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Strategies & Market Trends : Heinz Blasnik- Views You Can Use
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To: yard_man who wrote (2393)6/11/2003 11:09:42 AM
From: GraceZ  Read Replies (2) of 4905
 
No one would argue that it isn't difficult to impossible to judge the degree of monetary inflation by watching a basket or a changing basket of consumer goods but it is the most meaningful measure for individuals because it is in the prices of these goods and services that people experience the effects of inflation. My point is that using the money supply as a measure is deceptive as well. If the money supply grows without a subsequent rise in the general price level then almost no one would refer to that as inflation. What if money supply stays constant, does this mean the price of goods stays constant? What happens if the number of goods falls without a subsequent drop in demand? All supply would have to do is significantly drop below demand to trigger price increases even with a constant money supply. What if as the money supply grows people have a growing tendency to put that money in the bank rather than spend it as we have seen in Japan? This is also happening here as I've tried to point out.

Its difficult to impossible to judge how much the money supply needs to grow by watching the economy because it always has to be done by looking at the past. This is why Milton Frieman suggested a steady 2% growth and getting the Fed out of the job of engineering prosperity with money supply targeting. The long run growth in productivety is around 2%.

So what does Mises say about the difficulty of counting that which constitutes money?
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