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According to Webster`s New Universal Unabridged Dictionary published in 1983 the second definition of "inflation" after "the act of inflating or the condition of being inflated" is:

 "An increase in the amount of currency in circulation, resulting in a relatively sharp and sudden fall in its value and rise in prices: it may be caused by an increase in the volume of paper money issued or of gold mined, or a relative increase in expenditures as when the supply of goods fails to meet the demand.

This definition includes some of the basic economics of inflation and would seem to indicate that inflation is not defined as the increase in prices but as the increase in the supply of money that causes the increase in prices  i.e. inflation is a cause rather than an effect. 

However, The American Heritage® Dictionary of the English Language, Fourth Edition, Copyright © 2000 Published by Houghton Mifflin Company says:

Inflation: 
2) A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services.

Personally, I think "Inflation" is the result of "paying what is asked" without the consideration of "true value" relative to income, i.e., indiscrimate spending! Both on the individual and national level.  What are your thoughts?

Then you have the intrinsic value of money to consider. Take a look at the cost of "basic" foods?  The price of fruit and vegetables is crazy. Why? It`s more readily avilable today than ever (forget the assortment). The most basic "staples" are out of line. I think it`s mainly do to simply saying HERE`S MY MONEY? What do you think?  Don`t WE set the standard by not watching our P`s & Q`s?

Is the saying: "We make the worst mistakes during the best of times" true? I think so. Especially when we have CASH burning a hole in our pockets.

My definition of "inflation" is when my jeans won`t zip up after dinner.

It`s a bad cycle. Prices go up so people have to raise their prices to make a living. I live in the Bay Area ... I don`t even want to discuss housing around here. Incomes skyrocket, middle class starts at 100K+ per year, the working poor are everywhere ... sad, sad.

Nikole, I`m a simple guy - But!  What do you mean: "prices go up so people have to raise their prices"?  I can understand this is the case for some circumstances, i.e., "crop disasters" and such.  Certainly most "product and demand" situations are on equal footing - no?

I stick to the notion of "fat cat standardization". He purrs! We feed!  I think inflation is a balloon we inflate through bad consumership.

Perhaps this should be another topic: "The true value of money".

It`s sad to say, but most people (consumers) have no idea what money is - only what it does. Money has no more value than "we give it". Just like a diamond has "no real value" apart from being an industrial abrasive. But, just like money, we give it rank & value based on "promise". The entire basis of our economic system. No real value apart from how we use it, perceive it, or abuse it. 

Inflation is really hard to understand on a mico level. Unfortunately, I don`t think what we, as individuals, can have much of an effect. The forces involved are much stronger.

Think about it for a moment... the only way you can get money in your bank account is if someone subtracts money from theirs. The total amount of money if fixed*. Yes we can be more productive .. than means making the same thing with less money.. thats call `growth`.

But wait... Since WWII the US population has doubled. How can we all be sharing the same money? Wouldn`t we have bank accounts half the size as we do now? All the money has to be spread around to twice the number of people. If that happened things would have to be valued at half the price as they were in WWII. (deflation).

To prevent this the Fed prints money for a growing population. The amount is not fixed *  Print too much money and things run out of control, print too little and you got deflation.

Well that`s my definition, bet it`s not completely accurate, but thats the  way i make sense of it. Now think of Japan where the population will start decreasing .. what happens ... It hurts my head.

The cycle of rising prices. Housing prices go up and rental prices go up, so your grocer has to pay his workers more. In order to do that, he raises the prices on your goods. Now that you pay more for your basic necessities, you start raising the prices on your own services, plus you have to pay your workers more to be able to having living wages. Since wages are going up, housing prices continue to go up. It just never ends.

 

 

I guess what I’m trying to say is simpler in nature. Before there was money, there was “works” (expenditure of calories or goods). In exchange for future works ( calories & goods) there is a “promise of works & goods” (cerebral note). In exchange for a “promise of works", there is a  " promissory note”(paper promise) that represents and replaces all of the above in the form of a standardized-value-system. This is the basis of our “transfer of wealth” in the US (as it is currently).

 However, the value of the “first” $5 bill is fluent (unknown) until it becomes “standardized" IN USEAGE. I.e., on average everyone agrees to get/give “about” 5 pound of potatoes for it. This “practice is what sets the value of the $5 dollar note (or any promissory note).

The value of $5 for “works”(performance) is also standardized as a function of “common practice” (taking into account the price of potatoes of course). The price of potatoes (to make it simple) is referred to as “the cost of living”. Apart from these standards, and ONLY these standards. - Money has NO value. Nor does gold or diamonds apart from the value we assign them.

