Is moderate inflation good or bad?

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Originally Posted by RandBlade

Not so sure I 100% agree. I'm honestly not certain which if either has a dominant effect, but I do think one of the biggest effects in recent decades is state of the global economy.

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The state of the global economy is the same all over the world. The effects might vary. But main drivers like oil prices are almost the same. Still we see quite a difference in inflation rates.
Lewkowski pretty much said he was talking about the US inflation. And I do think that QE is playing a role there. Even though I don't want to go as far as claiming it is the biggest factor. Could be, could not.

I think people here are too far removed from the '70s (or don't know much about Latin America) to think about the role the government has with inflation. Historically, governments have been the main drivers of inflation, and still are in large parts of the world. It just so happens that most developed countries gave independence to their central banks, which made it much harder for governments to pursue inflationary policies. Except for countries that are highly dependent on imports, inflationary pressure from the outside is minor and temporary. Ultimately, it is the government that has by far the greatest ability to affect inflation, even if most governments of developed countries choose to not go down this path right now.

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Originally Posted by Aimless

A quick question for the brain trust re. making money: who makes money anyway? I thought huge investment banks made money (from promises hopes and dreams :downcast: ) and now you guys are saying it's the government. Isn't the government's role mostly indirect, in most of the west??

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They create inflation by manipulation of rates and buying bonds. Massive buying of bonds is the QE1, QE2 ect ect that the fed has been doing lately.

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Originally Posted by earthJoker

The state of the global economy is the same all over the world. The effects might vary. But main drivers like oil prices are almost the same. Still we see quite a difference in inflation rates.
Lewkowski pretty much said he was talking about the US inflation. And I do think that QE is playing a role there. Even though I don't want to go as far as claiming it is the biggest factor. Could be, could not.

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Originally Posted by Loki

I think people here are too far removed from the '70s (or don't know much about Latin America) to think about the role the government has with inflation. Historically, governments have been the main drivers of inflation, and still are in large parts of the world. It just so happens that most developed countries gave independence to their central banks, which made it much harder for governments to pursue inflationary policies. Except for countries that are highly dependent on imports, inflationary pressure from the outside is minor and temporary. Ultimately, it is the government that has by far the greatest ability to affect inflation, even if most governments of developed countries choose to not go down this path right now.

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Historically it may have been true, but not remotely convinced that its happening now

Go back a few decades and double-digit inflation rates were quite plausible, look at it now and we examine fractions of a percentage point to minute detail.

Joker, you say we see "quite a difference in inflation rates" and that is what I'm not convinced of. In modern, major developed nations (not the likes of Zimbabwe today or the Weimar Republic then) the bigger discrepancy between inflation now is not other nations now, its the same nation decades ago. Time, not geography, is the biggest difference.

I am not speaking about hyperinflation, but there is still a variation of a factor of 10 when you include countries like South Africa, Russia, Mexico. Now that probably won't fit your "modern, developed" criteria - well we both know we could add some southern European ones to the list if it wasn't for the European central bank.