worse as demand for our excess dollars evaporates.

    This is why the largest increases have been in things purchased on credit: homes, cars, college, etc

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