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The TRUTH About Inflation - YouTube
Channel: 21MillionTV
[6]
somewhat bizarrely the concept of
[8]
inflation has come to be one of the most
[9]
polarizing topics in the modern world of
[11]
economics
[13]
some people claim that a certain level
[15]
of inflation is good for the economy
[18]
others believe that even low inflation
[19]
is harmful to the economy
[21]
some people say that we have high
[23]
inflation today and some say we have
[25]
little to no inflation today
[27]
to confuse matters further people today
[29]
can't even agree on the correct
[31]
definition of inflation
[34]
the term inflation in a monetary context
[36]
seems to have originated in the mid 19th
[38]
century
[39]
during the american pre-civil war period
[42]
back then and into the 20th century
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inflation was generally defined as an
[46]
increase in the quantity of money
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this increase in the quantity of money
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then naturally led to an increase in
[53]
price levels of goods and services
[56]
therefore according to the original
[57]
definition inflation causes rising
[60]
prices
[61]
however in the mid 20th century some
[63]
economists began to muddy the waters by
[65]
referring to rising prices
[67]
not as an effect of inflation but as
[69]
inflation itself
[72]
in an essay entitled inflation and
[74]
unworkable fiscal policy
[76]
ludwig von mises articulately describe
[79]
the negative consequences of this
[80]
linguistic distortion
[83]
inflation as this term was always used
[85]
everywhere and especially in this
[87]
country
[88]
means increasing the quantity of money
[89]
and bank notes in circulation
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and the quantity of bank deposits
[93]
subject to check
[95]
but people today use the term inflation
[97]
to refer to the phenomenon that is an
[99]
inevitable consequence of inflation
[101]
that is the tendency of all prices and
[103]
wage rates to rise
[105]
the result of this deplorable confusion
[108]
is that there is no term left to signify
[110]
the cause of this rise in prices and
[111]
wages
[112]
there is no longer any word available to
[114]
signify the phenomenon that has been up
[116]
to now
[117]
called inflation as you cannot talk
[119]
about something that has no name
[121]
you cannot fight it
[125]
to avoid confusion from this point on i
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will use monetary inflation to refer to
[129]
the original definition of an
[131]
increase in the supply of money and
[133]
price inflation to refer to the modern
[135]
hijacked definition of an increase in
[137]
price levels
[139]
today in the united states when federal
[141]
reserve or government officials say the
[142]
word inflation
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they are almost always referring to
[145]
price inflation and more specifically
[147]
to cpi consumer price index
[152]
in theory cpi is supposed to measure the
[154]
changes in price of a basket of goods
[157]
in order to provide the public with the
[158]
ability to measure their currency's
[160]
purchasing power over time
[163]
however in practice all cpi provides is
[165]
the ability for the government to
[167]
promote a certain narrative
[168]
usually that price inflation is low that
[171]
their massive spending sprees have no
[173]
consequences
[174]
there are two main flaws with cpi
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the first has to do with the fact that
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cpi is not an objective measure
[183]
the basket of goods tracked by cpi is
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subjectively selected by the bureau of
[187]
labor statistics and is adjusted
[189]
frequently
[191]
some of these adjustments include the
[192]
process of substitution
[194]
which for example assumes that if the
[196]
price of beef rises
[197]
then consumers will simply purchase less
[199]
beef and more chicken
[201]
resulting in smaller cpi growth
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as charlie munger said show me the
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incentives and i'll show you the outcome
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a lower inflation rate justifies more
[211]
government spending programs
[213]
and also reduces state liabilities on
[215]
cpi-adjusted obligations
[217]
such as social security payments and
[220]
inflation-protected treasuries
[223]
with the government having such strong
[224]
incentives to keep cpi low
[226]
while at the same time having complete
[228]
control over the inputs of cpi
[230]
how can we trust cpi to be an objective
[232]
measure
[234]
the second flaw of cpi is more
[235]
fundamental in nature
[238]
the idea that a single static metric is
[240]
able to communicate the level of price
[242]
inflation across the entire economy is
[244]
simply nonsensical
[246]
as michael saylor likes to say inflation
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is a vector
