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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (77775)	4/16/2008 2:23:01 PM
From: Dan3	Read Replies (1) \| Respond to of 116555

Re: Indeed the PPI soared last month, primarily on account of energy and food. Is this inflation? ..... Ummm... Yes. I'm sorry Mike, but I think you're mistaken. Inflation is probably best considered as the money supply growing faster than the "desired goods" supply, which pushes up the price of desirable goods (oil and food, in this case). The fact that the price of cheap clothing and expensive housing falls as demand for it is displaced by demand for food and oil doesn't mean the deflation is what's going on. If the prices for cheap clothes and expensive houses were declining faster than the price of food and oil were rising, then you'd be right, but that doesn't seem to be the case. We could also try to use the total supply of money, without relating it to anything, but that can rise without there being inflation if the supply of desirable goods rises with it. Having the price of discretionary goods fall while people starve to death because the price of food is nearing infinity does not represent a state of disinflation.