posted on Sep, 2 2010 @ 02:10 PM
Here's how I understand economics in my own retarded way.
Inflation is too much money in relation to chasing too few goods. Conventional economics only call "inflation" expansion of the money supply, which
is only partially correct. Deflation is less money in relation to a fixed set of goods. The buyer is king, but the catch is there is less money
floating around - and therefore less potential buyers.
Imagine there is a balloon on the ground with a chalk circle around the balloon. And now another set. The chalk outline is representative of the
general population in both cases. The first balloon is monetary supply. The balloon can shrink or expand over our chalk circle outline. It can
cover alot of the population or it might not. If there are a lot of jobs, one can say that the money supply is distributely (unequally of course)
adequately across the population, giving many people access to money. If there is a lot of inequality, think of Bill Gates' bank account, then you
can imagine pinching off the balloon like a clown making a balloon animal. This creates "potential inflation" (potential increase in the money
supply if a super rich person wanted to spend it). And it all matters where the air supply hose is pumping the air - into the banks or into the
The other balloon with its chalk outline is resource extraction in relation to the population. If you have expanding resource extraction while the
money supply is not expanding, you can have a situation like the Great Depression where people didn't have jobs but they didn't starve either
because the person who did have money access could afford to give cheap food away.
If you have expanding money supply and shrinking resource extraction, then you will have hyperinflation. If you have shrinking money supply and
shrinking resource extraction, then you have a delegitamized system and people will quickly replace it with barter or something else. The problem for
the US in particular is that a job is people's only access to money (no govt handouts).