It is actually an oversimplification to say printing money causes inflation. Printing money doesn’t cause inflation. If it did the existence of money would cause inflation since someone had to print it a first time before it existed right?
Printing money under specific conditions causes inflation. Intuitive linear modeling where we assume that the money in circulation is proportional to or directly feeds inflation is simple not backed in reality. We can observe this through historical data. Obviously you can also have inflation without increasing money in circulation.
There is a key concept though- money IN CIRCULATION.
Moderate inflation Can and often IS a good thing. The idea is that when people have more money, and spend more money on goods, demand rises. Growth causes instability. When things are stagnant it is easy to predict costs and earnings. When there is sudden unexpected growth in an economy or economic area- predictions fail. If supply isn’t great enough there will likely be inflation- but much of economics isn’t so linear. So some inflation can be a sign of a healthy growing economy with new markets and opportunities that can translate to a better quality of life or other advantages.
But this requires sufficient supply AND circulation. If people hold money, having more money in circulation doesn’t directly impact the market because that money isn’t being used. There is no increase in demand and therefore no “natural” cause for inflation. Inflation in such circumstances is often not “natural consequence” but artificial. A matter of policy or law.
So, here are two examples. Oil prices often fluctuate and huge fluctuations often lead to financial crises. The “oil embargo” of the 1970’s is an example where America experiences economic troubles and high inflation. There was plenty of oil. Demand for oil has grown globally in magnitudes and it’s been over 50 years since 1970 but we still have plenty of oil to feed our vehicles and manufacturing. They didn’t make more crude petroleum… so there was always enough to supply an exponentially higher demand. The limits to supply were artificial. Like many things which are intentionally made scarce to drive price premiums. This artificial scarcity has nothing to do with the printing of money. If there were $500 US dollars total in the entire world and oil companies wanted to raise prices to profit more- they could produce 10 barrels a year and if there was 5 Googleplex dollars to the tenth power they could still cut supply and charge basically as they liked. The amount would be relative but
Is when businesses and sellers raise money not in response to a trend but in awareness that there is money available. In other words, you sell candy at school for $1 a candy bar. You go to a school where people don’t have much money. On weekends you attend a prep program at a rich private school. You charge those kids $2 figuring they have more money. This is artificial inflation- you’re charging more not because of supply or demand or any factor other than you think these people can afford to pay more. If you’re right and they buy your $2 candy you can make more profit for the same product.
But now say that the kids at the prep class figure out they can but from other dealers at your regular school for $1. Odds are good that if the sellers at your regular school discover they can sell for $2 they will. But say some kids don’t charge more so they can undercut and get more business? So those kids are charging $1 or $1.50. But what if the conveniences stores selling you the candy for $0.50 find out you are getting $2 and they are getting $0.50? So maybe they start charging $1.50 or even $2 since it seems people are willing to pay $2?
So now you can’t sell candy for $2 and make a profit and the kids undercutting for $1 or $1.50 would LOSE MONEY selling at those prices? So to keep the same profits as $2 you’d need to start selling candy for $3.50 since $2 goes to your supplier.
So there wasn’t an increase in circulated wealth that caused the inflation- it was an increase in demand for profits that led to a chain of increasing profits. If stores start making exclusive deals and we start getting some of the complexity of “real” business- you start hiring candy sellers to sell more candy and “control” wider markets you can’t reach alone- now a $3.50 candy doesn’t profit you $1.50 because you need to kick your seller back some money. If they get $0.50 a candy you need to charge $4 to keep the same profits.
Now maybe if someone recruited 500 candy sellers across the nation and had a deal with a national chain to supply their workers candy but instead of $2 a piece they do 0.50 IF each seller picks up $5,000 worth a month. So then your sellers may undercut the market by selling for under $2 by selling in velocity- very large volume at low prices so the total profits are worth it.
This will almost always end up with workers who are doing more work for less money and over time as fewer suppliers are able to afford the overhead to compete at that scale, the market becomes consolidated- you end up with only a few sellers and a few suppliers and then prices tend to rise again- but because the suppliers and resellers have agreements it often isn’t possible for new sellers to renter the market and undercut the existing sellers even as they raise their prices.
As the prices increase slightly over time the profits tend to increase compounded by the scale and volume of their sales and the fact that they control most of not all the customer base already. Their increasing profitability also allows them to generally more easily weather rough periods as well as to sell at losses in periods where competition enters the market and undercuts them.
If you’ve accumulated years of 200% profits, when a new seller enters the market and is selling at 30% less than you, you can often sell at 40 or 50% less or offer other incentives so that you are actually losing money with each sale. But you can endure losses for longer. So to stay viable in the new market against you, the new seller would need to cut prices or increase service or perks to compete- but they are often already operating at a negative balance as a new company. So on top of their already negative ledgers they’d need to decrease their ability to profit or even sell at a loss to compete.
