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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: GST who wrote (53864)2/15/2006 12:18:55 AM
From: Claude Cormier  Read Replies (1) of 110194
 
- prices DO rise for reasons other than money supply.

Of course. But if there is no increase in the money supply, the general level of prices will not increase overtime as whatever increase takes place somewhere, will simply be eventually compensate by a decrease in prices elsewhere. This is call the balancing act. If people spend more on gas or mortgages, they will spend less on fishing trips and mercedes if their paycheck has remained stable in the period.

As well, if one defines price inflation as a general increase in the level of prices, an increase in the money supply does not necessarily and immediately imply price inflation as other factors can allow a balancing act.

However, an increase in the money supply is certainly the best definition of what is inflation, because it is the only thing that can cause permanent prices inflation. Even if production of good and services increase at the same rate as the money supply therefore compensating for the additional purchasing power, over time, some goods and services are somehow destroyed or depleted while the money is still there. You then get price inflation somewhere.

In short GST, I think that everything (all ...flations) have to do with the rate of growth in the money supply in the first place, be it positive or negative.

The money supply come first and its movement will always cause some kind of ..flations.

RIght or wrong, this is how I see it.
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