Fisher's Effect and Multilpliers effect (Money Supply)?
Part 1.
Creation of money or money supply results in higher inflation.
Most the money is created through multiplier's effect that involves the creation of debt (ref: fractional reserve banking). Does that not mean the more debt lend by Washington and London based international financial instituitons, the higher should the inflation be?
Part 2
What influence has higher degree of lending on the inflation rates in a country spcially during a consumer boom?
Answers:
It depends on what you mean by inflation: Do you mean currency inflation or price inflation? By definition, adding to the money supply results in currency inflation; they are one and the same. Price inflation should theoretically only occur if currency inflation/increase in money supply is greater than the increase in GDP. A higher degree in lending during a consumer boom tends to increase or enhance price inflation, if there is not necessarily a corresponding increase in GDP.
Part 1: I am not an economist, but the way I see it is this: Yes it is true that the more debt lent by Washington and London the higher the inflation. But this extra money will only be lent if there are people who wish to borrow it. And this will only be the case if those people and those around them have confidence in the economy such that they have the confidence to invest in new ventures etc.
So inflation results from high confidence by people.
Part 2: I think, but I am not certain, that higher lending will indeed increase inflation.
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Creation of money or money supply results in higher inflation.
Most the money is created through multiplier's effect that involves the creation of debt (ref: fractional reserve banking). Does that not mean the more debt lend by Washington and London based international financial instituitons, the higher should the inflation be?
Part 2
What influence has higher degree of lending on the inflation rates in a country spcially during a consumer boom?
Answers:
It depends on what you mean by inflation: Do you mean currency inflation or price inflation? By definition, adding to the money supply results in currency inflation; they are one and the same. Price inflation should theoretically only occur if currency inflation/increase in money supply is greater than the increase in GDP. A higher degree in lending during a consumer boom tends to increase or enhance price inflation, if there is not necessarily a corresponding increase in GDP.
Part 1: I am not an economist, but the way I see it is this: Yes it is true that the more debt lent by Washington and London the higher the inflation. But this extra money will only be lent if there are people who wish to borrow it. And this will only be the case if those people and those around them have confidence in the economy such that they have the confidence to invest in new ventures etc.
So inflation results from high confidence by people.
Part 2: I think, but I am not certain, that higher lending will indeed increase inflation.
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