In other words you can likely drive them out of business by outlasting them and then raise prices again in a cycle after leveling out. There’s more to it- but in simple terms that’s an easy example.
So I mean- it’s often not the best and generally shouldn’t be the first strategy to simply print money- policy and law and other measures can be used to stimulate spending and growth and wealth inequity- consolidation of most of the wealth tends to cause problems. You can’t really buy things if you don’t have money. Do the math- a billion dollars- how long would it take to spend that money living even remotely prudently? Even if you drove a super car and lived in an opulent home and took regular vacations and such- it would be relatively difficult without being a complete fuck wit or very unlucky.
What do you buy? How many shoes or cars or iPhones or watches can you buy? Will you buy? What do you buy when you have everything you want? What would you buy if you had to spend $1 million dollars all at once on a single thing? Now do that 100 more times. Ten times.
So that’s the thing- the billionaire is not inherently inclined to spend money back towards the “average” person- what do they have of substance they want? They may pay a few hundred or thousand dollars here and there- someone to clean their home or what not- but nothing substantial really. Not a lot of folks making minimum wage have a mega yacht or a door made of ivory to sell, or much chance they’d be able to make or get one.
So at a certain point when the wealth is consolidated it tends to mostly stay there- except when it is divided. A rich producer pays a rich actor and rich director and they but the rights for a story from a rich ip holder. So $50, $100+ million dollars might change hands between those 4 people. Then another $50 million might be split between 500+ people to make a movie. Those 4 people who got most of the payments will get most of the profits and the 500 will likely get nothing beyond what they were paid out if that one time por of $50 million divided 500+ ways.
The people making the least don’t make enough to accumulate near the wealth of the 4 tops even if they save every Penny. But they will probably spend most of that money- investing in businesses and products owned in whole or in part by one of those 4 people and or their friends. The money paid out to make the movie finds it way back to them.
Conceptualize the scenario where Jeff Bezos owns EVERY business on earth. Everything is Amazon. Everyone works for Amazon. Ok. Bezos loses potential wealth each time he pays his workers, but normally the money comes back to him- you will buy his products and use his services at a mark up. Even if no new money is printed. The problem being that as the population grows and the amount of money stays the same- even if prices on goods stay the same- there is less money for each person right? It’s simple on a small scale. You have $5000 to throw a party for 4 people. Each person can have good food and lots of drink and you have lots for entertainment and party favors. If you still have $5000 and everything costs the same but you have 500 people- you have less to spend per person right?
But let’s say that is handled by healthy inflation. More money is printed and people can afford things. Ok. But… what happens if people stop buying anything except the BARE ESSENTIALS and start saving money under a mattress? Everyone does it? Suddenly Bezos is paying employees but he isn’t getting his money back. He isn’t making a subtle profit. Do you think he will let his money dwindle until he is no wealthier than anyone else despite owning every business in earth, or will he raise prices on the things people ARE buying because he knows they can afford to pay more because he knows what he pays them and what things cost? He can make a healthy profit selling items for 200% or more what he would before and just not selling the other things people don’t buy can’t he? Because at some point you have to buy something unless you are a self diffidence rural agrarian.
Which since many people literally live in places that are uninhabitable without technology and infrastructure or can’t support populations of the size that exist etc- so long as the population is larger than can be supported with “natural” means not everyone or most people CAN be self sufficient.
But it gets more complex- because land lords need to buy food too right? And suddenly they are paying 200% or more above and their job pays the same or less. They own property for wealth. So they can simply raise rent. Then the people who have less wealth than landlords feel additional inflation and that inflation is compounded with each tier of wealth passing down to the next lower so that they can maintain their higher socio economic status.
Printing money under specific conditions causes inflation. Intuitive linear modeling where we assume that the money in circulation is proportional to or directly feeds inflation is simple not backed in reality. We can observe this through historical data. Obviously you can also have inflation without increasing money in circulation.
There is a key concept though- money IN CIRCULATION.
So that is one example.
Another example…
So there wasn’t an increase in circulated wealth that caused the inflation- it was an increase in demand for profits that led to a chain of increasing profits. If stores start making exclusive deals and we start getting some of the complexity of “real” business- you start hiring candy sellers to sell more candy and “control” wider markets you can’t reach alone- now a $3.50 candy doesn’t profit you $1.50 because you need to kick your seller back some money. If they get $0.50 a candy you need to charge $4 to keep the same profits.
So that’s the thing- the billionaire is not inherently inclined to spend money back towards the “average” person- what do they have of substance they want? They may pay a few hundred or thousand dollars here and there- someone to clean their home or what not- but nothing substantial really. Not a lot of folks making minimum wage have a mega yacht or a door made of ivory to sell, or much chance they’d be able to make or get one.