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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: mishedlo who wrote (50618)1/21/2006 2:06:31 PM
From: gpowell  Read Replies (1) of 110194
 
Had you been able to answer this simple question, I don’t think you would be so quick to characterize increases in the money supply as inflation, or necessarily inflationary (if using the standard definition of inflation). Message 22043061

Given that the price level is the intersection of money supply and money demand. It must be a measure of how thoroughly the monetarist position has influenced monetary thought that everyone, including those that would label themselves Austrian, assumes that monetary demand is constant and therefore the price level is completely determined by the supply of money. It may have escaped your attention the one of the characteristics of a hyperinflation is a falling demand for money, such that money supply measures may actually shrink even as prices "hyper" inflate. Hyperinflation = delta P > 50% per month.

Once monetary demand, especially foreign demand for dollars, is accounted, for monetary reserves have not risen much since 1986. Further, given a presumed greater elasticity of demand with respect to inflation, the increase of foreign holdings of dollars helps to constrain and discipline the FED with respect to reserve creation.
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