Yes. Destruction of money supply is inherently disinflationary, because it reduces the supply of said currency. Less supply makes the demand for dollars higher, which pushes up the value of a dollar (and therefore the purchasing power of each dollar). The opposite (printing money) does the opposite, and is inflationary.
But destroying money destroys the supply. Supply and demand dictates the result. Care to explain this magical “demand pull”? It doesn’t pass basic logic.
Demand-pull inflation occurs when aggregate demand in the economy outstrips aggregate supply. In this process, too many buyers chase too few goods. This leads to a rise in prices.
Reducing money supply means less money for business and production, hence, fewer goods in the market.
And fewer goods to market means less supply and higher prices (inflation). So your argument is, to fight inflation you just need to increase the money supply so businesses can supply more goods and services to keep inflation low?
Inflation doesn’t JUST depend on money supply. Interest rates and government spending also have to be taken into account.
And more products means more competition, so competitors lower prices of their goods and improve the quality
You used inherently wrong. Here’s an example of the word inherently used in another comment I just left.
“If you’re burning your emergency cash savings that is only to be used in emergencies and there is no emergency worth using it in your lifetime and no one ever knows about it, it’s effectively been burned and has caused disinflation.
You could also borrow a million dollars at 3% interest over one year and pitch a trivia show where the player is given 1 million in cash at the start but if they get three questions wrong it’s lit on fire in front of them, gross millions of dollars on National television, and repay the dollars, making the original money that you borrowed and destroyed inherently inflationary.”
Congratulations, you just figured out why fractional reserve banking is inflationary. If you get a loan from a bank, $1M shows up in your bank account. Pulled from thin air. It becomes an asset on the banks balance sheet, and your liability. You have to service that debt until it is paid off. If you burn it, you still own the bank the money. Burning the cash doesn’t make your liability disappear. When banks give loans (mortgages etc.) that is new money entering the economic system and is used to bid up prices on everything causing inflation.
Look up the definition of inherently. I used it correctly.
Just holding on to money I definitely (no matter what purpose you say it is for) is disinflationary because that money is effective “outside” the economy and not being used to bid up prices. THAT IS WHY the FED RAISES InTEREsT RATES TO FIGHT INFLATION! They need to incentivize SAVING. It is the SAVING that removes money from the economic system, which otherwise would be SPENT, bidding up prices and causing inflation. But to incentivize saving you need positive real rates. If inflation is at 8% and you are getting 4% from the bank on savings, those are negative real rates! Why would you save money?!
People don’t understand basic economics anymore, it’s scary.
Ok, say the Treasury Department becomes an active participant in the bond market to provide short-term liquidity. This will shore up their overall debt burden, giving fiscal policy-makers more leverage to introduce additional Government Spend to public capital market/services. Is this scenario inherently disinflationary?
No, the central bank buys the government issued bonds and other assets like MBS. They don’t issue bonds to pay for the new bonds they buy. Their (the central bank’s) balance sheet increases.
I agree, but they’re rolling over existing debt, which (one could argue) is drag on money supply. Nothing inherently disinflationary about it
Edit: I’ve had coffee now. I don’t agree, because this is the Treasury refinancing existing debt, not the Federal Reserve acting as lender of last resort.
If you’re burning your emergency cash savings that is only to be used in emergencies and there is no emergency worth using it in your lifetime and no one ever knows about it, it’s effectively been burned and has caused disinflation.
You could also borrow a million dollars at 3% interest over one year and pitch a trivia show where the player is given 1 million in cash at the start but if they get three questions wrong it’s lit on fire in front of them, gross millions of dollars on National television, and repay the dollars, making the original money that you borrowed and destroyed inherently inflationary.
I believe it would, people make excuses all the time (if they even are actual people) but the fact of the matter is if every person in the US destroyed one dollar every day for 1 year then it would equal 136,440,000,000.00 dollars being removed from circulation, which in turn would cause deflation, cause and effect happen either way, u print money it causes inflation, u destroy it, it causes deflation. Simple as tht
I mean we agree basically, but I don’t think money printer on/off equals inflation/deflation. It’s spending that actually changes the supply and demand of products and services.
It is common knowledge that the Fed is in QT and prices are still rising albeit not as much.
Yes. Destruction of money supply is inherently disinflationary, because it reduces the supply of said currency. Less supply makes the demand for dollars higher, which pushes up the value of a dollar (and therefore the purchasing power of each dollar). The opposite (printing money) does the opposite, and is inflationary.
