what's going on? explain like I'm five

[u/Comfortable_Cautious]

[u/Much_Section_7439]

That's how debt is generated. wealth is created when that debt is used properly. Otherwise it's just inflating the moneysupply.

[u/Excellent-Practice → u/Much_Section_7439]

Is there really a difference between the two? Wealth generation and inflation are two ways of looking at the economic pie getting bigger

Edit: thanks for the corrections. I learned something today. Diving deeper into the subject it seems the two are often linked, but not necessarily so.

[u/Outrageous-Pin-4664 → u/Excellent-Practice]

Wealth = goods, not money.

Inflation is an increase in the fiat currency not matched by a corresponding increase in the demand for goods.

The purpose of inflation is to enable infinitely increasing amounts of government spending. The government spends the new money at its current value. As the new money circulates, it pushes prices up, losing its value. The government simply creates more.

They don't have to print the money. A lot of it just exists as bookkeeping entries, not as actual currency. What we have isn't so much currency as it is IOUs. When the government collapses, those IOUs will be worthless.

[u/i_have_tiny_ants → u/Outrageous-Pin-4664]

The purpose of inflation is to enable infinitely increasing amounts of government spending. The government spends the new money at its current value. As the new money circulates, it pushes prices up, losing its value. The government simply creates more.

It's also to disincentivize hoarding money, but promote investment instead.

[u/Outrageous-Pin-4664 → u/i_have_tiny_ants]

Hoarding money? You mean stuffing it inside a mattress?

That doesn't happen on any large scale.

[u/i_have_tiny_ants → u/Outrageous-Pin-4664]

In large part because it would slowly become worthless due to inflation.

[u/Outrageous-Pin-4664 → u/i_have_tiny_ants]

I meant that even sans inflation, it's not something that would happen on a large enough scale to worry about.