why must everything go up?

sofsofsof

sorry if in wrong place...


why is it every year everything goes up?
your council tax, your rent (if your renting), your broadband when you do a new deal , anything and everything!?
i know each year you get a pay rise and this sort of levels it off in some ways but has it always been this way?

[Deleted User]

Yes. Inflation isn't a new invention.

sofsofsof

Its just strange when you come to think of it. Wages go up so do bills and forever evens itsself out, this way tho money doesnt become worth what it was before etc. I never really thought about it but had the question posed to me by a work collegue

movilogo

It is due to inflation which is not necessarily a bad thing per se.

Low inflation is sign of healthy economy. If you know price of something will go up in future, you will be more likely to buy it today. This keeps economy thriving.

During a deflation, price falls over time. Hence, people wait to buy later as it would be cheaper later. Problem is, this reduces transactions which further drives down price and finally everything goes bust.

Before a deflation, economy becomes stagnant. That's what is happening with house price now. People are waiting price to fall further. This makes difficult lives for Estate Agents (not that I love them )

MovingForwards

Bills go up.
Wage rises don't always happen or don't match the amount bills have gone up by.

Part and parcel of life.

michaels

Although we all expect inflation now, weren't ther elong periods of history when prices were stable.

Could it be linked to the fact that we also now see productivity increases as being the norm rather than processes remaining the same over the centuries?

Or for the silver lovers could it be related to having a fiat currency rather than using fixed supply precious metals as currency?

Thrugelmir

michaels wrote: »

Although we all expect inflation now, weren't ther elong periods of history when prices were stable.

Inflation is a post war investion invented by Keynsian economists to keep insolvent Governments afloat. One wonders if the same policies can continue. Given that the world is now a very different place 70 years on.

Arcaine

Exellent article from Forbes on the causes of Inflation. (Yes there are several causes, and definitions)


https://www.forbes.com/sites/johntharvey/2011/05/30/what-actually-causes-inflation/#12eb2490f9a9

Malthusian

Thrugelmir wrote: »

Inflation is a post war investion invented by Keynsian economists to keep insolvent Governments afloat.

That'll be news to Germans who lived through the Weimar Republic, or anyone who lived through a famine (i.e. virtually everyone prior to the Second Agricultural Revolution that accompanied the Industrial Revolutions).

Inflation is an essential economic lubricant. It reduces unemployment, makes home ownership affordable for the masses, and incentivises people and companies to invest their capital instead of leaving it dead and useless stuffed under the mattress, in turn increasing economic growth and prosperity.

itwasntme001

Whether inflation is a good thing or bad depends on what it is exactly and who you are.


Electronics costs have fallen rapidly over the last few decades which has surely been a very good thing for consumers and businesses but a bad thing for the likes of HP and Dell - since price declines was largely driven by competition and the reduced need to replace old computers.


Surely we would all benefit from a fall in foods, energy, transportation, medical bills etc. I find it hard to believe this would be a bad thing overall - only the providers of such services and goods may not like it (although they may like it if productivity in their business increases).


Then you have asset inflation - surely a good thing if you own assets and a bad thing if you don't and want to own assets. Most likely a good thing generally for all assets to rise especially debt funded assets like houses.


So whether inflation is a good thing or bad really depends on what you are talking about and who you are. Personally as an owner of assets i would like asset prices to rise and consumption/service items to fall. cost of goods/services falling isnt necessarily a bad thing, in fact i think most likely a good thing as long as its driven by increase in productivity.

michaels

My director of studies always used to recommend this little volume - but then he wrote it!

Freidman had it right but unfortunately it is a tautology and doesn't give a lot of insight when he said:

Inflation is always and everywhere a monetary phenomenon.