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the level of price inflation experienced
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by a person is completely subjective and
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dependent on that person's lifestyle
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for a teenager who lives with his
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parents eats fast food and plays video
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games all day
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price inflation has been extremely low
[264]
over the past decade
[266]
but for a man looking to purchase a home
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send his kids to college
[270]
and retire in the near future price
[272]
inflation has been extremely high over
[274]
the past decade
[276]
there are two factors that combine to
[278]
cause this dichotomy
[279]
central bank monetary inflation and
[282]
technological price deflation
[285]
central bank monetary inflation refers
[287]
to the phenomenon most commonly called
[289]
printing money in reality
[292]
the united states money supply is not
[294]
expanded by revving up the printing
[295]
presses
[296]
but by adding a few digits on a computer
[298]
screen
[299]
listen to former fed chairman ben
[301]
bernanke explain this phenomenon in his
[303]
own words
[305]
so to lend to a bank we simply use the
[308]
computer to markup the
[309]
size of the account that they have with
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the fed so it's much more akin
[314]
although not exactly the same but it's
[315]
much more akin to printing money than it
[316]
is to borrowing
[319]
the fed has the ability to inject
[320]
trillions of dollars into the economy
[322]
with the click of a button
[324]
as it has worked since the beginning of
[326]
civilization when more money circulates
[328]
prices move higher technological price
[332]
deflation refers to the idea that growth
[334]
and technology
[335]
naturally improves efficiency and lowers
[337]
costs
[339]
this is the reason that items at the
[340]
heart of technological innovation such
[342]
as tvs
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smartphones and video games have
[345]
seemingly been immune to the price
[347]
inflation
[348]
experienced by most other areas of the
[350]
economy
[352]
while premium brands such as apple use
[354]
their brand loyalty to justify huge
[356]
markups
[357]
the technology itself is becoming more
[359]
affordable every year
[361]
this massive decrease in prices among
[363]
tech products is a natural consequence
[365]
of the exponential growth at the heart
[367]
of our current digital age
[369]
these two forces simultaneously act
[372]
against each other creating the illusion
[373]
of low price inflation
[375]
in reality prices would be far higher if
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it wasn't for rapidly improving
[379]
technology
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and conversely prices would be far lower
[383]
if it wasn't for a rapidly increasing
[385]
money supply
[387]
most people have it ingrained in their
[389]
minds that prices just naturally go up
[391]
as if it was ordained by god this is
[394]
completely false
[396]
prices have a natural tendency to go
[398]
down as each year our additional
[400]
knowledge allows us to build more
[401]
efficient systems
[404]
i highly recommend checking out the
[405]
price of tomorrow by jeff booth
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to begin to deprogram your mind from
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this fallacy
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central bank monetary inflation is
[414]
causing us to continually work harder
[415]
and harder just to stay in the same
[417]
place
[419]
meanwhile human ingenuity and
[421]
technological innovation are working in
[423]
the opposite direction to lower the cost
[425]
of abundance and prosperity
[427]
in order to fully enjoy the benefits
[429]
offered to us by technology
[430]
we must embrace falling prices rather
[432]
than demonizing them
[435]
modern american universities make price
[437]
deflation out to be a dangerous
[438]
phenomenon to be avoided at all costs
[442]
the reasons for this are less important
[443]
than the consequences
[445]
rising prices are not only seen as
[447]
natural but also as a positive for the
[449]
economy
[451]
price deflation has gifted nearly every
[452]
american household the opportunity to
[454]
own a smartphone and flat screen tv
[457]
just 20 years ago this level of
[458]
widespread abundance would have been
[460]
unthinkable
[462]
now imagine if this abundance could be
[464]
spread to other areas of the marketplace
[466]
the only thing holding us back is the
[468]
evil of currency debasement
[470]
the solution is to opt out of a broken
[472]
system beyond repair
[474]
and opt into a system which cannot be
[476]
manipulated by human emotion
[478]
or greed a system built to embrace
[480]
falling prices rather than offsetting
[482]
them
[483]
a system known as bitcoin
[497]
you
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