Inflation 101

The velocity of money is irrelevant. Money is simply a medium of exchange, how frequently it circulates throughout the economy is unimportant and has no impact on the price level.

Inflation is an increase in prices brought about by increasing the money supply. You can still have inflation even if the price level doesn't change, if the price level would have fallen in the absence of inflation. Falling prices are the natural and healthy result of a free market economy.

Can you wrote out the equation to show how inflation is measured on a single product?

No.

I doubt Milton Friedman is irrelevant but without velocity of money, how is that extra money suppose to move to increase prices ?
A government can print 1 trillions of $ but if he doesn’t spend it, how is it relevant for the economic inflation ?

Inflation generally refers to an increase in prices of various goods and services over time. If you're wondering how to calculate the inflation rate, estimating the inflation rate involves some straightforward steps:

Subtract an item’s original cost from its present cost.
Divide the result by the original cost.
Multiply by 100.

https://www.rocketmoney.com/learn/person...

This calculation should provide a general idea of how inflation impacts your spending power. Below, we'll explore some finer points of understanding the inflation rate and provide another formula.
What Is Inflation?

Inflation refers to an increase in the price for the same amount of an item or service. You can measure inflation based on price changes for a single item like a cup of coffee, but more often, it’s calculated based on a standard market basket of goods and services. The opposite of inflation is deflation, when prices fall. Over time, prices tend to rise more than they drop.

Rocket Money is your source? A place giving financial advice to simpletons?

i doubt central banks and any other financial entities foresight interest rates level by using single item inflation but who knows i might be wrong.

On the basic level we are still debating how inflation is expressed in a single item or if it can be expressed with a single item

I’m arguing it can, of course, and I provide the equation

You guys are arguing that it can’t and providing an opposite argument

I think you are the only that try to say an item going in up in price means the economy is in an inflationary era …..

So what does following that equation mean to you in regards to how inflation works?

Here’s an interesting take from A.I.

Inflation is not the same as a price increase for a single product or service. Instead, inflation is a sustained increase in the prices of many goods and services that people buy regularly over a long period of time. This can include services like haircuts or medical care, as well as goods like appliances and furniture. Inflation decreases the purchasing power of money, meaning that people can't buy as much with the same amount of money as they could in the past.
The rate of inflation is the pace at which prices are rising, and is usually expressed as a percentage. For example, if a soda costs $1 and increases by 5 cents over the course of a year, then soda inflation would be 5%. Inflation is measured in different ways depending on the types of goods and services being tracked. For example, the Federal Reserve uses the price index for personal consumption expenditures (PCE) to evaluate inflation because it covers a wide range of household spending

Yes, the PCE tracks a lot more of the expenditures that Americans pay for - mostly by weighing in all the indirect costs that people pay as opposed to POS transactions. Your CPI measures the price changes of all kinds of goods and services to give a rough estimate in determining headline inflation, which is the % price difference for a particular something over a 12 month period. Your Core inflation does just that but excludes food and energy as that could potentially give a somewhat of a more inaccurate reading as those particular items can change a lot more in a shorter amount of time.

Youve also got different types of inflation, like demand-pull, caused by things like covid stimulus checks creating an increase of demand that outpaces the supply of those goods. Or cost-push, which can be caused from supply chain shortages due to covid restrictions or global conflict. Bascially, demand pull is triggered by excess demand while cost push is from excess costs.

I find it odd that PW, who assured us he knows all about this topic owing to having a finance degree, keeps saying "I don't know" and then posting stuff from rocket money and ChatGPT instead.

This is ridiculous. The government didn't force anyone to make loans that almost certainly would never be paid back, and they shouldn't have bailed out the bad business people who blew up the system.

If the government had really wanted to help everyone be a home owner they could have loaned out the money themselves. But the banks would have cried about that because they wouldn't have made any money from it.

I don't think I was taught mostly one school of economic theory. I certainly learned about both the Keynesian and the Chicago schools. I even learned about communism. But I didn't take classes specifically on any of those.

You can look at things that way if you like, but that is definitely not the standard accepted definition of inflation.

No I didn’t do that. I don’t think I know everything. I’m just not stupid like people say

The community reinvestment act, along with the actions of the pressure group ACORN, absolutely led to loans being made to individuals who were previously deemed ineligible for credit. HUD also tasked Fannie Mae and Freddie Mac with providing loans to low income individuals with minimal deposits. Hundreds of billions of dollars in these loans were made.

"I doubt Milton Friedman is irrelevant but without velocity of money, how is that extra money suppose to move to increase prices ?
A government can print 1 trillions of $ but if he doesn’t spend it, how is it relevant for the economic inflation ?"

Agreed, the money must enter the economy to have an effect.

You are correct about the FMs, which are quasi-governmental agencies. But the big financial firms decided to take crazy risks and then were bailed out, in the perfect example of moral hazard. Now they know even better that companies deemed "too big to fail" can do whatever the **** they want while knowing they have a possibility of making great money with no risk of a downside. It's just like if a casino gave millions of dollars of free play to certain gamblers, particularly the richest gamblers, while screwing the poorer gamblers out of everything.

Again, that could be a definition of inflation, but it's currently not the generally accepted one, and hasn't been for at least the last 50 years, so you're really an old man yelling at a cloud here.

Anyway, while I understand that your concept of inflation could be very useful, I don't see how it could ever be practical in terms of giving a percentage number to the rate.
How can we know for sure that prices would have gone down if not for a particular monetary policy, and even if it were fairly obvious, how could that amount ever be quantified? We can't know exactly what prices might have been if different actions had been taken; all we can do is measure what they are now.

Its' where modeling comes in. The better models the better measure we can have of the effect of different actions.

The problem with just going with the actual numbers is that they are so divorced from the causes. Major causes can be very complex and many decades before the actual numbers. Actual numbers dumb down the very difficult subject of economics to political headlines that are close to drivel.

Thanks for typing this out and saving me the time. I have probably written the same thing 20 times on 2+2.

Agreed which is what I wrote here:

To help people understand this concept: If your neighbor finds 1 trillion dollars in his back yard, but he never actually digs it up or does anything with it how would that effect prices of any product or service?

AZ Iced Tea would obviously go up.