Inflation

Marketplace Whiteboard

: (Marketplace)

Most economists agree that inflation of about 2% or 3% annually is a natural function of a growing economy. But people are worried government stimulus measures could spark much higher inflation. Senior Editor Paddy Hirsch explains

Hostile takeovers

We all know what a takeover is. That's when one company agrees to be bought by another. But what happens when companies don't agree and the takeover goes hostile? Senior Editor Paddy Hirsch explains.

Derivatives

Credit default swaps? They're complicated -- and scary! The receipt you get when you pre-order your Thanksgiving turkey? Not so much. But they have a lot in common: They're both derivatives. Senior Editor Paddy Hirsch explains.

Bonds, notes and bills

So much government debt! But what's the difference between the Treasury's bills, notes and bonds? Senior Editor Paddy Hirsch explains.

Inflation

High-frequency trading

High-frequency trading is creating a ruckus on Wall Street. Marketplace Senior Editor Paddy Hirsch explains what high-frequency trading is and why some people are up in arms about it.

Factoring

Many small businesses get the cash they need to operate and expand from so-called factors. One of the biggest factors in the business is CIT, and with CIT on the ropes, small businesses are worried. Senior Editor Paddy Hirsch explains what factoring is, and how it works.

Comments

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By Chris M

From hollywood, FL, 11/03/2009

not sure if i agree with this one, started out saying when people talk about inflation they are referring to the cpi, but in reality it came back to the money being pumped into the system.

By Bill Camp

10/21/2009

On your video about Inflation.
Nice explanation about "Demand Pull" inflation. Leaves out "Cost Push" inflation. I think we are already seeing this, maybe for a rather indirect reason. People who have saved and have money now realize inflation is coming and want to protect the purchasing power of that money. Realizing they cannot leave it in money (or near money) then look for something scare to buy that they think will track inflation in the future. Gold used to that scarce commodity, but oil is much more effective in today's world -- it actually has a use and therefore, needed. That is people will pay whatever it takes to get it. So, people with money buy oil and oil contracts (another form of paper money since it can be left unfulfilled, but I pass over that) and, voila!, the price of oil goes up. Cost push inflation. Now, here is the part that most people don't get -- let interest rates go up, and the money goes elsewhere instead of chasing a scarce commodity like oil. Now no cost push inflation. More importantly, only businesses that are strong can afford to pay the (higher) interest rates for money and the system grows. What I find so frustrating about this, is that our current path of low interest rates does: a) leads to cost push inflation; b) props up weak businesses that only survive with zero cost money; c) reduces savings and therefore, reduces investment. Sounds like a 100% guaranteed path to failure. McChesney Martin did exacly (I do mean exactly) the same things Bernanke is doing now - we know how that turns out. Why do we do it all over again, but 10 or 100 times larger scale this time? That is where the real story is.
Bill Camp

By Sanoran Triamesh

From WA, 10/11/2009

Inflation: Inflation is computed in a very funny way. If an 8gb MP3 player is replaced, in the market, by a 16gb MP3 player, although the price is the same, is considered deflation. But if Tomatoes become so expensive that people stop buying them, then the old woman's method (some woman in the bureau of labor and statistics?) says that we simply ignore tomatoes now, although people's diet is now worse since they are eating less vegetables. And rent, education costs, and a whole bunch of other things are not counted at all. So, curiously enough, inflation always undersestimates the true increase in costs. But so far no one complains because the industrial goods we produce is in general cheaper, and while we eat more processed food, at least we are getting fat, not starving. That's economics for you :) I guess a math-major would go nuts if he were to try to understand the basis of all these assumptions.

By Greg C

From WWU, WA, 09/23/2009

@ jason wetzel

Paddy is addressing demand-pull inflation, as it's in regards to an increase in the money supply, and is assuming supply to stay fixed at a given level given shorter time frames.

It's easier to raise prices on a good and increase profit / prevent inventory shortage than it is to try and ramp up production. Additionally, it's doubtful he's really going to increase his consumption of cereal all too much and will likely buy other goods with his increased income--assuming other goods have not increased so considerably in price as to make his purchasing power the same or less than prior to his income increasing.

It's worth noting restaurants prices tend respond to cost-push inflation, not demand-pull as individually increasing their price risks losing customers to competitors who cost less but provide a comparable service. I'm reminded of Pho restaurants in the UW area that generally have the same cost per large bowl, 5.75 before the rice crunch 2 years or so ago. Once the rice shortage occurred, all of their prices jumped to around 6.50 and have remained there since.

By Paul Peloquin

From Broollyn, NY, 09/13/2009

William Greider and others have commented that the big banks are insolvent and should be put into receivership. The instead of bailouts and Federal Reserve loans and loan guarantees the insolvent banks should be taken over and the bankers that got us in the problem fired. The credit crunch would be solved by the receivers making loans. Much cheaper for the citizens. How about a White board on receivership?

By Nagesh Rao

From Rochester, MI, 09/11/2009

I am a big fan of Paddy Hirsch's White Board videos. Mr. Hirsch break complex things into layman's terms so that people like me can understand better. Thank you for all your work and I look forward to your next video.

By jason wetzel

From Seattle, WA, 09/11/2009

If Bill has a lot of money to buy Lucky Charms, the cereal company may not raise prices. They may hire more people (since people are now "cheap") and produce more. Afterall, when restaurants are packed, they don't necessarily raise prices, but expand. How does this factor in?
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