Good illustrative answer, but some points are way oversimplified. Two main points you touched:
Pricing. How goods are priced is a very complex subject. Your trillion rice vs trillion dollars kinda works but really isn’t doing it justice. Like, who produce the rice? If there is a singular rice producer making all the rice, then it doesn’t make sense to price the rice any value. Because even if you pay them, there’s no way to spend that money - there’s just nothing else to buy. If that trillion kg of rice is produced by us each individually, and we each have enough rice for ourselves (i.e. we don’t have desire for anymore rice), then rice would the priced at 0 no matter how much money there is. because there is no demand for it. Another scenario, I have 50 apples, and you have 50 kg of rice, let’s say I have $50, and that’s all the money in the system (fancy jargon: M0 = $50). I pay you $50 for your rice, and you pay me $50 for my apples, and we think that’s a fair trade. Would that mean each kg of rice is 1/50 of all goods? And we can keep going, I can have trillion apples, and you can have trillion kg of rice. We will still be able to exchange all of them with a single $50 bill, it’s just going to take tons of transactions.
Basically, price is determined by supply and demand (caveats apply), and how money supply plays into that is complicated and way above my pay grade. I just want to note that price increases aren’t always caused by more money, it could also mean an increase of demand, or a decrease in supply.
Is inflation good? You mentioned people might hoard money to drive up value, but that’s not the only thing. First of all, inflation drives people to spend money (or at least that’s what’s commonly believed anyway), because you’d want to spend money today if it’s going to worth less tomorrow. This drives demand, and if there’s more demand people try to create more supply to meet it, thus the economy grows (I have to emphasis this is an extreme oversimplification). Secondly, even if there is no hoarding, as the productivity of the society grows, money inherently becomes more valuable - no hoarding needed. So you need to create more money to keep price stable anyway.
Also, when people talk about printing money, I feel they mostly are thinking about like printing more physical money? That’s just not the case these days. In fact, most of the money in circulation nowadays isn’t even physical. The primary way central bank creates money is by creating debt. Say I have the only $50 bill, and I wasn’t planning to spend it. So I lend it to you, now you have a $50 bill, and I am entitled to get that $50 back in the future. Now the money supply doubles, without printing anymore physical money. When the central bank and the government do it, it’s called Quantitative easing.
Good illustrative answer, but some points are way oversimplified. Two main points you touched:
Pricing. How goods are priced is a very complex subject. Your trillion rice vs trillion dollars kinda works but really isn’t doing it justice. Like, who produce the rice? If there is a singular rice producer making all the rice, then it doesn’t make sense to price the rice any value. Because even if you pay them, there’s no way to spend that money - there’s just nothing else to buy. If that trillion kg of rice is produced by us each individually, and we each have enough rice for ourselves (i.e. we don’t have desire for anymore rice), then rice would the priced at 0 no matter how much money there is. because there is no demand for it. Another scenario, I have 50 apples, and you have 50 kg of rice, let’s say I have $50, and that’s all the money in the system (fancy jargon: M0 = $50). I pay you $50 for your rice, and you pay me $50 for my apples, and we think that’s a fair trade. Would that mean each kg of rice is 1/50 of all goods? And we can keep going, I can have trillion apples, and you can have trillion kg of rice. We will still be able to exchange all of them with a single $50 bill, it’s just going to take tons of transactions.
Basically, price is determined by supply and demand (caveats apply), and how money supply plays into that is complicated and way above my pay grade. I just want to note that price increases aren’t always caused by more money, it could also mean an increase of demand, or a decrease in supply.
Is inflation good? You mentioned people might hoard money to drive up value, but that’s not the only thing. First of all, inflation drives people to spend money (or at least that’s what’s commonly believed anyway), because you’d want to spend money today if it’s going to worth less tomorrow. This drives demand, and if there’s more demand people try to create more supply to meet it, thus the economy grows (I have to emphasis this is an extreme oversimplification). Secondly, even if there is no hoarding, as the productivity of the society grows, money inherently becomes more valuable - no hoarding needed. So you need to create more money to keep price stable anyway.
Also, when people talk about printing money, I feel they mostly are thinking about like printing more physical money? That’s just not the case these days. In fact, most of the money in circulation nowadays isn’t even physical. The primary way central bank creates money is by creating debt. Say I have the only $50 bill, and I wasn’t planning to spend it. So I lend it to you, now you have a $50 bill, and I am entitled to get that $50 back in the future. Now the money supply doubles, without printing anymore physical money. When the central bank and the government do it, it’s called Quantitative easing.