What creates inflation?

[Philosophy Explorer]

It should be mentioned that banks create money through lending, that's the process they use.

Well, they increase the money supply; they can create liquidity. But they are also constrained by the state of the economy generally. I can also create money in the sense of extending credit...but I am constrained by the worry I might not get paid back!

I would let the banks worry about that end of things.

PhilX

[bobevenson]

It should be mentioned that banks create money through lending, that's the process they use.

Well, they increase the money supply; they can create liquidity. But they are also constrained by the state of the economy generally. I can also create money in the sense of extending credit...but I am constrained by the worry I might not get paid back!

Sorry, lending money is not creating money, it is merely changing the terms of sale.

[Philosophy Explorer]

It should be mentioned that banks create money through lending, that's the process they use.

Well, they increase the money supply; they can create liquidity. But they are also constrained by the state of the economy generally. I can also create money in the sense of extending credit...but I am constrained by the worry I might not get paid back!

Sorry, lending money is not creating money, it is merely changing the terms of sale.

Wrong again. It increases the money supply fool which means money is being created. You're no authority.

PhilX

[bobevenson]

Sorry, it does not change the money supply, only the terms of sale. If you sell me something, and I tell you I'll pay you next month, you have not increased the money supply.

[Philosophy Explorer]

Sorry, it does not change the money supply, only the terms of sale. If you sell me something, and I tell you I'll pay you next month, you have not increased the money supply.

By definition the money supply has increased Wimpy.

PhilX

[bobevenson]

Jesus Christ, you don't know shit about money, I don't know how you pay your rent!

[Philosophy Explorer]

Jesus Christ, you don't know shit about money, I don't know how you pay your rent!

You don't know shit from Shinola Wimpy.

PhilX

[Science Fan]

People really don't get how banks operate. Yes, it is a fact of economics in the modern world that banks do indeed create money. Banks use a deposit for their reserve requirement, and they base their loans on these reserves, which means they create money, and a quite substantial amount. When central banks set their target rates for short-term interest rates, they have to take this money creation by private banks into account.

[bobevenson]

Jesus Christ, you don't know shit about money, I don't know how you pay your rent!

You don't know shit from Shinola Wimpy.

PhilX

You're going to have to start coming up with your own lines, pal.

[Philosophy Explorer]

Jesus Christ, you don't know shit about money, I don't know how you pay your rent!

You don't know shit from Shinola Wimpy.

PhilX

You're going to have to start coming up with your own lines, pal.

Better than your lines, dum dum.

PhilX

[bobevenson]

Please, those are my lines, and they're all copyrighted.

[Philosophy Explorer]

Please, those are my lines, and they're all copyrighted.

Baloney. Provide proof they're copyrighted.

PhilX

[Londoner]

Sorry, lending money is not creating money, it is merely changing the terms of sale.

I don't know what you mean by 'changing the terms of the sale', but it would help this discussion a great deal if we were clearer by what we mean by 'money'.

If the thread is about inflation, then lending money increases the amount of money available for people to spend. That might or might not cause prices to rise; it would depend on other things.

For example, if all the banks decided they were going to offer lots of cheap mortgages you would expect inflation in the price of houses. On the other hand, if people were worried that they were going to lose their jobs and not be able to pay those mortgages, then they wouldn't take up those cheap loans. Or, if they expected deflation, they wouldn't buy houses now because they expected the price of houses to fall. Or maybe the increase in house prices would cause more houses to be built, thus the price of houses would return to where it was before....and so on.

So the banks are not free to just create/lend money, irrespective of what is happening in the economy. They are only one part of the system.

[Philosophy Explorer]

Sorry, lending money is not creating money, it is merely changing the terms of sale.

I don't know what you mean by 'changing the terms of the sale', but it would help this discussion a great deal if we were clearer by what we mean by 'money'.

If the thread is about inflation, then lending money increases the amount of money available for people to spend. That might or might not cause prices to rise; it would depend on other things.

For example, if all the banks decided they were going to offer lots of cheap mortgages you would expect inflation in the price of houses. On the other hand, if people were worried that they were going to lose their jobs and not be able to pay those mortgages, then they wouldn't take up those cheap loans. Or, if they expected deflation, they wouldn't buy houses now because they expected the price of houses to fall. Or maybe the increase in house prices would cause more houses to be built, thus the price of houses would return to where it was before....and so on.

So the banks are not free to just create/lend money, irrespective of what is happening in the economy. They are only one part of the system.

Bob is empty-headed for more than one reason. So what you say in one ear goes out the other.

PhilX

[bobevenson]

What a garbled-up response. First of all, inflation does not apply to an increase in the price of specific commodities, only to a general increase in prices. Secondly, money is legal tender backed by the government that issues it. Thirdly, terms of sale is when the money is due from the buyer to the seller. Class dismissed!