To: Ilaine who wrote (86 ) 3/28/2001 12:57:17 AM From: JF Quinnelly Respond to Well, I think you are mistaken. It's not just Austrians who use that definition of inflation and deflation. Simple price rises aren't "inflation", and you can hear as much from Greenspan and most other economists. Inflation is a monetary phenomenon, and creates widespread, generalized increases of all prices. If the gross domestic output of goods and services is constant, you get an inflation only by increasing the supply of money. I suppose you could also get an inflation if you reduced the supply of all goods and services in the economy at the same time while keeping the money supply constant, but that would require The Black Plague, or a series of Egyptian plagues perhaps. In the 30's, when 30% of the nation's banks went under in 3 years, you had a massive deflation, even while the supply of goods and services plummeted (which would have been inflationary!).but in the case of manufactured goods, energy costs are passed on to the extent they can be. won't have the pricing power to pass on costs because their customers don't have the extra money to pay the costs. Either the companies eat the higher costs or they sell fewer goods.
