Thomas, a more civil and less terse response:
Currencies are devalued in terms of another
currency. That means the price of the devalued
currency has declined in terms of another piece
of paper money.
Deflation and inflation refer to sustainable changes in
the price of commodities and assets. Changes in the
money supply are thought to be the main cause of
price change which may be an effect. Some
economists believe that inflation, an effect, is the result of
the supply and demand imbalances for real goods, another cause.
The markets are generally focusing on asset deflation which
means declining values of stocks, property, gold etc.
The precipitating factor in the Far East was the central
bank response to currency devaluations and movement
off fixed pegs. The CB's had to raise interest rates to
defend their currencies. The rise in rates caused stocks
to sell off. Fears of nonpayment of loans were then fueled,
increasing the possiblity of real estate declines to cover
bank loan losses. That's why we're here now on the DJIA.
<G>If you have come up with an new definition of
inflation, meaning price changes, versus
money supply changes, which might be a cause, then
I may have to rewrite my dissertation and Paul Samuelson
and Milton Friedman will have to have their debates
all over again. <g> You, of course, win a Nobel prize.<g>
BTW Uncle Milton was right, and so is Robert Lucas: Its
unanticipated money supply changes that cause changes in
real economic activity. |
