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Pastimes : Clown-Free Zone... sorry, no clowns allowed

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To: yard_man who wrote (383734)	4/7/2009 2:30:52 PM
From: carranza2	Read Replies (2) of 436258

Not the way I see it. Inflation is a monetary phenomenon: too much money chasing too few goods. The destruction of wealth of the last couple of years - halving of IRAs, 401(k)s, stock market losses, home value losses, etc. - means that the amount of wealth that can be turned into money to chase goods has decreased enormusly. If you look at the stats, the wealth destruction is much more significant in scope and in size than the increase in the monetary base. Some significant proportion of the destroyed wealth admittedly was not going to be used to chase goods anyway, certainly not in the near term. But a lot was, especially retirement assets. Another aspect of the problem is that easy credit has gone the way of the dodo bird. That element has to be taken out of the monetary mix as well. Bottom line: We have a lot of very good reasons to think that the easy story inflationists propose is not necessarily one that may be true. Perhaps eventually as wealth is re-created, credit eased, etc., but that is not going to happen anytime soon. My point is that the simple equation, huge injection of $ = inflation, is not necessarily a given.

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