IFB150: Economy Basics Pt2 – Inflation, Deflation, and Currency

Announcer (00:00):



You’re tuned in to the Investing for Beginners podcast.
Finally, step by step premium investment guidance for beginners led by Andrew
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Dave (00:36):



All right, folks, we’ll welcome to Investing for Beginners
podcast. This is episode 150 tonight; we’re going to continue our discussion on
the economy. Talk a little bit about economic basics. This is going to be part
two. We’re going to talk a little bit about inflation, deflation,
hyperinflation, money, some of those fun topics. And we’ll try to make it
interesting for you guys, so you don’t go into a snooze fest. I was just
kidding. So I’m going to start us off a little bit and talk about a few of the
basics. So let’s talk a little bit about inflation and deflation. So basically,
inflation is the increase in prices for supply and demand. So goods and
services. So when goods and services and their prices rise, so that would be
considered inflation. The opposite of that would be deflation. So that when the
prices of supplies and, or I’m sorry, goods and services decrease, that would
be deflation. Now, most people think that inflation is a bad thing, and it’s
not a when prices are rising; generally, that’s a good thing because, along
with that, typically then wages are going to rise at the same time.



Dave (01:50):



So inflation can be a good thing and the only, there are
times when it’s going to be bad. So, for example, something like
hyperinflation, hyperinflation is when the prices rise more than 50% in a
month. And that’s not good because wages are not going to increase at that
weight, at that rate, which means that things are going to cost more and we’re
not going to be able to buy as much. And as we’ve talked about before, that all
kind of feeds into the economy. So when we’re talking about inflation and
deflation, we’re also talking about the monetary supply. So the monetary
supply, how that impacts both of those is when there’s credit expansion, and
there’s too much money in this system. Kind of like what’s happening right now
is the cysts. They’re flooding the economy with a lot of money. And what they’re
trying to do is they’re trying to tamp down on inflation by doing that because
when there’s too much money in the supply system that just me or the monetary
system, that means that there’s too much money chasing prices and it helps
lower the prices.



Dave (02:58):







Now, if they contract the money, in other words, they make
credit harder to get, and the money in the system gets harder to get out into
the system.