Low unemployment rate causes recessions?

Originally posted by @metal-brain
I disagree. We had hyperinflation in the 70s and the Saudi embargo cannot be blamed for that. After Iraq was invaded we saw oil prices soar, yet no hyperinflation.

That is the problem with economic theory. It is not economic fact.

You had stagflation in the US. Something that was not foreseen due to multiple reasons. But saying that a huge price increase in oil prices due to the OPEC embargo didn't have any effect on the overall price level is bonkers. Money supply wasn't the only reason for inflation during the oil crisis.

I don't think I've mentioned hyperinflation once, so stop moving the goal post.

Originally posted by @metal-brain
Supply price increases are mostly because of inflation. Competition is supposed to keep prices in check. Even higher oil prices after the invasion of Iraq did not cause inflation to spiral downward and out of control.

You are just repeating unsupported economic theory.

Supply price increases are mostly because of inflation. What?

Competition is supposed to keep prices in check. What?

Which Iraq war?

Originally posted by @metal-brain
"As long as the interest rate are above the inflation there is incentive to save money - and depending on your risk tolerance even below."

Sure, but that is not always the case. After the 2008 financial crisis for example. High inflation and low interest rates. Didn't the FRS artificially support US treasury bonds to prevent an exodus from them?

Yes. I don't think we disagree about anything here.

Originally posted by @lundos
You had stagflation in the US. Something that was not foreseen due to multiple reasons. But saying that a huge price increase in oil prices due to the OPEC embargo didn't have any effect on the overall price level is bonkers. Money supply wasn't the only reason for inflation during the oil crisis.

I don't think I've mentioned hyperinflation once, so stop moving the goal post.

How high was the price increase because of the oil embargo compared to the price increase after the post 911 gulf war?

" Money supply wasn't the only reason for inflation during the oil crisis. "

So you admit an increase of the money supply was at least part of it?

Originally posted by @lundos
Yes. I don't think we disagree about anything here.

So what was your point?

Originally posted by @lundos
Supply price increases are mostly because of inflation. What?

Competition is supposed to keep prices in check. What?

Which Iraq war?

Inflation causes prices to increase of raw products used in manufacture. The manufacturer then has to raise prices as a result. That is how inflation works it's way through the economy. It is no surprise. Kazet wants us to believe supply increases has nothing to do with inflation without citing an example. Kazet is Mr. Ambiguity. He makes assertions that only make sense to him and maybe even not himself.

Originally posted by @metal-brain
Inflation causes prices to increase of raw products used in manufacture. The manufacturer then has to raise prices as a result. That is how inflation works it's way through the economy. It is no surprise. Kazet wants us to believe supply increases has nothing to do with inflation without citing an example. Kazet is Mr. Ambiguity. He makes assertions that only make sense to him and maybe even not himself.

Labour is part of the manufacturing process. Hence, if the cost of labour (wages) goes up, so do prices. Why do you apply the theory to raw materials but not to workers? It's inconsistent.

Originally posted by @metal-brain
How high was the price increase because of the oil embargo compared to the price increase after the post 911 gulf war?

" Money supply wasn't the only reason for inflation during the oil crisis. "

So you admit an increase of the money supply was at least part of it?

Lets keep focus here. Comparing oil price changes in different circumstances can be due to a lot things like e.g. expectations or demand. However, if the (oil) price increases it causes inflation. How big the inflation is depends on the importance of the asset (oil) and the level of increase.

I've never said otherwise. What I have said is that money supply isn't the only reason for inflation.

Originally posted by @metal-brain
"Japan and the eurozone have long struggled with low inflation"

I think you are confusing deflation with inflation. No country struggles with low inflation. Low inflation is good.

Where are you getting your information from, Portfolio magazine? Where are you getting such sick propaganda from?

I think you are confusing deflation with inflation.

Oh dear. Nope.

No country struggles with low inflation. Low inflation is good.

It's really not a good thing. Very low inflation can be a sign that there is something wrong with the economy.

Where are you getting your information from, Portfolio magazine? Where are you getting such sick propaganda from?

