what does inflation meam?
480090
It is "too many dollars chasing too few goods".  Prices go up, but the value of the currency drops.  The purchasing power of the dollar declines.
716189
Technically, money supply is not inflation - but it is empirically associated with inflation.  \n\nInflation is typically taken from a consumer price index from a fixed basket of goods and services. While UK M1 rose 14.5% on broad measures for September 2006 (but only 5.1% on narrower measures), consumer prices rose 2.4% in October '06 (vs. 2.3% last year).  \n\n\n\nYou are right to point out that the market is awash in liquidity. Money comes from numerous sources - at its basic core bills, coins, checking and savings.  But the broader money supply (which is the one that matters) includes many other supplies - like the capital markets. \n\nWhere is all this cash coming from?  \n\nFirst and foremost, it is coming from loose monetary policy, residual from low interst rate environment post-9/11.  As interest rates went to 40-year lows in the US, Japan and Europe, borrowing costs got so cheap as to be extremely cheap.  This trigger asset reflation in real estate and commodities. Indirectly, it also help spur corporate earnings growth (double digit in the US, whereupon 7% is more like the average growth).  The asset reflation also gave consumer a base to start borrowing from, dipping into equity saved up in their houses. \n\nSecondly, the typical brake on liquidity - government bonds - has not been working.  Typically, centralized banks and treasuries issues more paper in order to soak up excess liquidity in the system.  For example, the US had to issue lots of new debt in 2005 to cover the costs of post-9/11 security and the two wars.  However, large trade imbalances have lead Asian and Gulf countries to purchase large amounts of these issues to 1) stabilize interest rates in countries with fixed or quasi-fixed currency regimes (e.g. China) or keep interest rates stable in those markets with floating currencies.   \n\nSo money supply has surged but without the surge in wages (revenue-side inflation) or prices (cost-side inflation).  How?  Basically, we are seeing a tsunami of capital formation - not at the consumer level - but at the corporate, government and asset level.  We are already seeing the side-effects of this capital formation through the emergence of private-equities, rise of hedge funds and record pace of corporate earnings. \n\nWhile we b*tch and moan about inflation at 3-4%, clearly we have short memories.  Woe were the days back in the 80s when itnerest rates were in the twenties or the seventies when we had to wait in line for gasoline and prices went up so fast that they didn't bother posting the price.  \n\nEverything is relative.  It hurts pretty bad going from a very long period of almost no inflation to "normal" inflation.\n\nBy the way... the US still publishes its M1 and M2, but discontinued M3.
102289
This site rocks!  http://www.westegg.com/inflation/
823137
It's a way to gauge interest rates, but a poor way to gauge personnel inflation.  If you love cheese and movies and have serious health care problems, your personnel inflation rate will probably be several times higher than the CPI.  I was watching one show where this guy's personnel inflation rate jumped 1,500% from the previous year just because of what he bought.
107390
7% ARE YOU KIDDING ME?\n\nInflation makes everything go down in value compared to the money you have today. My $100 today buys me 100 shmounces (I made up a new unit to make the math easy) of gold. In one year with 3% inflation it will take $103 to buy those same 100 schmounces of gold.\n\nIf you are borrowing the money then the cost is 4% and you get the benefit of not losing the 3% that you would have lost if you waited, so 4%-3%= 1% nominal. You pay the 4% in interest rates and the 3% in the amount it didn't go down in value because you got to enjoy the fruits right now.\n\nIf you are saving the money then it is 4%-3%=1%. You are paid the 4% interest rate which buys you 3% less when you do spend it.\n\nAs you can see inflation helps you in one case and hurts you in the other but the nominal rate is still the same. Weird huh?\n\nIts all about the math.
65836
A substantial increase in inflation will diminish the purchasing power of money.  Say you kept $100 under your bed.  If the inflation rate jumped up to 10% (high), then your $100 can't buy $100 of stuff anymore.  Something that cost $100 last year would cost $110 now.  In essence, you lost 10% of your purchasing power.
