Wednesday, November 25, 2009

Money Inflation vs. Price Inflation

Buddy explains the difference...

"folks need to bear in mind a crucial distinction between “inflation” and price inflation. inflation is here –the supply of dollars per underlying value has already been tremendously inflated. what we don’t see in the general economy is a commensurate ‘price’ inflation –and we can thank falling demand for that. Curing that hangnail by cutting off that finger, sorta."

...

"So banks look at the parabolic money supply growth, see higher rates ahead and depreciating rather than appreciating loan portfolios. In order for the fiat money to appreciate these real estate portfolios, housing demand has to rise, which requires job creation, which requires business expecting better sales, which the fiat money is supposed to create, but can’t until it is lent, which it won’t be because banks are worried about money inflation = asset deflation. This is the ‘what’s different this time’ –and it has everything to do with the system operating within a powerfully anti-market politics. Price deflation is like a union –great if you have one of the fewer and fewer jobs your system is allowing. "

http://pajamasmedia.com/richardfernandez/2009/11/23/odds-against-tomorrow/#comment-72

I said a while back to myself when thinking all of this through "deflation is not so bad... as long as you are able to keep your job"

Vindication of my ability to think (on a limited basis at least) appears to be at hand. Hurray!

Honesty...

... is such a lonely word.

http://pajamasmedia.com/richardfernandez/2009/11/23/odds-against-tomorrow/#comment-40