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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: chainik who wrote (50615)1/21/2006 12:57:51 PM
From: mishedlo  Read Replies (2) of 110194
 
From the link you provided:

en.wikipedia.org

In some contexts the word "inflation" is used to mean an increase in the money supply, which is seen as a cause of price increases. Some economists (of the Austrian school) still prefer this meaning of the term, rather than to mean the price increases themselves.

Now whether or not one agrees with that usage it should have been clear to everyone that all my discussion has been based on that context.

The definition I provided is probably the standard construct even though the cart is before the horse.
dictionary.reference.com

A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services.

At any rate I hope it is clear that I am not a nutcase as GST implied when he mocked my definition. Furthermore it should have been 100% clear to ANYONE here that the context from which I was speaking was one of these contexts: In some contexts the word "inflation" is used to mean an increase in the money supply, which is seen as a cause of price increases.

The reason the Austrian definition is preferable is simply because prices of goods can rise or fall for dozens of reasons but the problem comes about when it is specifically because of loose credit and rampant increases in money supply. It is in fact impossible to target prices as the FED has no control over where the money goes. The FED should have had their foot heavily on the brakes in the late 1990's but failed to do so because prices were not rising that fast. That masked TRUE inflation (money supply). Instead of rapidly rising prices, money went into stocks. Which I repeat is why targeting prices is a fools game.

Mish
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