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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (53790)	2/14/2006 3:50:13 PM
From: FiveFour	Read Replies (2) \| Respond to of 110194

ok, no more silliness. regarding the point of when money supply and credit is expanding inflation is expanding, I have seen examples where this did not occur. In early and mid-90's expansion in Argentina money supply and credit was expanding at at a much higher rate than inflation, of course, during that time, the country maintained an artificial exchange rate. Also, in Brazil in late 90's and Argentina in early 2000's in the period after each country devalued, money supply expanded at a much higher rate than inflation and imports dropped significantly. In both cases, the devaluations destroyed significant value when measured in another currency, but the impact was significantly less to the local J6P with local currency affairs who could still buy or sell his assets for the same number of pesos or reals. A steak dinner and wine in Buenos Aires was $15 dollars in 1999 and $5 dollars in 2001. The cost was the same to the local J6P paying in pesos: 15 pesos, zero inflation. So, how do you measure if zero inflation or deflation actually occurred after the devaluation? Perhaps it was none or little deflation if you measure it in a local currency, or a hell of a lot of deflation if you measure it in another more stable currency. Maybe the measurement using another currency is not even appropriate. Or, maybe the difference only occurs because the exchange rate was being kept an artificial level. In either case, the question is how to come out ahead.