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Strategies & Market Trends : Heinz Blasnik- Views You Can Use
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To: zonder who wrote (1559)5/20/2003 5:58:52 AM
From: gpowell  Read Replies (1) of 4905
 
How about acknowledging that inflation is indeed "price increases" since that is how it is calculated?

Pardon the interruption, but you are being very loose with your terminology.

Inflation is defined as a persistent rise in the general level of prices. If the money supply doubled tomorrow and all prices adjusted that would not be defined as inflation.

Here's an example for you: Assuming the hypothetical case of general (and high) price increases in every sector DESPITE contracting money supply, would we have inflation or not?

Not necessarily. The rise in prices could have been caused by a permanent productivity shock combined with inflexible wages. After equilibrium was reached, prices would stabilize commensurate with the new marginal product of labor.

FYI, definition of Price changes:

"observed short-run changes in a price index (sometimes called ‘measured inflation’).Price-index changes are caused by many other influences than only ‘true’ inflation. For example, because many indexes are constructed with fixed weights, even relative price movements show up as changes in price indexes. Also, not every change in the price index is permanent, or the result of a change in the underlying trend growth rate of prices."
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