Is fractional reserve banking inflationary?

no one sees the "direct cost".

 

so? inflation causes taxes wages and prices to go up. So???

 

It's OK, james M. Although you are really slow to be able to put 2 and 2 together, at least you're making some effort to try to understand this.
This is an area that a lot of economists do not even properly understand.

 

the difficulty is you don't speak english well and you have no education in economics so say what pops into your head and imagine its profound

 

It will cause the amount of taxes to go up beyond just the rate of inflation, because like I've already explained to you multiple times, the government needs to make up the difference between the amount of money they collected and the inflation that's happened during that time.

 

??? WTF??? it does not cause anything they can run a deficit if they want to!!! and raise taxes as much or as little as they want.

 

What you're using now is a fallacy that they call "Logic Chopping".

Economics is a field so complicated, and with so many caveats, it's virtually impossible to make any statement that's entirely exactly true.

So tell me james M, if you are able to recognize that (that deficits go up) then OBVIOUSLY you do not need to ask me what the point is, do you?

Either way, whether taxes go up or deficits go up, inflation carries a cost.

 

translation: you have no idea what you are talking about.

 

I can see this is all a little too complicated for you to easily be able to grasp, and you don't seem to have the attention span to go to the trouble of understanding it.

 

yes its hard to understand gibberish!

 

Yes things can appear like gibberish when you don't have the attention span, or don't care to take the necessary time and effort to give them more than a passing thought.

 

good excuse so you can talk gibberish and think you're talking economics

 

see that, you think you've asked a profound question but its pure 100% gibberish. Everyone is able to recognize that deficits sometimes go up, but I still obviously have no idea what on earth your point is.

Its not that economics is complicated its that your language and thinking skills are not suited for it, to be polite..

 

utterly irrelevant since no one disagreed. Its is like saying 1+1=2 and taking credit for your insight. Do you know what a strawman is?

 

so?? any govt person house company needs more income to keep up with inflation. So?? did someone disagree? Do you have any idea what your point is??

 

Obviously you are having some difficulty understanding. If inflation goes up 5%, naturally, like you are saying the amount of absolute taxes will also go up 5% to keep up with inflation.
But that 5% inflation also ate into the government's purchasing power between the time inflation happened and the next time they collected taxes. The government will have to make that up too.

So, as a very oversimplified illustration, if the inflation was zero, but for only just one year there was a 5% increase in inflation, the level of taxation might increase by 5% for two consecutive years, even though inflation only happened during one of those years.

Inflation increase:
0% 5% 0% 0%
Tax increase:
0% 5% 5% 0%

I hope that makes it possible for you to understand.

All I'm saying is that inflation is very much like a tax increase.

 

100% nonsense of course, depends if they raised taxes, which they are always doing, before, long before, after the inflation.

 

does anyone deny that? So why even bring it up???

 

Yes, believe it or not there are plenty of members here who deny that expanding the money supply will cause inflation, or deny that inflation would be a bad thing.

If it seems obvious to you, well, that may be because you're very much a Conservative. It's not obvious to a lot of other people here.

 

show me one!

 

Ok james M, I'm in a time and space to calmly and patiently explain it to you.

It's almost "common knowledge" among economists that people having more money in bank accounts creates inflation.
Many economists readily accept it as a fundamental fact of economics, like the gospel truth.
But what if this presumption they make, which lays a foundation for their numerous other theories, wasn't actually true?
That would pretty much shake up the entire school of economic thought.

As we know, most of the money in bank accounts does not constitute actual paper dollars issued by the Federal Reserve. There's a lot more money in bank accounts than there is actual money, a phenomena known as "fractional reserve banking".
This money in bank accounts just represents money banks are promising to pay in the future.

Many economists believe that if there is more money in bank accounts, people will have more money to spend. Seams reasonable enough on the surface.
Expensive things are rarely bought with actual paper dollar currency and are instead purchased with bank transactions. The money is moved from one account to another.

I'm simply pointing out here that for every dollar in someone's bank account, there's also a dollar of debt that someone else owes to the bank.
Why would we imagine that one creates inflation but the other doesn't create deflation?
To me, I think these two inseparable pieces overall balance each other out.

Basically, I'm saying there's something that behaves like "negative money", and that's debt.

 

Let me give an example.

There are only $100 in the whole economy (a little hypothetic one). The government has a 10% tax on the economy, so that means they collect $10 annually.

Now, let's add another $100 into the economy, so now there's $200 floating around.
When people go to pay their taxes, they will be paying taxes on income earned earlier in the year. So basically now they will be paying $10 again, but this $10 is only worth half as much. The government has been cheated out of half its revenue.

That is why I said that inflation is like a transfer of money from the U.S. Treasury to the Federal Reserve Bank.

Don't get me wrong, inflation is still very bad, but its toll on the citizenry is less of a direct one. The government is just going to raise taxes to compensate and/or will have less purchasing power of money to spend.

 

this is a silly preposterous lie because you know nothing whatsoever about economics. The greatest economist to ever live said inflation was "always and everywhere a monetary phenomenon";and that inflation was caused by the central monetary authority printing too much money. Now do you understand?

 

And you advocate a central monetary authority. Weird, for someone who calls themselves pro free market.

 

nobody imagines that except you because you forgot to take Econ 101 before you became an "economist"