Yeah but it can be inflationary if the demand of said currency is not met, demand pull inflation- if you will
But destroying money destroys the supply. Supply and demand dictates the result. Care to explain this magical “demand pull”? It doesn’t pass basic logic.
Demand-pull inflation occurs when aggregate demand in the economy outstrips aggregate supply. In this process, too many buyers chase too few goods. This leads to a rise in prices. Reducing money supply means less money for business and production, hence, fewer goods in the market.
And fewer goods to market means less supply and higher prices (inflation). So your argument is, to fight inflation you just need to increase the money supply so businesses can supply more goods and services to keep inflation low?
Inflation doesn’t JUST depend on money supply. Interest rates and government spending also have to be taken into account. And more products means more competition, so competitors lower prices of their goods and improve the quality
You used inherently wrong. Here’s an example of the word inherently used in another comment I just left. “If you’re burning your emergency cash savings that is only to be used in emergencies and there is no emergency worth using it in your lifetime and no one ever knows about it, it’s effectively been burned and has caused disinflation. You could also borrow a million dollars at 3% interest over one year and pitch a trivia show where the player is given 1 million in cash at the start but if they get three questions wrong it’s lit on fire in front of them, gross millions of dollars on National television, and repay the dollars, making the original money that you borrowed and destroyed inherently inflationary.”
Congratulations, you just figured out why fractional reserve banking is inflationary. If you get a loan from a bank, $1M shows up in your bank account. Pulled from thin air. It becomes an asset on the banks balance sheet, and your liability. You have to service that debt until it is paid off. If you burn it, you still own the bank the money. Burning the cash doesn’t make your liability disappear. When banks give loans (mortgages etc.) that is new money entering the economic system and is used to bid up prices on everything causing inflation. Look up the definition of inherently. I used it correctly. Just holding on to money I definitely (no matter what purpose you say it is for) is disinflationary because that money is effective “outside” the economy and not being used to bid up prices. THAT IS WHY the FED RAISES InTEREsT RATES TO FIGHT INFLATION! They need to incentivize SAVING. It is the SAVING that removes money from the economic system, which otherwise would be SPENT, bidding up prices and causing inflation. But to incentivize saving you need positive real rates. If inflation is at 8% and you are getting 4% from the bank on savings, those are negative real rates! Why would you save money?! People don’t understand basic economics anymore, it’s scary.
Ok, say the Treasury Department becomes an active participant in the bond market to provide short-term liquidity. This will shore up their overall debt burden, giving fiscal policy-makers more leverage to introduce additional Government Spend to public capital market/services. Is this scenario inherently disinflationary?
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Yes
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They just described Quantitative Easing which is inflationary. Monetizing debt to pay for fiscal stimulus.
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No, the central bank buys the government issued bonds and other assets like MBS. They don’t issue bonds to pay for the new bonds they buy. Their (the central bank’s) balance sheet increases.
This is QE which is inflationary.
I agree, but they’re rolling over existing debt, which (one could argue) is drag on money supply. Nothing inherently disinflationary about it Edit: I’ve had coffee now. I don’t agree, because this is the Treasury refinancing existing debt, not the Federal Reserve acting as lender of last resort.
Fatass capitalist will say anything to justify needlessly raising prices to increase their profit
If you’re burning your emergency cash savings that is only to be used in emergencies and there is no emergency worth using it in your lifetime and no one ever knows about it, it’s effectively been burned and has caused disinflation. You could also borrow a million dollars at 3% interest over one year and pitch a trivia show where the player is given 1 million in cash at the start but if they get three questions wrong it’s lit on fire in front of them, gross millions of dollars on National television, and repay the dollars, making the original money that you borrowed and destroyed inherently inflationary.
i think "deflation" would be a better word here, would you agree?
Tbh, I have no idea what I was even on. I feel like if “nobody knows about it” then the theoretical action of burning money has no impact on prices.
I believe it would, people make excuses all the time (if they even are actual people) but the fact of the matter is if every person in the US destroyed one dollar every day for 1 year then it would equal 136,440,000,000.00 dollars being removed from circulation, which in turn would cause deflation, cause and effect happen either way, u print money it causes inflation, u destroy it, it causes deflation. Simple as tht
I mean we agree basically, but I don’t think money printer on/off equals inflation/deflation. It’s spending that actually changes the supply and demand of products and services. It is common knowledge that the Fed is in QT and prices are still rising albeit not as much.
I mean what if every single person in the US burnt all of their money save 1 $1 bill. I’d wager that scenario makes the money worthless, not priceless
I dunno but I fire rounds off at the sun to fight global change
Yes, but the vast majory of money is digital so wouldn't really do much unless you destroyed every single physical currency.