Why is there inflation?


Our friends from Seis por Derecho give us the lowdown. In Spanish.

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  1. I don’t know if it’s just me today (maybe a raton) but listening to that guy is just pure annoying.
    Talks way too fast.
    May have a valid message but my head was spinning after the first 30 seconds or so.

    • It was pretty fast, but the message is so simple that I was able to follow it. Anyway, the target audience is much younger than us, and was raised on music videos that are even faster than that video.

    • agree with you. Evidently our comments last time fell on deaf (obtuse) ears. I’ll just avoid the rest of this video and these offerings by Juan, in future. #annoyingashell #faltadecriterio

      • Uh, why don’t you comment that to the video makers in their youtube channel then?
        As long as I know, Mr. Juan is just bringing them here, he doesn’t make the videos o_o

        • Done. Thanks for the suggestion. I had assumed that this group were panas of Juan and would visit this site to see their work published on another channel, as well as to read the comments pro and con. I mentioned the speed of the voice, hoping that the comment be taken as constructive criticism, and assuming that the slower voiceover will also correct the annoying pitch of the vocecita.

  2. “¡Es el imperio! ¡Es mentira! ¡Es el imperio!” xDDD

    Well, on a more serious note, there are a few conclusions I can draw from the brief explanation in the video:

    “With more money and the same amount of available products and services, people will pay more for the product or service.” -> Money loses its value as a means of exchange, as the people with more money are competing for the scarce product or service.

    “With more products and services offered, the supply can cover the demand and the surplus can be exported.” -> The amount of offer directly affects the retail price, as a healthy competition would keep the prices in reasonable margins, this time, competing for the customer’s money.

    • Too often the presence of several ‘competitors’ doesnt result in any advantage to the consumer because those competitors implicitly agree to enforce a certain set of pricing conditions which ordinary consumers find difficult to escape and which handsomely profits all of the former This was the case in Venezuela in many markets . The only way of breaking this practice of local ‘competitors’ was for the government to allow the import of goods from other places where costs and prices were lower, but then if the latter were more productive and competitive than the local competitors the latter might find themselves out of business. The idea that competition is always healthy and automatically benefits the consumer is too often a pipe dream . Its too easy for competitors to organize the terms of their competition so that the big loser is always the ordinary consumer. This is particularly true of small markets. Also problematic is the assimmetry in the information handled by the participants in any complex market.

      • You said it, in small markets, not in every market.

        Undercutting prices to take clients off the competition difficults the existence of oligopolies (What you mentioned of a handful of competitors “agreeing to screw the consumer”)

        When I’m interested in selling my product or service I’m not interested in having the next door guy taking my customers away, the notion that “competitors agree to fuck the customer” is one that rises in the middle of a distorted economy like Venezuela’s, with enough supply options, you can’t possibly make them all agree in “enforcing consumer-screwing price conditions” without a written agreement, and there’ll always some of those who’ll break said “implicit agreements” to take more customers from the others.

        I can give you an example which dates from two and half years ago in the computer parts market, you could check mercadolibre for prices, and you would have found lots of sellers who were undercutting others in order to sell their products at ridiculously low profit margins (I often sold stuff at 12 – 15% of total gain and made some decent money from it) because prices to replenish merchandise were either steady (There were dollars to import, regardless of their price) or even sometimes went down. That is a luxury you can’t afford now, as replacement prices tend to spike in a 20-30% monthly rate for this stuff, product of an external cause such as dollar prices and scarcity to import.

        • The point which deserves consideration is that the hale and hearty competition which people refer to as if if were an automatic and universal feature of all markets is often not the case . In quite a few cases players in a market are happy sharing a market on conditions which basically sattisfies all of them but in which the consumer comes out a loser . Thats not to say that there is always an express collusion to defraud the customer just a tacit comfort in applying certain trade practices which all competitors happen to favour . The dog eat dog image of market economies very often does not reflect market realities. Ive worked for companies which when letting out a contracts on a competitive bid basis discovered that the bidders would rig their bids so that theyall took turns winning each contract . Or cases where you tried to enter a market offering what you knew was the best price but a competitor would get favoured treatment for reasons that where not entirely commercial ( old buddy systems,) . There are all sort of conditions which warp and distort competion in endless ways and in which the customer or buyer comes out badly. Recently I read about a passenger complaining about how seating spaces in almost all US airlines was becoming so niggardly uncomfortable and how that played into the practice of those airlines of charging extra if you wanted a more comfortable seat.

          The above is not to condem the competitive market system which whatever its periodic shortcomming is certainly the most economically rational and efficient of all systems but to point out that there is no such thing as an autoamatically perfect system , that in every system there are abuses and inefficiencies which require some effort of correction or control . That all human endevours are ultimately problematic ,

          More generally one basic principle of human behaviour is that if one person finds himself in the posisibility of abusing another for his own benefit there will be many instances where they will succumb to the temptation .!! Market behaviour is no exception .

  3. I wonder what they would make of that video in Japan? Print lots of money and no inflation. Maybe in the Japanese video, there are Juan, Pedro, Ana, and 7 others,and between M1 and M2 and M3 a couple of them are dying? Hence deflation? Any thougths

    • The model in the video is the simplified model that explain the root of inflation in a simple way. Which is not “there is too much money” but “there is too little production for too much demand”.

      The reality of a country can be much different, starting with the simple fact that the root situation can be altered in so many ways (production can be up or down, imports can alter the available stuff, people can get more money, there may be more people…) and then going for all the complications of a real economy with more stuff than mangoes. Japan, the US, (and Europe) are in a “deflationary trap” in which it doesnt matter a lot how much money you inject, because people are not consuming and lending as much as they could (due to small things like being already up to their eyeballs in debt, etc..) In those conditions, the extra money does what you want – it stimulates spending which helps kick out the deflation by having more demand, thus avoiding the less demand – less jobs – less demands vicious circle, but it has a very big opposite effect to fight (banks not lending because they are afraid and already in debt, people not consuming because they are afraid, already in debt, or not working)

      Understanding the fundamentals is important. But mistaking the fundamentals for the whole picture is a mistake. You may have heard the joke about spherical cows…

  4. The message is fine, but the voice is annoying and the speed much more so.
    The guy also says “hubiesen” for “there were” a couple of times.
    It is “hubiese”, just like we say “hay 2” and not “hain 2”.

  5. Inflation affects the economy (people´s lives) because all prices are not indexed to the daily consumer price index. Index all prices daily and there will still be inflation but no effect of inflation.

  6. Everything has a price: a salary, a wage, capital, interest, a tax, rent, money, a debt, a loan and every other item expressed in terms of money.


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