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Inflation question

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1Inflation question Empty Inflation question on Wed Jul 17, 2013 6:24 pm

Reflection


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MEMBER
Please help me understand this. The way I'm understanding it may be wrong, I'd like to understand it.

The higher the auctions go, the more dinars it takes to cover that, in turn that makes inflation rise?

If that's true, the amounts sold in the auctions lately, shouldn't their true inflation be through the roof?

I get the funny feeling someone is "cooking the numbers" to keep people off their back.

Please explain. Thanks.

2Inflation question Empty Re: Inflation question on Sun Jul 21, 2013 8:58 am

Reflection


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MEMBER
Hmmmmm. ok

3Inflation question Empty Re: Inflation question on Sun Jul 21, 2013 9:38 am

Shredd

Shredd
CO-ADMINISTRATOR
CO-ADMINISTRATOR
Hey Reflection! I didn't see your question from Wednesday so I'll give it a shot now.

Inflation basically depends on the growth rate of money supply in relation to the growth of the economy. We've seen where supply and demand pressures in the economy, prices and interest rates move it too...like here in the US.

Specifically to currency, the general effect of inflation is the expectation of being able to exchange our dinar at a later time for a higher rate than what we paid for it. What affects currency inflating is money supply, its velocity, and the nominal value of exchanges.

Now, that said, you are correct that supply affects inflation and you are also correct that the inflation rates can be "cooked", meaning countries will exclude certain numbers from their inflation calculation to make it look good.

Finally, to the auctions, one of the key functions of the auctions to allow the central bank to manage currency supply. Based on that function alone, we know auctions are cyclical in nature. One cannot simply add the total amount of auctions and assume all units taken in stay in reserves and all units released stay in circulation.

Hope that helps!


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4Inflation question Empty Re: Inflation question on Sun Jul 21, 2013 7:59 pm

Reflection


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MEMBER
That does help some. Thank you.

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