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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: GST who wrote (53383)2/10/2006 12:39:11 PM
From: mishedlo  Read Replies (3) of 110194
 
The concepts inflation and deflation do not refer to transient price movements in either direction.

I agree - but where did I ever say otherwise?
That is of course why I want to see a credit bust before I say deflation is here.
OTOH practically every person on this board looks at every little uptick in everything and calls it inflation.

In fact prices have nothing to do with inflation at all (except as an outcome) or result of inflation. It is the increase in money supply and credit that causes inflation.

Neither upticks or downticks in prices are inflation but they may (or may not) be attributable to inflation.
Inflation is an increase in money supply and credit.

I agree that without persistence, or at least a stronger move in one direction vs the other there is no inflation and no deflation. We certainly have SEEN inflation. It is impossible to dispute both rising money supply and rising credit. Right now, money supply is flat. Money AMS is down. Expansion in credit has kept the ballgame rolling.

I am looking ahead. At some point monetary injections fail to produce inflation because credit contracts faster.

I expect an upcoming credit bust, rising unemployment, hugely falling asset prices, and if we follow Japan, the CPI might only show a modest decline. The key is a bust in credit.

Mish
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