tag:blogger.com,1999:blog-53246864840716464.post1991793952811483087..comments2024-02-29T00:46:38.800-08:00Comments on Washingtons Blog: Saut Confirms Mixed-Flation TheoryUnknownnoreply@blogger.comBlogger4125tag:blogger.com,1999:blog-53246864840716464.post-77529669604590260322009-09-11T19:00:35.792-07:002009-09-11T19:00:35.792-07:00To say that inflation is always a monetary phenome...To say that inflation is always a monetary phenomena is an oxymoron (since prices are always expressed through money).<br /><br />If the definition of inflation is rising prices and if we grant that as the supply of something rises relative to its demand, its price decreases, then of course inflation must be equivalent to a relative increase in money supply in relation to its demand. (Lets include velocity in our definition of supply - since supply is a replenishment process).<br /><br />But once defined, you cannot use that definition to explain WHY something happens - that is completely circular reasoning.<br /><br />Also, you cannot explain inflation without an appreciation of debt - its not enough to print money, how it finds its way into circulation (via government, via capital spending, via consumer debt) also influences where and how inflation is experienced.<br /><br />Finally, people experience inflation in different ways - its probably more accurate to define inflation as a rise in price relative to income - this is the only way to account for the demand for money. This also allows for different social groups to experience inflation differently - which results in different behaviors (like the middle class avoiding the stock market while higher income brackets are starting to catch the fever).pebirdnoreply@blogger.comtag:blogger.com,1999:blog-53246864840716464.post-57160085551786951872009-09-11T05:10:32.659-07:002009-09-11T05:10:32.659-07:00I have been saying this for the last year and is n...I have been saying this for the last year and is not a big mystery to those of us in the real world. And now some "expert" weighs in and says the same thing and so it now has legitimacy?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-53246864840716464.post-74039245487648893442009-09-10T15:39:19.706-07:002009-09-10T15:39:19.706-07:00Inflation is always a monetary phenomena that expr...Inflation is always a monetary phenomena that expresses itself in the form of higher prices. Central banks have been printing/pumping money into the world's economies to create inflation because of the massive asset deflation that they are experiencing due to a Credit Bubble burst. Since no one can either lend or borrow, the speculative bubbles in oil and minerals that is developing is really just the people/institutions with all that extra paper money to find a store of value before their paper money is worthless.<br /><br />RBM411Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-53246864840716464.post-53874082270399826512009-09-10T10:59:05.350-07:002009-09-10T10:59:05.350-07:00There are many meanings of "inflation" a...There are many meanings of "inflation" and "deflation." One is monetary, another is price, and another is wage. It is possible to have monetary deflation ( as we are experiencing now due to contraction in money plus credit, with price inflation, as the monetary authority (Fed in US) attempts to reflate to counter deflation. This creation of liquidity flows not where the Fed wants but where there is perception of easy money to be made. As a result we are now experiencing price increases (price inflation) in commodities and basic necessities like health care. At the same time, we are experiencing wage deflation due to business cutting back because of overcapacity in the face of declining demand (consumer purchasing power).<br /><br />In short massive deleveraging is leading to monetary deflation, and declining bargaining power of labor is leading to wage deflation. While some price deflation is taking place through inventory liquidation, there is also price inflation due to speculation in energy, etc. Precious metals are also rising in the face of rising future uncertainty and declining trust in institutions and governments.Anonymousnoreply@blogger.com