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Robert: Not so sure we have to agree with Mr. Greenspan. Using your example of P&G; if they raise prices this is not inflationary...rising prices are not inflationary. Rising prices are the consequence of prior inflation. And inflation comes from one place: government, which introduces globs and globs of "new" money into the economic stream. The key indicator nobody seems to be watching is money-supple growth. Say you're playing Monopoly one rainy Saturday with 5 of your friends. Everybody has $10,000 at the start of the game. There are 50 "properties" on the board. With $50,000 available and 50 properties the "average" price that can be paid per property is $1,000 ($50,000/50). Sure, some properties will go for more, some for less...but the general level of prices will be $1,000/property. Now if one of your friends shows up at the game with another $30,000 in monopoly money (culled from his game at home) tucked surreptitiously into his pocket, he can, by introducing this $30,000 into the game, lift the general level of prices...that is, he can cause inflation. And rising prices for properties on the board are the consequence, the result, of his inflation of the money-supply. (Lee) |
