A layman question about economics and inflation

[PlanetaryOrbit]

Is inflation supposed to just go up gradually, forever (assuming no huge changes such as war, major disaster, economic collapse, etc.)?


Does this mean that some day far off into the future, we're going to see gasoline at $30 a gallon, bread at $20 a loaf, a pair of shoes for $200, etc.?


(Income/wages obviously being higher as well).

[PoliticAverse]

1. Probably, since those in charge think a certain amount of inflation is a good thing. n/t

[TreasonousBastard]

2. Yes. There's an assumption that things can't simply stay the same, so it's better...

to have the money supply, goods supply, and incomes rise. The problem is when all of them don't rise together or things get completely out of hand. Pre-war Germany was an example of it getting out of hand.

We've never experienced deflation, but those who have were devastated. Bankrupt businesses, savings wiped out, mass unemployment...

[PlanetaryOrbit]

4. Why can't they stay the same on a per capita basis?

If a nation of 100 million still has gasoline at $3 a gallon, bread at $2 a loaf, etc., but 100 million customers buying this products and making $25,000 a year, isn't that overall expanded national growth over the same country with all the same prices and wages but with only ten million people?

[TreasonousBastard]

7. It can get really complicated, but the first problem would be innovation...

and changing products.

For instance, my last new car was a 1975 Dodge Dart, stripped except for AC, that I bought in 1975 for my driving school. $4,500
Until a few months ago, when I bought a new Chevy Cruz for $18,000. Any inflation calculator will tell you $4,500 in 1975 is a little under $20,000 today, so you could say I got it cheaper than the Dart. You could also say that since it's an infinitely better car, with great gas mileage, unheard of (back then) options and safety stuff like OnStar, satellite radio, airbags, anti-lock brakes, cruise, airbags, bluetooth, etc... it's really a lot cheaper than the Dart was.

So, how do you measure that in terms of inflation?

And, back then we didn't even have VCRs, much less all the goodies we have now.

Then you get into cost-push vs demand-pull inflation-- both sides of the same coin, but with some differences. Essentially, is the inflation due to a shortage in supply when demand stays the same, or an increase in demand when the supply remains the same.

Yikes! And we haven't started on whether the money supply went up or down.

So, the population changes, lifestyles change, and you couldn't get prices to stay the same if you wanted to, but you can nudge the price changes to stay slightly upward in cash dollars while getting more for your money. That's kinda the way things want to go if left by themselves, but it can get out of hand with no controls.

Now, remember we're just talking about essentials and fun stuff the general population gets. Super Bowl tickets, Hatteras yachts, Matisse paintings, and other optional things may or may not go into the inflation numbers, but are priced on the basis of what the wealthier part of the population will pay, and the wealthier they get, the more they will pay.

So, to get back to your example-- no, it doesn't really work that way.

On edit, forgot to add a pretty good link on this stuff:

http://www.investopedia.com/articles/05/012005.asp

[Recursion]

3. Growth generally implies some inflation

So, in general, yes, unless we go through some kind of catastrophic depression

[Boom Sound 416]

5. As the currency weakens

Things cost more, especially imports like gasoline.

Like currently with our fed pumping digital money into Wall Street.

[PowerToThePeople]

6. math says (one dumb guys view)

that production costs should go down over time - improvements to process.
renewable resources should go down or stay constant over time.
non-renewable resources should go up over time.

What we see as "inflation" is just a result of fiat currency and monetary policy by the money printers and banks. It is a result of the fight for the resource of "fiat" between everyone who lives within the system.