this post was submitted on 21 Aug 2023
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We won’t fix inflation while economists stay in denial about its causes (www.smh.com.au)
submitted 1 year ago by Zagorath@aussie.zone to c/australia@aussie.zone
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Non-paywall link.

TL;DR: economists are still stuck in the idea of the market as a perfect force for reaching optimal outcomes. They're ignoring the simple fact that businesses are putting prices up purely to increase profits. And that they can do this because the economic ideal of perfect competition (where many small firms compete with near-identical products) does not exist. We have a small number of very powerful businesses—oligopolies—in nearly every market for consumer-facing goods.

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[–] Screwthehole@lemmy.world 1 points 1 year ago (1 children)

Government spend much money. Much money come from tax and borrowing. Let's pretend there's $100 in the economy. Gov't takes 10% in tax. They spend $10, and the rest of the people share $90.

When next year comes, the economy grew to $110 and the government Collect $11 in tax, but actually decide to spend $20. Meaning they borrowed $9.

Year 3, economy grows to $150. Government gets $15 in tax, everyone feels "richer", but government has to borrow to pay the $9 on last year, plus whatever new spending this year. Let's say gov't now owes $50.

So the next year! They create inflation and everyone has lots of money but can't afford shit. Maybe economy balloons to stupidity like $500. Government takes $50, and pays off their debt. Or could.

In in this way, over time, inflation helps reduce the massive debt load incurred by governments because $1 is a lot easier to get in 2023 than it was in 2019.

[–] MotoAsh@lemmy.world 3 points 1 year ago

Your analysis would be true if many people's economies who weren't running up debt vs GDP were doing just fine. They are not. Countries with the same relative debt are way worse off lately.