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Does anyone think that the current massively inflated prices will ever fall? I'm still so pissed off about it, a year later. Due to the fact that much of my income is based on the company's stock, which massively fell the same time inflation went nuts, I make less money now than I did a few years ago, despite having been promoted and working harder than ever. Couple that with inflation making my money worth less, and it's a wonder I can afford any non-essential spending at all. Every single good that I buy has increased in price by very noticable amounts. Generally, many people may not have the same problem as me, where their income is based on stock, but still, most people's cost of living has greatly increased and their income has stayed the same. Prices have been so out of control lately.
Is it just the Russia-Ukraine war that's keeping prices so high, or is it more than that, like aftershock from the pandemic, lockdowns, and COVID relief spending upending the economy? What's the best to hope for? If the war ends, is all we have to look forward to a reduction in inflation, meaning that prices will stop going up? Or is deflation a possibility, to bring prices back down to previous levels? I know close to nothing about econ, but I always hear deflation talked about as if it's this terrible thing. I don't really know why, I guess just because it destabilizes the market, and makes outstanding debts larger. To me right now, my dollar being worth more sounds great. Is deflation immediately following inflation a bad thing if it just brings prices back to previous levels?
If I have a fixed long term contract to sell oil at $X and there's suddenly inflation, am I not equally screwed? There's a danger in the stability of fixed long term contracts going both ways.
Say the price of energy fell, that would cause deflation. Energy is used to make nearly everything and run every business. Why should energy getting cheaper be bad? That would be a good thing, lower costs for everyone, more money to buy other things, more production! Machinery should be improving, we should have widgets that can make more steel or cars with fewer inputs.
Investopedia suggests that deflation is bad in so far as it pops bubbles:
That might be bad for those flying high on printed money but it's not necessarily bad for the economy in the long term. Deflation as a result of Depression is another matter. Putting deflation to one side, we can see how people might pull out from investments if the economy is crashing, worsening the crash. But if deflation comes as a result of rising productivity, the economy should be growing and there shouldn't be a problem.
Through a more conspiratorial lens, the power of central banks is that they print money. The more money they print (up to a point) the more power they have. When they print money, they redistribute wealth from productive industries and savers to their buddies in the government and financial sector. If the money supply needs to grow, there should be fair rules about how it expands and a cost for expansion. Either dig out gold from the ground or mine bitcoin or whatever, just don't have a system where a single well-connected body can print as much as they like arbitrarily.
Deflation is good actually, as long as it's from increased productivity, not a giant fall in demand due to the collapse of an asset bubble, which are usually propped up by reckless monetary policy.
Central banks exercise power through monetary policy (which, btw, is a lot more than "printing money"). They exercise that power when they decrease the money supply as well as when they increase it. So it is false to say that the more money they print, the more power they have.
The exact opposite is true. Increasing the money supply causes inflation, which harms lenders, including banks, by reducing the real value of outstanding loans. If anything, central banks have a bias towards keeping the money supply low, not high.
Over the last 20 years, the money supply in the US has gone up enormously, whether that's M1, M2 or M0. Money has clearly been printed and in great amounts: https://tradingeconomics.com/united-states/money-supply-m0
Consumers are hurt the most. Those who control assets (the financial sector, amongst others) benefit.
I don't know why you are saying things like "money has clearly been printed ... in great amounts" given that coins and currency make up a tiny percentage of the money supply.
In any healthy, growing economy, of course money supply is going to grow, because in a healthy, growing economy businesses borrow and invest at high rates, and borrowing money creates money. Thus, the fact that the money supply has grown says nothing about Fed policy, esp since all that growth came while inflation was (around 2 percent across that 20 year period)[https://www.usinflationcalculator.com/inflation/historical-inflation-rates/]. And, of course, as soon at inflation accelerated, the Fed started taking steps to reduce the money supply. Clearly, the claim that central banks always increase the money supply in order to enhance their power is wrong.
Just because consumers are hurt by inflation (and of course any consumer with a fixed rate mortgage is helped, at least in part) does not mean that the financial sector is helped.
Central banks have a long history of prioritizing fighting inflation over fighting unemployment and they would not do so if inflation is good for their "friends".
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