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Strategies & Market Trends : Bob Brinker: Market Savant & Radio Host
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To: J-L-S who wrote (23808)8/17/2006 2:24:37 PM
From: Kirk ©  Read Replies (1) of 42834
 

“Higher prices for anything reduces purchasing power which is the definition of inflation.”

Your definition of “inflation” is not correct.

You are making it far too complicated.

inflate... blow up as in a balloon or the price of gasoline.

From answers.com

in·fla·tion (in-fla'sh?n) pronunciation
n.

1. The act of inflating or the state of being inflated.
2. 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.

I don't care what causes somethings price to inflate...

You can quibble all you want with technical stuff such as saying higher demand causes the price of oil to go up "not inflation" but inflation, when speaking of the CPI, is simply a measure of loss of purchasing power caused from too much money chasing too few goods or services which is demand.

Brinker was quite clear in saying higher energy prices were deflationary and he is wrong.



If they were deflationary, then the graph would have had CPI going down, not up, when energy prices go up.

Bottom line... higher demand causes prices to go up. Prices going up causes loss of purchasing power. CPI measures this.
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