This is my argument. We as consumers “create” inflation as a function of “fluctuating” standards of living. An entirely “manufactured” phenomenon of will, virtue, habit, etc. I think we are confusing apples and oranges. I know I’m confused

 

 

The  increase in housing costs is a function of “circumstances”. A “particular” economic event that “trickles down” from a myriad number of variables:  an increase in population, which causes unrealistic speeds in construction (and all of it’s consequential costs); artificially

perceived values of real-estate (nice view), etc.. All of which deal with the domino-effect in the transfer of wealth for that market situation. What value we attach to the domino (money) at large, is another issue. It is my opinion that the devaluation of the $5  (inflation) is base on "accepting less for it" as a standardized practice. Which is the same as paying too much; therefore, setting a new standard for the value of $5. The cost of living is therefore a  result of practice - not an "out of nowhere" situation we find ourselves in.

Anything beyond this is another subject. Our economy is "complicated" only because of how money is handled: transfers systems, investment models, credit systems, speculation, on and on... etc.

 

 

 

 

Inflation is one of those terms that`s dependant upon it`s "subsuming" set. That means the "bigger thing that the smaller thing is part of." It`s not the same as saying inflation is relative to something else, but it`s *part of* a bigger concept.

That concept, as you`ve said, is the true meaning of money.

I`m not an economist and I might have my example backwards, so someone with a degree in economics can help out here.

Money is just a symbol. In and of itself, money is whatever anyone wants to say is money. In prison, cigarettes are money (currency). The symbol *represents* underlying value.

Back when the US had a gold standard, it meant that the fundamental value of all the commerce in the country was matched by a weighted amount of gold. The "standard" was based on an ounce of gold having a meaning of some number. Paper bills and bank notes all referenced that number.

If 1 oz. of gold is worth $100, who says so? We`ll leave that alone for now, and accept that it`s a standard. Therefore, if you have paper that says $1,000, the country ALSO has 10 oz. of gold.

Inflation is where you 1 oz. of gold no longer matches the one hundred $1 bills "floating around" in the economy. Instead there are 101 dollar bills. So we have a choice as to what to do about that extra $1.

The US doesn`t use a gold standard anymore, it was too "rigid" and "demanding." It required congress to stay within its spending means, have a real budget, and all sorts of other bad rules. Instead, really smart economists proposed that we could take the actual "economy" by itself, and assign a number to that....something.

The idea is that if you take every single thing that`s produced, all services rendered, and all intellectual value generated in a period of time, that`s the "value" of the US economy....say in a year. You then divide it up into units small enough to call "$1." And that`s the value of the dollar.

It gets more complicated because the US $ also has to compare and have a value in foreign currencies and economies. Suppose Japan were to use 1 oz. of gold, and define a value for the US dollar? That wouldn`t work at all.

So today, "inflation" means that the value "somehow" derived for everything is going up and there isn`t enough paper money to handle it. In other words, "inflation" really means nothing excepting to people who believe it matters, who understand it, and who want to point to it as a reason for something else. :-)

A much more interesting problem/question is "What is money?" And that relates directly to "What is a symbol?"

As far as we know, human beings are the only animal capable of manipulating symbols with their mind. Laguage is a basic form of symbol usage, so we`re supposing that since no other animals have a language, they don`t use symbols.

That`s being tested in examples we see on TV of animals being taught human language. We also know that animals do communicate, but they don`t seem to have a symbolic langauge.

An example of a symbol would be the word "balance," for example. You can`t point to something and say, "that is balance." You can put two things on a scale and when they`re the same on both sides, "it is" balanced....but you still can`t point to "the" balance. Another good example is "equal to," or any number. So "2" is a symbol for something.

Money is a symbol. It represents stored effort.

Suppose you see an empty field of land. You take some seeds of corn and plant them. When they`re harvested you have 100 bushels of corn. You take that corn to a market and a commodities broker buys all your corn. In exchange s/he gives you something. That "something" is money.

But whatever you take home with you is a representation of all the effort you made to clear the field, plant the seeds, tend to them, harvest them, separate them by weight, and transport them to market.

If you had used that same effort to weave some cloth, spin some thread, carve a needle from bone, and sew a shirt, you would have some clothing. But you can`t do both. You don`t have enough time. So you "store" the effort you`ve expended. The tailor also stores his or her effort. That way, by using this money symbol, you can hand over your stored "corn effort" and get in return a "shirt effort" from the tailor.

My definition of inflation is:  I make $6.15/hour plus tips and gas is $3.10/gallon.  A month ago I made $6.15/hour plus tips and gas was $2.68/gallon.  Three weeks before that I made $6.15/hour plus tips and gas was $2.37/gallon.  Three years ago I made $6.15/hour plus tips and gas was $1.65/gallon.

jillybeans