Someone explain to me what inflation is

[AliBaba]

Title says all.

 

[celticwar17]

To be put simply, it's when the dollars value goes down over time, usually due to the amount of money in the system increasing. Its why a shave and a haircut was only 2 bits, and why Doctor evil was laughed at when he demanded 1 million dollars when he went to the future.

 

[Fisher]

There are a finite number of goods on the market. The more cash people have, the more they will be willing and able to pay for those limited goods so prices go up. Think of it like a Christmas must have gift. When there are only 100K new X-box's and 500K people want them they sell for a lot more than they would if there were 600K X-boxes. Economically it is caused by the demand outpacing the supply, which in macroeconomics has to do with the amount of cash available for spending.

 

[Gonzo Rodeo]

To put it in even simpler terms, let's say Alibaba, Fisher, and I all have 10 gonzobucks each. Bread costs a gonzobuck, a gallon of gas costs a gonzobuck, a movie ticket costs a gonzobuck, etc.

Now, suddenly, I print off 100 more gonzobucks and put them in my wallet. I now have 110 of the 130 total gonzobucks, and I start buying all of the bread, gas, and movie tickets. The price of these things all go up because the demand sharply rose (because I started buying all of them). But Alibaba and Fisher still only have their 10 gonzobucks apiece. Prices are rising, but they don't have any more money. In fact, the money they have is worth less, because each gonzobuck represents a smaller share of the total gonzobuck supply.

When there were only 30 gonzobucks total, your 10 gonzobucks were worth 1/3 of the total supply. When there were suddenly 130 gonzobucks, your 10 gonzobucks were only worth roughly 1/12 of the total supply.

That's how inflation works.

But it's sometimes a good thing. For example, if there are more people, and more goods to go around, there needs to be more money in order to stabilize prices. But when the amount of money rises faster than the amount of goods and services (and to some extent, people), then the money itself is worth less the more that gets printed. You could really think of printing money as a "hidden tax," because it's directly taking value from savings. (QE3 is designed directly to devalue bank holdings to FORCE them to start loaning again, or else their holdings are going to be worth less in the long run.)

 

[Real Korimyr #9]

It's supply and demand. People think of money as a substitute for barter, but it isn't really; money is just something we use to barter with. The more moneys there are, the less each individual money is worth.

So when people talk about 'quantitative easing'-- printing off more money to pay off our debts-- what they're really talking about is devaluing those debts by using less valuable moneys to pay them off. It's a form of cheating and our creditors have every right to be furious about it.

 

[Medusa]

To be put simply, it's when the dollars value goes down over time, usually due to the amount of money in the system increasing. Its why a shave and a haircut was only 2 bits, and why Doctor evil was laughed at when he demanded 1 million dollars when he went to the future.

this is what we usually have in turkey....

 

[Peter Grimm]

The devaluing of money.

Title says all.

 

[pdog]

Easiest for me to remember is too many dollars chasing two few goods. This article helped me a lot:
Money Growth Does Not Cause Inflation! - Forbes