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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: pogohere who wrote (53876)2/15/2006 12:44:16 PM
From: GST  Read Replies (1) of 110194
 
Hi Pog. Consider this: The world has in the last twenty years added one billion people to the global consumer society. The rate of additions and their impact have sharply accelerated in the last few years. These additions are global, but China accounts for a large share. This massive mobilization of human resources has a decidedly deflationary impact no matter what does or does not happen to money supply. Money supply has indeed expanded rapidly in part to accommodate this massive influx of new workers. The influx of workers depresses wages. And the rapid (wasteful) extraction of resources depresses prices at the earliest stages. But then comes later stages -- this is where we are now. These same workers are increasingly productive -- and their productivity is linked to them earning higher incomes and spending more of what they earn. This in turn puts heavy pressure on commodity prices -- and this price pressure is inflationary. This is all independent of growth or shrinkage in money supply.

Does money supply matter? Of course. But to say that money supply is the primary or even sole determinant of inflation is just about the stupidest thing I have ever heard.
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