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What drives inflation?


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#1 The-Administrater

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Posted 28 April 2018 - 01:14 AM

When it comes to money, things get complicated. For most units of measurement, things are static. For example a kilogram will always be 1000 grams. And conversion will also be strait forward. 1 kilogram will be about 2.2 lbs. But what if one day, a kilogram went up in weight to 1067 grams? Or if converting 3000lbs became about 1 light year?

 

This seems to be the way with money. Why cant a system be setup so that a pound sterling has a specific value, for example £1 will always get you a loaf of bread, or 3 millilitres of unleaded. Why does stuff have to go up?

 

Conversion is even more baffling. At least for someone who knows the complete F.A on economics. £1 used to be worth 2 U.S bucks some time back. No idea what it's actually worth now but apparently it's more like 1.5 U.S bucks. What are the reasons for this, and why are there not international standards setup for currency conversion and the value of each unit?

 

This probably sounds ridiculous but it's how my mind works. This is just one thing I often wonder about.



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#2 Rocky Bennett

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Posted 28 April 2018 - 05:57 AM

Simply put the reasons for inflation are based on

supply

demand

access to natural resources

trade deficits

the labor pool

debt

savings

trends, both societal and economic

evolution of technology

human population, both locally and globally

human migration

birthrates

 

 

There are few other factors but these cover the most relevant factors.


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#3 Al1000

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Posted 28 April 2018 - 06:31 AM

Why cant a system be setup so that a pound sterling has a specific value, for example £1 will always get you a loaf of bread, or 3 millilitres of unleaded. Why does stuff have to go up?


Back in the day, one pound sterling bought one lb of silver.
 

Conversion is even more baffling. At least for someone who knows the complete F.A on economics. £1 used to be worth 2 U.S bucks some time back. No idea what it's actually worth now but apparently it's more like 1.5 U.S bucks. What are the reasons for this, and why are there not international standards setup for currency conversion and the value of each unit?


One reason is that even though both the US and UK have carried out 'quantative easing,' which amounts to printing bank reserves, international trade is mostly conducted in US$ so demand for them is higher. While the US prints them, all other countries have to earn them.

You might find the section on Government versus Private Control over Money Issuance in this IMF research paper interesting, as it goes into the history of money. It's 5 pages long and starts on page 12:

https://www.imf.org/external/pubs/ft/wp/2012/wp12202.pdf

#4 Havachat

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Posted 28 April 2018 - 08:32 AM

Its all about Checks and Balances , Countries have a Dollar Value as per their Economy , Assets , Debt , etc.

Sell , Buy , Trading the List goes on as stated prior.

 

If we didnt have a Balance of our Dollar compared to others ? then we as a thriving nation with low unemployment and a good workforce would`nt  be able to trade if our Dollar was high and other countries gave us nothing for it { eg poor  countries , under developed countries , high unemployment etc etc }  then we would go broke supporting them at a lower dollar value.

 

Have a look at what Countries current Debts are to work out whos travelling well economically , and it aint USA ! , they keep printing cash and owe Trillions but they are better off than a lot of others , sometimes Debt can be good but it generally has to be balanced.

 

I always wonder as a side note , how Nth Korea survived with so many Sanctions in place and no Trade ? ......someones been assisting them ?






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