You are a funny guy, Metal Brain.

Originally posted by @metal-brain
So what was your point?

That the way to combat inflation depends on the rest of the economy and there isn't a one size fits all. So the FED doesn't want to keep people poor. They just make mistakes from time to time.

Btw I can understand why they did what they did in the 70s with the data and computers available. I don't feel the same way about the 2008 crash which were predicted by plenty of the best macro economist around the globe.

Originally posted by @ashiitaka
Labour is part of the manufacturing process. Hence, if the cost of labour (wages) goes up, so do prices. Why do you apply the theory to raw materials but not to workers? It's inconsistent.

Yes. Wage-price spiral or the cost-push effect.

It looks like we are done here.

Originally posted by @lundos
First of all, I'm not struggling. Lets start by defining inflation - from wiki: "inflation is a sustained increase in the price level of goods and services in an economy over a period of time."

A snap shot in itself tells us absolutely nothing. What happened in the previous period? Are there sticky prices (or wages) or was money supply decreased? At what ...[text shortened]... reduce risk, they cannot, since another bank will feel no moral obligation to reduce their risk.

Wait, what, wait.

What do you think would happen to prices if wheel barrows full of cash are added to an economy?

A/ Prices would go down, people would hide the extra cash under their beds, they prefer to struggle to pay low prices so long as no one gets to touch all that lovely currency.

B/ Nothing would happen, similar scenario, the extra currency would simply be, somewhere, who knows where. Two people competing for the same good would just hold that extra money back, they wouldn't use it to out bid the next fellow, thus raising the price.

C/ Prices go up, we'd see the old "charge em what they'll pay" scenario come into play. In the wage market (eventually) for property (probably the first thing to move) and other goods.

So you're arguing that currency supply doesn't effect inflation, that would be A or B for you then right.

"Government should regulate banks even more to avoid another 2008"

What, wait, you're measuring regulation how? by the thousands of pages? because those industries already operate under thousands of pages of regulation. How many 'more' regulations would you like to see?

Originally posted by @wajoma
Wait, what, wait.

What do you think would happen to prices if wheel barrows full of cash are added to an economy?

A/ Prices would go down, people would hide the extra cash under their beds, they prefer to struggle to pay low prices so long as no one gets to touch all that lovely currency.

B/ Nothing would happen, similar scenario, the extra curren ...[text shortened]... rate under thousands of pages of regulation. How many 'more' regulations would you like to see?

I'm certainly not arguing that money supply have no effect on inflation. I'm arguing that more than money supply have effect on inflation.

Ceteris paribus the answer to your 'case' would be C if the wheel barrows aren't full of 1 cent coins (do they still exist?).

There is a moral hazard concern regarding bank behavior. It's not something new and I don't understand why it's not discussed more (regarding regulation). It's government's role to regulate this as the market doesn't. I would like to see regulation that makes it certain that the penalty for criminal behavior outweighs the benefit. As a minimum.

Originally posted by @ashiitaka
Labour is part of the manufacturing process. Hence, if the cost of labour (wages) goes up, so do prices. Why do you apply the theory to raw materials but not to workers? It's inconsistent.

Because wages do NOT keep up with inflation. Do you accept that fact? I don't know why you are so stubborn. Do you just ignore facts when it contradicts your bias? Is that why you seem so ignorant?

Originally posted by @lundos
Lets keep focus here. Comparing oil price changes in different circumstances can be due to a lot things like e.g. expectations or demand. However, if the (oil) price increases it causes inflation. How big the inflation is depends on the importance of the asset (oil) and the level of increase.

I've never said otherwise. What I have said is that money supply isn't the only reason for inflation.

What you did was blame inflation on oil prices. You never mentioned other factors so you seemed dismissive of them. At the very least you claimed oil prices were the main cause, but oil prices also rose after the invasion and overthrow of Iraq and there was not much inflation relatively speaking.

Your explanation was flawed and I'm pointing that out. The main cause is the money supply increase. Why don't you just accept that I'm right? I think you know that I am.