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Pastimes : How to best deal with KOOKS at this web site
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To: Gottfried who wrote (1153)8/21/1997 3:49:00 AM
From: Bill Ulrich   of 1894
 
GM, not surprising that you would be puzzled --
most economists can't agree upon it themselves.

The 'Classical' school of econ (as opposed to the
Keynesian) believes inflation results from too many
dollars chasing too few products.

The IBD scenario:

"When a central bank creates money at a faster pace than
the economy is growing, that's inflation"

describes demand-pull inflation -- theoretically, consumers
have more money (and more desire to purchase) than the economy
has products to offer, thus prices increase to meet the
equilibrium point set by demand. My earlier post describes
cost-push inflation.

Keynesians would prefer to say inflation is not a purely
monetary phenomenon because the effects of fiscal policy can
negate monetary measures. Tax increases, a fiscal measure, can
dry up a money supply increase pretty easily in addition to
adding a 'cost-push' to inflation.

Your simple question of 'what causes inflation' is actually
a pretty complex cocktail, particularly when one debates printing
more money vs. decreasing rates as a measure to increasing
the money supply. Then add another fiscal policy, government
spending, shake well and stir...

That's why I like the simple stuff -- like JavaScript. ;-)

-MrB
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