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Latin America

Flatulo

(5,005 posts)

14. A word about inflation...

Reply to Peace Patriot (Original post)

Wed Nov 27, 2013, 11:37 PM

Nov 2013

As I understand it, inflation is not caused by a shortage of goods (and the resulting increased demand). It is caused by too much currency being in circulation for the amount of goods being produced.

If the net worth of a state is the sum of all the goods and services produced, plus the capital equipment (factories etc) then the value of the currency can be derived by dividing the net value of the goods by the number of currency units in circulation. When additional currency is printed and handed out (for example, the 3X December bonus in VZ) without any corresponding increase in production, the the value of the currency is diluted.

I'm sure it's more complicated than my simple model, but the essence is that just increasing the money supply alone is inflationary.

Please feel free to correct or expand on this as needed.

Edit: of course, if wealth is redistributed through the tax code, then no new currency is created. The government is just taking from one and giving to another.

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25 replies

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Highlight:

Venezuelan gov't has been using "decree powers" for half a century! [View all] Peace Patriot Nov 2013 OP

As predicted ... Chavez rules as dicktater fer life! Mika Nov 2013 #1

is it common for the legislature to expel a member of that body just so they can have enough Bacchus4.0 Nov 2013 #2

Yes but complaining about the situation there dipsydoodle Nov 2013 #3

It seems they never intend to stop trying to get the last word on it. Judi Lynn Nov 2013 #17

Nothing unusual? NOT "dictatorial"? Zorro Nov 2013 #4

The term 'decree' is being used for dramatic effect. It's just an executive order, IMHO. freshwest Nov 2013 #5

Pathetic, isn't it? Only a would-be propagandist would use that word. Judi Lynn Nov 2013 #6

what's pathetic is you don't know what an executive order is or the difference Bacchus4.0 Nov 2013 #10

It's the word that the Venezuelan government uses spanza Nov 2013 #11

Decree with Rank, Value and Strength of Law is the exact term in the Constitution of Venezuela. spanza Nov 2013 #7

no its not, an Executive Order only applies to the Federal executive branch Bacchus4.0 Nov 2013 #9

You are mistaken on all counts of the extent of Executive Orders, freshwest Nov 2013 #24

No. Venezuela Decrees are absolute legislation. joshcryer Nov 2013 #18

Not really... it had been used 4 times in 40 years from 1958 to 1998. spanza Nov 2013 #8

Hell, Chavez had it for 2/5ths of his Presidency. joshcryer Nov 2013 #19

Waitaminnit waitaminnit waitaminnit... Benton D Struckcheon Nov 2013 #12

I see your point but it's not hilarious to me. Rather depressingly human. freshwest Nov 2013 #22

Very worthy "toon." Sad to know we are in any way connected to it! n/t Judi Lynn Nov 2013 #23

Thanks for setting the record straight MinM Nov 2013 #13

A word about inflation... Flatulo Nov 2013 #14

Yes that is true, however Paolo123 Nov 2013 #15

Cartels usually don't last, though. Someone gets greedy and services the pent up demand. Flatulo Nov 2013 #16

Which of course is never in the interests of the suppliers. joshcryer Nov 2013 #20

I'm not really arguing one side or the other. Paolo123 Nov 2013 #21

What the Venezuelan government does is criminal Socialistlemur Nov 2013 #25