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Politics : Formerly About Advanced Micro Devices
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rdkflorida2
To: Tenchusatsu who wrote (1471619)7/23/2024 10:17:06 AM
From: Qone01 Recommendation  Read Replies (3) of 1572145
 
Inflation is caused by too much money chasing too few goods.
This is the symptom, but not the cause.

There are two types of inflation.

Normal fiat currency inflation that is cause by federal government constantly printing new money. This is the Federal Reserve's 2% target. Also why the stock market indexes always go up in long periods of time. This money finds its way into assets.

Inflation spikes are caused by supply/demand imbalances that precede the too much money chasing to few goods.

A example of this is the price of oil. As the pandemic got underway. The demand for oil got out of balance with supply. Demand cratered, then supply as the price was to low to support the size of supply. Then demand came back and supply was out of balance. The result was a huge inflationary spike.

This happens in all markets and filters it way through the entire economy. When ever there is a supply/demand imbalance there will be a inflation spike as a result.

The Federal Reserve reacts to this by raising interest rates to slow the demand side. But they can do nothing about the supply side.

I did notice that not one trumpster even attempted to answer.<G>
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