Posted on 12/12/2006 12:15:06 PM PST by GodGunsGuts
Well of course inflation is always and everywhere a monetary phenomena.
But if a currency is declining vis a vis other currencies it's probably a sign that there's too much of that currency sloshing aroung.
No, high prices do not cause inflation, inflation causes high prices.
Rob,
I think you mean to say disinflation.
Deflation is ruinous. Just ruinous.
They'd love to have us believe this.
The dollar and dollar assets (Tsrys) have done well as real returns are higher here than abroad.
Few financial writers are even accurate, much less worth your while.
Actually, inflation is caused by too much money. Asset price inflation is caused by credit expansion, then procyclical behavior among those who extend credit, then by phenomena such as risk shifting (See Allen and Gale) and animal spirits.
"it's probably a sign that there's too much of that currency sloshing around"
We had a discussion about the rates in another article yesterday. The over use of exotic loans by people who had no business taking loans is coming back to bite us. The aggregate economy itself is taking a hit from the loan industry. Its going to be a rough 2007 because the rates are not coming down. The fear of inflation is too great.
seems to me we are in just as much an ecconomic war as a bullet war.
This hurts the EU and that is a good thing.
Or too little of the other currency.
He's a renter. And confused. Economics is hard.
Nice charts!
Don't be such a gloomy gus!
The USDX will take months, at least, to break 80! LOL!
There's plenty of time to reverse course, cut the fat, cap spending, de-regulate, whatever. I'm sure The American Government, in all its wisdom, will make the dollar go up.
uh, /sarc
I don't really see how you could have deflation in todays economy. What percentage of the monetary flow is cash these days? Not all that much, I'd bet. Deflation could only occur if the credit market dries up.
And if that happens, it would truly be a world changing event. Mrs. X would walk into a grocery store to buy Hamburger Helper for dinner and put it on her credit card, which still has a few hundred bucks on it before it's limited out, and allofthesuddenlike the machine just chews up the card and spits out these little plastic ribbons..
Man o Man o Man they just keep pushin this thing so that when it breaks, it's gonna really break!
Manufacturing costs should continue to decline, much as the cost of electronic goods declines, for obvious reasons - have you ever looked inside one of the original Beta VCR's? There is a reason they were so expensive.
There is a difference between deflation caused by gains in productivity and/or by improvements in technology and deflation caused by too little money supply growth.
Expected.
Smoke and mirrors.
The Fed is inflating the economy as we speak. They stopped publishing M3 for a reason. While the raised rates to 5.25%, money supply grew at a seasonally adjusted annual rate of 8.7% in the three months from November 2005 to February 2006.
So on one hand they say they are fighting price inflation but in the background they are creating money inflation. I suspect the dollar is reacting to the growth in M3, not the Feds public interest rate decisions.
All the more reason to educate Americans that "MONEY IS TOO IMPORTANT" to Trust with Central Bankers!
http://www.financialsense.com/fsu/editorials/dorsch/2006/1212.html
How much is M2 growing?
October was 4.83%
Lost of charts / data
http://www.nowandfutures.com/key_stats.html
Still falling...
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