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How can money be both devalued and expensive? (lemmy.ml)

submitted 2 months ago by fractal_flowers@lemmy.ml to c/asklemmy@lemmy.ml

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An acquaintance who works in finance said that the USD was devalued during COVID but hasn't yet experienced much inflation except in household goods because money is still expensive. What does that even mean? How can money be expensive? And how does that differ from being valued/devalued?

I would think "money is expensive" means something along the lines of "there isn't much liquid cash", but I thought the money injected into the economy was liquid cash.

Would someone more into finance/trading than me explain how this is possible? Thanks!

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[–] conciselyverbose@sh.itjust.works 20 points 2 months ago (1 children)

Usually "expensive money" means that it's hard to borrow.

"Devalued" refers to purchasing power. "How much food will $1 buy me?"

They're describing different things. In terms of the economic relationships that result in the current scenario, I'm not even going to try. Ignoring that we don't really know and a lot of traditional economics rely on the assumption that actors are rational (which we now know is absurd), I'm far from an expert in macro-economic theory. Systems are complicated.

[–] fractal_flowers@lemmy.ml 4 points 2 months ago (1 children)

Ah, I see. So being "devalued" is like mixing base metals in your gold coins, while "cheap money" is like loaning out the treasury. Both contribute to inflation, but in different ways.

[–] HobbitFoot@thelemmy.club 1 points 2 months ago

Not quite. Cheap money is more that a loan doesn't cost that much money to pay back. It isn't the treasury loaning out the money, but individual banks judging based on inflation.