Bob Brinker: Market Savant & Radio Host Message Board

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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 8:09:09 PM
From: queenleah	Read Replies (1) of 42834

In a conversation regarding Brinker's comments on inflation, Kirk said “Higher prices for anything reduces purchasing power which is the definition of inflation.” To which J-L-S replied: Your definition of “inflation” is not correct. First, higher prices are one of the results of inflation; they are not the cause of inflation. Second, if you have to choose between buying X and Y, and you have to buy X as its price goes up, then you will have to cut back on your purchases of Y providing your money supply has remained constant (that is, no inflation). That is not inflation. Your purchasing power is the same; you just have to make different choices as to what you purchase with it -- X or Y; gasoline or beer. Excellent IMO, J-L-S. I would only add if it hasn't been said already, that speaking in general terms and not about this issue in particular, the fact that two variables rise or fall together never guarantees that one causes the other. We should never automatically assume that they are even related without further evidence. The rising or falling of both may be caused by a third or fourth or tenth variable or a combination of many variables.

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