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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: GST who wrote (51385)	1/25/2006 4:12:31 PM
From: mishedlo	Read Replies (2) of 110194

Once again you badly mistake my position. Horribly so. "The Austrian economists claim that the only cause of inflation is the increase of the money supply relative to the output of the economy.1 These economists outright reject the theories behind cost push inflation, wage push inflation and other common theories of inflation. From their perspective, the correct policy is not based on the total quantity of money, but to set a particular quality of money, a relationship between the MZM, that is "Money to Zero Maturity" and the growth of the economy. Because controlling the available immediately spendable currency is crucial to price stability in this view, economists who subscribe to this idea often advocate the return to a gold standard." I have no use for MZM nor does Shostak I do not think Kasriel uses it for anything either. It is a heavily flawed measure of money. Wages will indeed push prices and I have said so many times. Furthermore I have repeatedly said that rapid expansion of wages and jobs would put a kabosh (at least temporarily) on any deflation scenarios. I do not see rising oil prices as inflationary unless they are a direct result of a rise in money supply. Inflation: 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. That definition is more or less reasonable. The problem with it of course is is deciding why prices are rising. If oil prices spiked to $150 overnight because of an overthrow in Saudia Arabia that would be a hugely deflationary event. It would crush spending, crush housing, crush the stock market, and cause mammoth losses of all kinds of jobs. Demand for goods would plunge and inventories of stuff would skyrocket. Prices of other goods would fall. My position is logical, consistent, and easily defendable. Mish

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