When they add massive amounts of dollars to the currency supply, the result is more currency units chasing the same number of goods in the economy, thus forcing prices up.
But won't the manufacturing efficiency increase as well?
Which is why i thought dollar has remained somewhat stable.
Improving technology rapidly and increasing manpower contribute majorly to the economy, so the increased currency circulation doesn't get "too high" for the goods and services being produced in the country
Yes, manufacturing efficiency does increase over time. In a free market (with a free-market currency) everything should get cheaper as time goes on and we get more efficient.
However, that hasn't been the case. We've seen prices increase significantly over time on most goods and services. Take Motel 6, for example. It opened in the early 1960s charging $6 per night. Today, they charge about $50 per night. If the currency were stable, it would still cost around $6/night.
In order to keep kicking the can down the road, they (government/federal reserve) are going to have to create new dollars very rapidly - At a much faster rate than we've seen already.
The prices are increasing.. But so is the purchasing power.. Making it so an average person could afford paying $50 for a night. I understand it's not all cut and dry, but the poverty rates have been constantly declining in almost all countries despite the inflation, which to me, indicates we're doing alright
I agree with you for the most part. Assuming we're talking poverty rates in the US, the statistics I've seen were something like 95% poverty rate in 1800 which steadily declined until it got down to about 15% in the mid 1960s. Since the mid 60s it has stayed right around 15%.
For clarity, the point of this post wasn't what has happened in the past. Instead, it was regarding what is going to happen in the future. I don't think we've seen anything yet relative to what price inflation is going to look like.
Ah i see. Thanks for clarifying.
One can look to other countries where it happened for a perspective..
US isn't turning into Venezuela or Zimbabwe at any point in the future but it does look bleak, considering how more and more youth are unable to pay for colleges, healthcare and buy property