tag:blogger.com,1999:blog-216294901676642720.post1324530994444105823..comments2023-04-09T08:50:31.282-07:00Comments on Whinging in New Zealand: Economic IgnoranceJoyce Deanhttp://www.blogger.com/profile/11225084520420328606noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-216294901676642720.post-19864336861989307422017-08-07T15:40:18.585-07:002017-08-07T15:40:18.585-07:00Inflation means your money won't but as much t...Inflation means your money won't but as much today as it could yesterday. It's that simple. There's all kinds of reasons for this - including printing too much of it as your mentioned. <br /><br />Milton Friedman and his Chicago cult of strict monetarism from the 70's would agree with you that this is always the cause, but really sorry, I don't. Whenever monetarism failed to control inflation, their prescription was "more!". Their antics eventually induced recessions, a drop in aggregate demand and a drop in the inflation rate - how clever. M3 used to be reported reverently in the financial press, but you don't hear much about it anymore and that's no co-incidence<br /><br />Rises prices in the price of inputs *will* also induce inflation. The follow-through effect of an increase in the oil price means that the cost of *everything* rises, and your money will buy less. <br /><br />Oil prices don't just rise because it's "an increasingly rare commodity" - they rise because of changes in supply and demand - just like anything else. If your assertion were correct, there is no explanation in the drop of the oil price from over USD100 some years back to it's current price of USD45-55.<br /><br />It is true that the RBNZ has an inflation target, and it is positive. Deflation hits the economy hard - why buy something today if it is worth less tomorrow? Suddenly businesses can't sell things and they lay off workers. Not helpful.<br /><br />Here's the definition from the RBNZ:<br /><br />"Inflation is the term used to describe a rise of average prices through the economy. It means that money is losing its value. The underlying cause is usually that too much money is available to purchase too few goods and services, or that demand in the economy is outpacing supply."<br /><br />Note the "usually" and also the second cause listed. <br /><br />I'll take their definition over yours. Unless of course you believe there is some undeclared conspiracy and that RBNZ is "in on it".<br />Anonymousnoreply@blogger.com