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

To: Tommaso who wrote (68560)	8/21/2006 12:48:59 AM
From: mishedlo	Read Replies (3) \| Respond to of 110194

Inflation can also occur if production of goods and services declines. In a war, there is destruction and waste of goods and services, so even if the money supply does not expand (which it usually does) prices can rise. Contrariwise, if production of good and services expands, money supply can increase without inflation. That's what occurred 1980 to the present, pretty much. It won't do just to look at the monetary side. If one believes inflation is a monetary thing, there is nothing else to look at except money and credit growth and the velocity of money. Prices are irrelevant. Mish

To: Tommaso who wrote (68560)	8/21/2006 3:00:20 AM
From: bart13	Read Replies (1) \| Respond to of 110194

Inflation can also occur if production of goods and services declines. In a war, there is destruction and waste of goods and services, so even if the money supply does not expand (which it usually does) prices can rise. ... It won't do just to look at the monetary side. Well, if you want to get specific - in my opinion inflation is simply defined as more money than goods. And then we have to get into all the variables on defining money and goods... but I digress. Yes, goods do have to be taken into account... but that doesn't negate that inflation is always and everywhere a monetary (excess creation) phenomena. It just means that the excess creation in your scenario should be interpreted as money supply should shrink when goods manufacturing drops in order to keep inflation/deflation in check or balance. Destruction of goods in a war in my opinion has to do with assets and is a balance sheet item, and is minimally inflation or deflation related. I don't know if you're familiar with the broken window fallacy, but I think it applies here. Contrariwise, if production of good and services expands, money supply can increase without inflation. That's what occurred 1980 to the present, pretty much. All I can say about your 1980 to present comment, assuming that it means you don't think much inflation has occurred since 1980, is that I couldn't disagree more strongly.