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Originally Posted by !@#$%!
still at work, so let me summarize quickly what i've grasped/deduced and ask you some questions
-because money is not a commodity but just a means of exchange, economic supply and demand are the only thing that matters--yes? these can be regulated by the government via money supply.
-inflation happens due to a loss of productivity plus other factors when supply cannot meet demand--yes?
-therefore recession/depression happens when demand drops?
and if the aboves are yeses: how is it that stagflation happens?
thanks in advance. if harassed elsewhere please ignore.
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i edited a bit to clarify
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To give my best/simplest explanation, stagflation was the meeting of multiple forces... the OPEC oil shock providing real resource constraints on business, and wage demands due to labor power of the era. Oversimplifying here, but MMT says that inflation will occur when the real resources of the economy become fully employed/utilised. After this, the 'bids' made for these scarce resources increase, as well as firms raising their costs in order to remain profitable with the fewer available resources.
There is a lot more detail to the stagflation question and it is a pressure point which divides the traditional Keynesians from the MMT and other heterodox economists.
The main point is the particular historical contingency of the 70s oil shocks, which have sadly been used to extract generalizing principles