472815
It is product of the conservative party's policy's, they have implimented supply side economics which is always wrong which leads to inflation and then depression, or recession. If you have a pile of boxes on the floor and you want to move them if you go over and pick up the top box all that you move is the top box. If you pick up the bottom box all the boxes move including the top. Repuglicans always choose to move just the top box.
199954
An inflationary gap means that demand has outstripped supply. This typically leads to inflation of prices because there is less supply to meet the demand, if the demand curve for the product in question is inelastic, prices will rise because the supply curve will have shifted to intersetct the demand curve at a higher price point.\n\nOr more simply put, people will be willing to pay more for the product because it's not as easy to come by.
492698
First the term "Inflation" is generally the difference expressed as a percentage of the increase in value of everything except the currency of a country. The reverse to this it takes more money to buy anything.\n\nThe reason that governments go to lengths to reduce the rate of inflation of a country to as low as possible is that should inflation increase then an economic spiral starts with the population buying less then industry must respond by shedding jobs and investing less. This in turn affects investors and they reduce there exposure by selling their investments then if unchecked inflation rises, the spiral goes around again and again.\n\nThis spiral starts by producing what is called a recession and then as inflation increases you enter an economic depression which puts stress,poverty and starvation on the population and the weakest are the most affected.\n\nWhen inflation is run away or "rampant" either a turn around by extremely conservative measures and years of recovery or an injection of funds by neighboring states to bring the value of the currency back to the value of everything else in the country at the cost of massive debt.\n\nGetting back to high inflation, if left for too long becomes what is called hyperinflation then strange things like you wait half a day in a line to just get a cabbage or need a wheelbarrow of money just to buy a loaf of bread and all of a sudden a new currency printed to manage the old. This aggravates the general population so much and generally leads to someone getting the blame (government), then civil instability followed by violence and revolt.
629550
Its hard to tell for now because its still 2006, but at the end of the year you can use this link to calculate inflation.\n\nhttp://www.westegg.com/inflation/
509492
Inflation is not "decided", it is measured by the Department of Labor (consumer Price Index)
1186988
No, not entirely.  However, a gold standard would eliminate a lot of the incentive to create the types of inflation we've seen in recent history.\n\nInflation comes when the money supply is expanded while the supply of goods and services holds constant.  You end up with more money chasing the same amount of goods, so prices expand upward.  That's the side of inflation we see.\n\nIn a fiat money economy like we have now, the government or the central bank can expand the money supply at will, and inflation can develop.  Since the government benefits from effectively printing up more money, there's a lot of incentive to inflate and disrupt people's lives.\n\nOn the other hand, a gold-standard economy leaves far less room for government or central bank manipulation, and therefore inflation would seem less likely.  On the other hand, there were cases of inflation during times like the California Gold Rush, when lots of new gold came onto the market.  On balance, however, I'm still inclined to think that the gold standard would be more dependable than putting my faith in government bureaucrats to stabilize my money.
74344
They are deflationary to combat inflation
1145664
market forces do play a part in the rates set by the fed.  the main concern of the fed is to balance inflation and growth of the economy.  If growth is too high and inflation rates spike, then higher rates cool things down.  It's a fine balancing act.
172919
v = value of money in a future year, multiple of current value\ni = annual rate of inflation, decimal fraction\ny = elapsed time, years\n\nv = (1 + i)^y\nlog(v) = y * log(1 + i)\ny = log(v) / log(1 + i)\n\nPrice will be doubled when the value of money is 0.5, so substitute 0.5 for v.\n\nThe annual inflation in the US has averaged about 0.0425 in the last 20 years or so.
221216
I don't know who told you that, but typically, what you could buy last year cost less than what you would pay for it today. This means that last years dollars were actually worth more. That's what inflation is all about.
504383
Decreasing interest rates can actually spur inflation rather than curb it. That is why the Fed keeps raising interest rates.