Is fractional reserve banking inflationary?

That is a fairly complicated subject that probably deserves its own thread.

The short answer is that we all know what it generally is, but it's actually very hard to come up with an objective quantifiable definition everyone can agree on, and even harder to precisely measure it.
Maybe we could give a very simple definition and say it is prices in the economy going up caused by more money having been pumped out.
But as you can see, that simple definition does not really address the specific question asked in this thread.


Were you perhaps seeking to gain a more fundamental understanding of the phenomena of inflation, hoping that would allow you to be better be able to answer the question of whether fractional reserve banking would be inflationary?

 

No. I was asking to determine whether you knew what inflation was.

 

The usual definition in economics is a general increase in prices. How to measure which prices to determine the general level of prices is the rub, and enables all manner of political manipulation. Certainly the CPI is almost worthless as a measure of inflation, as the items consumers buy change so much from year to year, and prices for assets, labor, and public services and infrastructure are left out completely.

 

A general decrease in the price of money?

 

Price is what a thing traded for, so prices are generally quoted in money, not of money.

 

It is not a phenomenon.

Here's some help for you - a definition:

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Now that wasn't difficult, was it?

Do you think that rising prices is an economic phenomena. I don't.

This defines "phenomena":

Inflation, therefore, is not a phenomenon - it is the natural happenstance of when Demand is greater than Supply and therefore prices-rise. Which instigates manufacturers to produce more in order to meet Demand. Upon which the phenomenon disappears. Because Market Demand is fully Supplied. (Until it happens again that Demand outstrips supply.)

There is no magic about what is happening. None whatsoever.

What happens is that Demand outstrips Supply and prices rise to a point where Demand is selective. For instance a very expensive diamond may make its way onto a royal crown - but not to any female finger. So, there is no phenomena regarding the price of very large diamonds.

Economic phenomena are rare. That rarity happens because the price of something/anything is so important as to stifle demand.

Methinks ....

...

 

So what happens when the gov't increases the supply of money. As the supply rises, does the price fall?

 

Cet. par., prices in general can be expected to rise. But which prices rise depends on how and where the additional money is added.

 

Ah, the Cantillon effect. And that, my friends, is how the banksters become the 0.01%. Isn't the state and its truncheons awesome? If only it owned all the land. That would be swell.

 

I think it's important to focus in on the differential between general wage levels and general prices.
To make a particular distinction between them.

I think that might help distinguish between inflation caused by cost increases, and general monetary-caused inflation (but I could be wrong).

 

Yep. Private owners of privately owned banks that exercise a state-issued and -enforced privilege. Now, what does that remind me of....

That's privilege (from the Latin for "private law") for you: the state issuing and enforcing legal entitlements for private interests to benefit from the abrogation of others' rights without making just compensation.

I could have sworn that reminded me of something....

That's it! Private land titles! You mean instead of issuing titles of privilege to private landowners for their unearned profit at the expense of the community, as it does for private banksters, the state should administer possession and use of land in the interest of, and to secure and reconcile the equal individual rights of all its citizens? There is certainly an indisputable moral and economic case to be made for such a reform, a case that no one has ever been able to refute, and no one ever will.

Indeed. I think you are onto something.

 

Yeah, that's worth a Doctorate degree discourse.

We've been "talking about it" for almost a century: Law of Supply and Demand

It's a law! Wow! I wonder when Congress got around to passing that one.

Happy reading .... !

 

Well, to some extent I think this discussion could be useless if we don't take a good look at that.

It would help us identify whether the price increases are really being caused by excess money being pumped out, or whether they are caused by other things, unrelated to the money supply.

 

A LOOK IN THE MIRROR

I wonder. There have been - since the notion of Supply & Demand became the Sacred Rule of economics - many attempts to "understand" how it works as a mechanism. Besides, what is "excess money"? That which produces runaway inflation?

Ok, but is that all it does? No, if used properly it benefits the economy by "pushing it" in certain well-founded directions. (For instance, that great big bundle of funding that created the NASA Space Program.)

Thus the Money Supply does indeed have a profound effect upon the rate-of-inflation - but that effect is purely incidental. Because it is caused by a number of factors and not just two or three or four. Meaning it is practically unsolvable as a riddle. (Unless you'e got a PotUS who is reading the inflation-data on a monthly basis. And that aint-gonna-happin for a long, long time. Nobody elects economists to run a country. Thank god!)

That kind of economic-thinking (solving riddles) is not possessed by the typical politician who gets elected to run a country. So, who's finally at fault?

Let's all look in the mirror to see, shall we?!? Yes, that's it - Consumer Demand is the guilty-party! Suppliers will produce&market anything they think YOU-THE-CONSUMER want in abundance! And both parties to that economic equation will borrow mountains of money to do so!

That, in my book, is the very essence of that entity we call Supply&Demand and how economies can get it so wrong ...

 

And that phrase has as its essence, "Human Nature". To always want more, and more, and more ...

 

I can't get on board with your commie stuff. The state should not own all the land.

 

Well, if you are against everything communists advocate purely because communists advocate it, that means you are against public education and pensions, and in favor of child factory labor. Are you in favor of child factory labor? Or are you just logically inconsistent because you have realized that logical consistency would destroy your false and evil beliefs? You know, communists all say that 2 + 2 = 4. Is that wrong because communists say it?

No one can rightly own land, as I have told you dozens of times and you always disingenuously pretend to forget. But the state has to administer possession and use of all land because that's what the state is: the sovereign authority over a specific area of land. The alternative is anarchy, and a return to hunter-gatherer and nomadic-herder economies that would imply reducing the earth's human population by about 99% through starvation and violence. I suspect that is what you advocate, because it is so completely evil.

 

Well, maybe we should (and this is just a thought) view inflation as an effect rather than something tangible and physically observable.
That inflation could cause prices to go up, or it could be other factors causing those prices to go up.

Inflation can be a little bit of an ambiguous word, and perhaps we do have to specify exactly what we mean by it, in any particular context.


I mean, for example, what if prices in general in an economy are going down - it has nothing to do with the money supply - and then we think we can pump out more currency without it raising prices, because price levels were going to go down anyway? Would you classify that as "inflation"?
There certainly would be an inflationary effect countering the downward pressure on prices, but we would not see prices increase.

 

Inflation is always and everywhere a monetary phenomenon. It is impossible to have inflation in the absence of money.

 

Your statement is still vague and ambiguous enough not to mean anything.

Perhaps further clarification of what you're trying to say?

 

Hm, not quite sure what further explanation is required. Inflation is always and everywhere a monetary phenomenon.

 

Well, then in that case isn't it true that sometimes we see prices go up across the board which is not actually inflation?
Or that there can be inflation but we will not see prices go up?

Hopefully you can see the connection between what I'm saying and the statement you made.

 

Isn't prices going up across the board sort of the actual definition of inflation?

 

You just said it was "always and everywhere a monetary phenomenon".

How do you reconcile between the two?

You can see how I'm not able to understand what you're saying.

Maybe you need to use less ambiguous language so that other people can be sure what you actually mean?

 

Is there something ambiguous about saying that inflation is always and everywhere a monetary phenomenon?

Perhaps you could describe inflation in a non-monetary economy. That might help.