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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: Horgad who wrote (90284)1/8/2008 5:18:21 PM
From: GST  Read Replies (2) of 110194
 
If it was esoteric I would not bother, but understanding the gathering surge in in inflation is essential to understand the investment climate, in my view. There is a widespread and thoroughly misguided notion that a recession in the US means deflation is coming our way. If that was true your investment strategy would be guided in one direction. If on the other hand a recession in the US is coupled to a surge in inflationary pressures in the US, then your investment strategy would be to move in exactly the opposite direction as you would in a deflation. By the way, some reference to persistent changes in price levels is standard for any dictionary definition of inflation. Denying that rising prices are the focal point and measure of inflation is, in my view, just plain silly. I am not making stuff up -- inflation is persistent rise in price levels, and increases in money supply are one of the most obvious driving forces, albeit only one of many driving foreces these days in our global economy. That is exactly what we have -- and it is set to get much worse.

The deflationists are not merely quibbling about the role of money supply as a driving force of inflation -- they are saying that inflation IS an increase in money supply -- ie, inflation is an increase in money supply caused by an increase in money supply. That is nuts, but it is the only way to escape the facts of rising price levels in the US if you are trying to fake some sort of case for deflation.
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