What Is Inflation?
Look for the source of a society’s collapse, and you’ll usually find the i-word (inflation) at its core. So what exactly is inflation? How does it work? Why is it so dangerous? And how does it affect your everyday life? Steve Forbes breaks it down.
*There is a misspelling at 2:12. Our apologies.
#inflation #useconomy #economics
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Script:
Inflation isn’t new.
This man-made disaster has bedeviled civilizations at least since Ancient Rome.
In order to pay for his extravagant expenses, the first-century Roman emperor Nero debased the Roman currency, the denarius. How did he do it? By replacing silver, which was valuable, with copper, which was not.
And that was just the beginning.
Rome’s corrupt governments debased the coinage on a regular basis. By the fourth century, the price of wheat was two million times higher than it had been in the mid-second century. By the fifth century, Rome was finished—overrun not by barbarians, but by inflation.
In the sixteenth century, English King Henry VIII did essentially the same thing with England’s coinage to pay for his wars, divorces, and debaucheries. In what became known as the Great Debasement, food prices soared. Ultimately, Henry left it to his daughter, Queen Elizabeth I, to clean things up by issuing new, high-quality coinage, setting the stage for the emergence of England as a great power.
The Continental Congress of the American revolution tried to print its way out of its money problems by paying soldiers with paper money. The first US currency, the Continental dollar, was so over-printed that it became “confetti”, collapsing into hyperinflationary oblivion. Alexander Hamilton, the first treasury secretary, saved the day by linking the US dollar to gold.
Figures like Elizabeth I and Alexander Hamilton are rare. These stories usually end badly. In the 1920s, rampant money printing by the Weimar Republic in Germany led to hyperinflation, economic collapse, and ultimately, the rise of Adolf Hitler. Argentina, once the most prosperous country in South America, has never really recovered from its wild money printing in the 1950s. And Zimbabwe, now one of Africa’s poorest and most corrupt nations, is infamous for its one hundred trillion dollar bill.
Look for the source of a society’s collapse, and you’ll usually find the i-word.
So what exactly is inflation?
There are two types: non-monetary and monetary.
When a hurricane slams the Gulf of Mexico, interrupting fuel production, the price of gasoline rises. This is non-monetary inflation—the rise of prices due to some external event. Over time, the market recovers and prices normalize.
Monetary inflation is something entirely different. It’s the distortion of prices that occurs when money loses value. It’s that feeling that something isn’t right. Why is my weekly grocery bill, which used to be $100, now $200?
Because your money is losing value. It’s not that bananas have suddenly become more valuable. It’s that your money has become less valuable.
This can happen rapidly—as we’ve seen since 2021—or slowly over time. For example, in 1970, a can of Coke cost a dime; a Big Mac 65 cents. Fifty years later, a Big Mac is five bucks, and you’d be lucky to get a soda out of a vending machine for two dollars. Obviously, these products haven’t changed. It’s the dollar that’s worth far less.
This slow-motion devaluation of the dollar is why young people today can barely make rent when, years ago, their parents, who made far fewer dollars, could buy a house. Their dollars were worth much more.
If you feel cheated by that, I don’t blame you. You have been.
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Thanks a lot Richard Nixon you crook!!! I hope God is punishing Nixon in his afterlife.
If hyperinflation holds true we will all me billionaires
💱🆕
Tremendous mental clarity.
As usual, government is the problem, laissez-faire is the solution. The root of the governmental problem is expansion allowed by an irrational interpretation of the Constitution that emerged from the New Deal SCOTUS case U.S. v Butler in 1936.
you do go the way of rome , brics is gold backed isnt it.
Even though I plan to stick with it, inflation is wasting my money and my portfolio is losing gains every day, so I need a cure right away. My main concern is how to raise the value of my cash reserve because it has been lying there for a very long time with little to no increases and inflation is currently about 10%.
I( agree with everything Mr Forbes said. Im sharing !!
👍🏼
Inflation is when the imaginary interest rate on imaginary money is either called in, or raised…. It is all simply a grand delusion to keep you sweating your life away…… Have fun kiddies…..
I wish that PragerU could also produce a video "What Is Deflation?" Since for some reason many economists seem to fear deflation more than steady inflation.
It’s easy to blame President Nixon for taking America off the gold standard but we have to know that at that time he had little choice. Inflation was happening anyway due to excessive government spending so people were exchanging dollars for gold too much. If Nixon hadn’t done that people would have bought away all of America’s gold reserves.
Rome was overrun by inflation, not barbarians? as a historian this drivel physically hurts to listen to
What is inflation
Great! Now please tell me what cause the Great Despression again.
Monetary inflation isnt the reason houses are so expensive today, its becasue the rich are buying up the houses, and treating it like an investment instead of need. Becasue of this, the supply of houses has gone down while the demand for it steadily increases over time due to the growing population, thus, increasing the price. Its basic economics, if supply is higher than demand, the price goes down, if its the other way around, it goes up.
"Inflation is a tax everyone pays that nobody agreed on."- Milton Friedman
Did not the introduction of "Credit" by way of 'hire purchase' through instalments with interest start the problem of "runaway money" mentality.
Here in the UK, the Father, the single breadwinner of a Family of eg. Five in the 1950's saved cash to purchase Every item, clothes, food, furniture etc – some of which became inherited admittedly – then in the 1960'6 hire purchase was introduced leading to some people having their items repossessed through lack of payment And being Blacklisted! Bank Managers were addressed Formally so there was a degree of respect for Banks and money. Now, with "Horizontal Managment" and Computer algorithms there is No one Bank Manager who has a personal knowledge of the History of a Client!! Meaning – with Credit Cards etc. The Money System is Rotten to the Core with no real Value to the 'Consumer' and Almost Totally Anonymous!!!
Always a Joy to listen to you with such Succinct Appraisals of "convoluted" Subjects!!!
0:41 Related factoid: English coins minted during Henry VIII's reign had a tendency for their thin silver plating to wear off high-relief parts, exposing the coin's underlying copper. This earned Henry the nickname "Old Coppernose".
Inflation is government theft created by the central bank increasing money out of air so the government can overspend and devalue the dollar.
Bitcoin solves this!
INFLATION IS THEFT !
Its like an extra tax !
Not a word about record corporate profits and stock buy backs, huh Steve ?
Only in a society run by people inspired by 1984, could inflation somehow be a controversial topic.
It's what you get every time a Democrat is elected.
Why did Richard Nixon remove the gold standard?
Who benefitted from that act?
I've loved Steve Forbes for decades; even before becoming a Republican in 2012. I can't agree with what he said about Nixon's move. I love the Forex markets and the supply and demand between other currencies is what values the almighty dollar against other countries currencies. It's actually a lot better.
👍👍👍. But again… anyone borne after 2001 Couldn’t Even Point to Rome/ Let alone show where ITALY IS on a Globe!!! Watch a few Jessie Waters “ Interviews on the Street “ Crinches!