I was trying to figure out how to work the word "pimp" into inflation but like "pimpflation" wasn't really conveying the desired message. Anyways...

Inflation:


- Your understanding of it: “Grandpa’s old timey whiskey cost a nickel back durin’ the quaint ole war times and now it costs 54 bucks for a handle, it’s where shit gets more expensive and it’s solidly in the lame column”

- The verdict: You’re right.... sort of. A low and predictable level of inflation is generally regarded as a good thing. The biggest thing is the predictability of it, as long as everyone knows that a buck will buy 3% less Big League Chew in one year (ie. It costs 3% more because of a 3% annual inflation), job markets will adjust to pay higher wages, and everyone can keep right on chewin’ the shit outta that shit. (ISBA: “purchasing power” is how much Chew you can hook up on your income. If the price of Chew increases more than expected due to inflation and your wages don't adjust upwards enough you can say that your “purchasing power eroded”. Boo ya.). Canada and the US generally opt for a target of between 1-3% annual inflation.

- Excess inflation (see Zimbabwe now or Germany post WW1) swallows for several reasons; In an environment where the value of a dollar changes foolishly on a daily basis no one will save money because what can buy a crate of big league chew today will likely only be able to buy a single sack of deliciousness tomorrow and then a friggin’ crusty-ass bazooka Joe the next day, where’s the incentive? So as you are watching your “purchasing power” (eh? EH?) have its fingertips fed to wolverines what do you do? You consume, you buy everything you can and then when you can’t buy anything else you borrow money to buy some more stuff. You borrow content in the knowledge that when your debt actually comes due guess what because the value of money is now so low the amount you owe is practically rien (that’s French for nothing). So now you have a ton of people out there frantically trying to buy as much shit as they can before their money becomes more worthless than reality TV stars. What does this do? Well if a store has one fountain Dr. Pepper left and everyone is in a tizzy to get it what will happen? Demand will rise...again which causes Prices to rise... again... your purchasing power gets effed... again and it’s a vicious cycle. Essentially, in an environment like this money loses all its perceived value and the economy reverts back to the barter system (“I give you 5 breads for sheep?”). Wages will increase of course to try and maintain your purchasing power, but imagine a situation where prices are 10X higher every time you go to the store and having to negotiate a new salary every day pretty much? Completely non functional.

- Now what causes this excess inflation you ask? There are a variety of things that can trigger it, but it comes down to one root cause: a big ole increase in the supply of money floating around without a corresponding increase in goods and services to spend it on. The usual way the money supply is increased is the government, looking like the poor version of the monopoly guy, starts juicin’ up the printing presses and goin’ to town making money to pay for its expenditures. Think of it like this, all the goods in a country are puppies and the only thing people in that country want are two fluffy puppies named Napkin and Tippy Toes Mcwhispersons. If this country has a population of 2, there are two puppies available, and the GDP of this country is 6 dollars then each puppy will have a value of 3 dollars. Now say the government prints 6 more dollars, now there are 12 dollars chasing the same two puppies and their value is now 6 each without any actual change in the underlying puppy!



- An example of this (sans puppies) is Weimar Republic Germany in the 1920s. The treaty of Versailles, signed at the conclusion of WW1, saddled the Germans with a truly butthole expanding amount of “reparation” debt that the Germans, with much of their industrial land looking like the plains of Mordor from the fighting, had no chance of paying back. So one day, in an incredible simplification of a combination of complex economic effects, the Kaiser was chillin’ and in between bites of saurkraut or whatever goes “Sheisse la merde shit (he was pretty good at languages), we getting jooked here! We ain’t got no chedda’! (he was pretty hood too).” So he goes to his boy the Commish of the Reichsbank, who was eating a sausage on his printing press and says “yo! juice that fucker up lets print some billz.” At June 20, 1921 the Mark was fairly stable at about 60 Marks to 1 USD, by November the Mark had fallen to 330:1 with the USD, by December, after international talks to try and solve this inflation issue broke down, the mark had fallen to 8000:1. In January 1923, Belgian and French governments exclaimed “chazbut..... we’re getting hosed here fellas” and sent in troops to the Ruhr valley to ensure that the reparation debts would be paid in hard goods. So the German workers went on strike and appealed to the Kaiser for help... and help he did...how you ask? “JUICE THAT FUCKER UP HIGHER BOYS!! YEEHAW!”. Inflation, being a vicious cycle already, peaked in November 1923 when one US dollar was worth approximately 4 trillion marks. At one point prices were doubling every single friggin day, one firm who was helping out in printing these notes submitted a bill to the Reichsbank for 32,776,899,763,734,490,417.05. Yea that’s 33 quintillion marks, no big deal. Anyways, this wild nonsense was finally stopped when the bank stopped production of the old Marks, lopped 12 zeros off the new ones, and essentially proclaimed that each note was tied to a certain percentage of hard assets (agricultural land or industrial assets) so thats its value wasn't debateable, but fixed. So needless to say the government was interested in blaming absolutely anyone but itself, one popular target: local bankers and speculators who were... you guessed it primarily Jewish. Though the Weimar republic would persist for another 10 years of so past this period, this event was credited as one of the early contributors to Hitlers eventual takeover of Germany.