Inflation is a monetary phenomenon: it basically means that all prices go up, in a way that is not related to market scarcity. So, if the foodstuff section in your supermarket becomes more expensive, and the hardware section becomes cheaper it is not inflation. But if when you get at the checkout your bill is steadily 3% more every month, for the same average set of purchsed goods, then it is inflation.

Inflation can be accompanied by a raise in salaries, so that the average citizen's buying power stays more or less the same (you are able to eat the same amount of Cool Whip per month). Alternatively, producer margin can be reduced (the maker of Cool Whip gains less money), or citizens can be told that these are hard times, and will please everybody tighten their belts ?

Some economists believe that a moderate amount of inflation is actually good for an economy, though there is dissent about exactly how much. Notice that in some economies, the so called free market ones, the government cannot really lower or raise salaries - but it can usually work on taxes. One major lever to act indirectly on inflation is the prime rate, which means basically the price of borrowing money from a bank.

Historically, and in different countries, inflation has been anywhere between zero and thousands per cent per year: notorious examples are Weimar Germany and Argentina. Very high inflation rates weaken a currency, because people tend to get rid of it and buy either gold or more solid currencies (like Swiss francs).

Now what I would really love is for an economist to come out of the woodwork, tell me that all this is crap and write a good writeup on the subject.

A period of exponential expansion in the early universe Originally proposed by Alan Guth to explain why we see no magnetic monopoles, also explained the flatness problem, the horizon problem, why the universe is expanding and where all of the structure in the universe comes from. as yet unproved but quite believed in.

Inflation is defined strictly as an increase in the general price level. Whether this is related to market scarcity is another matter.

The general price level is a measure of the prices of many goods and services. There are several indexes of the price level, and the one which is commonly used is the Consumer Price Index (CPI). This is what most people mean when they talk about inflation.

The CPI is the weighted sum of prices of goods and services consumed by the "typical" family. Usually, a statistical body determines what these are.

Another measure of the price level covers all the goods and services in an economy. This index is called the implicit GDP deflator. The implicit GDP deflator compares the value of the GDP in two years, based on a base price level.

Among the causes of inflation are excess demand created naturally through the economy. The reason why the prime rate/cash rate is so important is that it indicates the relative supply of money to the relative demand, and thus the potential rate of inflation.

Other causes include union demands on wage relativity, profit pushing by companies, increase of market power by companies, increase in taxation rates, changes in the rate of social security benefits, bad wage fixing by industrial relations bodies and government. And that's not all.

Inflation potentially has no effect on producer or consumer margins. If the price of Cool Whip (what the hell is Cool whip?) rises, and the inflation rate is 0, the producers get more money.

Inflation is a progressive increase in the general level of prices in an economy. The rate of inflation is the rate at which general prices are rising.

In the case of consumer goods, the Retail Price Index is used to measure that rate.

Inflation can cause problems for businesses because price rises may make their products less competitive in world markets.

The two main causes of inflation have been identified as:

  • Cost-push inflation, when rising costs lead to rising prices, which leads to rising costs and so on.
  • Demand-pull inflation, where excessive demand in a sector of the economy pulls up prices, which pulls up costs, and so on.
Although a small amount of inflation can be seen as a good thing (by reducing the size of debts in real terms), it is usually viewed as negative due to the following costs:-

Shoe-leather costs - If costs are unstable, consumers are more likely to shop around to find out what is to be considered a reasonable price. This use of time is an opportunity cost.

Menu costs - A restaurant will have to spend money upgrading it's menus to the increased prices. This is especially expensive with vending machines.

Pschological and political costs - If prices rise, people feel worse off, even if their wages are rising above the level of inflation. History suggests that periods of change and revolution (e.g. Nazi Germany) coincide with times of high inflation.

Redistribution costs - Income is often redistributed in periods of high inflation. Anyone on a fixed income suffers from inflation - in the UK many pension schemes give fixed returns. It is often hard for government to keep per unit taxes in line with unexpected inflation.

Unemployment and growth - Inflation is linked to increased unemployment and low growth by monetarists. It increases the costs of production and creates uncertainty. Therefore less businessmen are prepared to risk investment and thus growth is reduced.

From 4chan I learned of the fetish "inflation",
Embarked on a fortnight of mad masturbation,
And drew up some sketches of my own creation.
I felt that I had a new hunger to feed.

The sight of an oxygen pump makes me swoon
As I think of the flesh I could cause to balloon.
The ideal woman's turgid and round as the moon,
And tethered, ready to float off if freed.

But further desires would soon manifest
In my heart (or my loins); although I'd seen the best
The net had to offer, to myself I confessed:
These pictures were failing to fulfill my need.

I needed to bloat up a girl I could touch.
Would using an air pump be asking too much?
Probably. But over a date (going Dutch)
I had an idea. What if we were to breed?

Over dessert of some cream pies Bavarian
I noticed our viewpoints were often contrarian.
My interest in her was strictly ovarian
So I took her to bed and I planted my seed.

The pregnancy took and she started to swell,
And while I was in heaven, she saw it as hell.
And after the birth, when she shrank, I could tell
That inflation in images was more at my speed.

In*fla"tion (?), n. [L. inflatio: cf. F. inflation.]


The act or process of inflating, or the state of being inflated, as with air or gas; distention; expansion; enlargement.



The state of being puffed up, as with pride; conceit; vanity.

B. Jonson.


Undue expansion or increase, from overissue; -- said of currency.



© Webster 1913.

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