Video: Understanding the Effects of Inflation on the Money Supply

by: Prieur du Plessis

This video, courtesy of ziocody, explains the basic effects of inflation of the money supply.

Please follow the text below the clip in order to identify the commentators.

NATS – Money Counting

A solution being offered now to get the economy back on track was to dramatically increase the money supply

0:10 Tim Shaughnessy – Professor of Economics – Louisiana State University

So we had the T.A.R.P. bailouts, bailouts of the financial organizations and the car companies. All of this was done through printing of money

NATS – Money Printing

By printing more money means that eventually there’s going to be more dollars out there chasing the arguably the same amount of goods which that’s the definition.

0:28 Chris Combs – Professor of Economics – Louisiana State University

Of inflation right. When you have more money chasing the same amount of goods all it’s going to do is raise the price of goods.

Which provides dollars to these organizations that need it but what does it do to the value of the dollars that are already in exsistance? Well it’s going to drive the value of our dollars down.

We’re looking at the big picture, and we are saying ok, we can fix the short term problem maybe. Depends on what camp you come out of whether it will work or not. But even if it does work, and it might not work, but even if it does, the problem is inflation tomorrow.

NATS – Shopping

1:03 Cody Jennings – Videographer

On the one hand you have buyers increasing their demand for goods. They say to themselves, you know this good is going to be a lot more expensive.

1:15 Joe Salerno – Professor of Economics – Lugwig Von Mises Institute

Three months down the road, or even a few weeks down the road. That’s how fast prices are increasing. And therefore I’m going to buy it today. But if everybody starts to think that way that will drive prices up even faster and cause greater inflation and it becomes a vicious cycle. At that point you get a breakdown in the economy.

NATS – Printing Reciept

1:37 Dr. Loren Scott – Professor of Economics – Louisiana State University Baton Rouge

I think this is a function of the fact that suddenly the government is running, not just deficits, but enormus deficits. People were very worried the deficits increasing under George Bush and they said my gosh. Look at these defecits under George Bush. I mean the 1st year defecit under Obama is just straight through the floor. And if by any stupid decision they decide to put another stimulus package in, it will really be through the floor.

NATS – Inflating the Dollar Baloon

The dollar keeps being inflated

NATS – Inflating the Dollar Balloon

We are running these huge budget deficits that we try to pay off through increasing the money supply

NATS – Inflating the Dollar Baloon

And so people are seeing that fiscal policy, monetary policy doesn’t seem to be very well under control in the U.S. so the attractiveness of the dollar falls because of it


We’ve continued on a path of false prosperity thinking that we can bring about prosperity by creating money and having artificially low interest rates. The true path that we want to get back to is a prosperity based on the resources that we do have and the voluntary savings and credit we are capable of generating in a free market economy

Source: ziocody, YouTube, November 16, 2010.