Allow me to respond in kind, to your thoughtful response.
1. Your new definition is much better -- it would be perfect, if the part starting with "because" were left off. That part is nothing but an assumption -- and we could fill a hard drive debating it.
2. Please note that your new definition includes: "or a persistent increase in the purchasing power of money."
3. You reposted this statement of mine: "The good times toward the end of the 19th century, which 1010RD alluded to... ...overall prices dropped by about half." You also provided us with a link to a website, from which you extracted some facts about American price indices. Using the calculators on that website, I've extracted the following facts:
| year |
cpi |
average annual inflation |
| 1865 |
15.79 |
|
| 1899 |
8.04 |
-1.97% |
IOW, the website you pointed to proves my statement about prices dropping by about half. My historical records were neither made up nor arbitary. Same as my definition -- for which I've already provided plenty of rationale.
4. I don't recall taking a position one way or another regarding the Fed -- nor the efficacy of monetary policy in general.
I would just like to point out two things: (i) as your chart shows, a huge bubble began inflating
after the fed was created, and famously burst in 1929 -- leading to the Great Depression. (ii) Keynesiasm started in the mid 1930's as a
fiscal policy solution to the depression.
The debate about the relative efficacy of fiscal and monetary policy tools rages on to this day. Your chart could be used to bolster the arguments of either side.
5. FWIW, I do think that monetary policy matters, and that central banks
can be a force for stability. They can also be a source of economic disasters.
your new definition includes: "or a persistent increase in the purchasing power of money."LOL --I forget the name of the economic principle where every negative one place is a positive elsewhere (mass death = soaring undertaker profits). Just the same, we really need to say this is either "our" definition because it's the "only" definition. Your saying it's "my" definition suggests that you've got one. Do you?
"The good times toward the end of the 19th century, which 1010RD alluded to... ...overall prices dropped by about half." ... ...the website you pointed to proves my statement...
Ah, you were right about the prices dropping by half --I'd glanced at the inflation from 1850-1899 but we do in fact see a 50% drop in the 1865 to 1899 segment. What we're still missing though is the "good times" part. The '65 - '99 block was an era mostly in economic contraction (from US Business Cycle Expansions and Contractions) while since 1899 there were three times as many months of expansion than contraction months. This is the kind of correlation that give economists the "Deflation = contraction & Inflation = expansion" approach that's at odds with your "deflation is not necessarily a bad thing".
a huge bubble began inflating after the fed was created, and famously burst in 1929 -- leading to the Great Depression.
Some say the Fed caused the depression and others say the FOMC caused the recovery.
I don't recall taking a position one way or another regarding the Fed
Life does go on and we do need to work to feed our families. So while others think about making up their minds the rest of us can go with the Fed till we find something better.