Regarding prices and the Austrian view, what about supply and demand shifts for a particular commodity? This could be due to changes in culture, technology, population etc. Say population grew (all other thing equal), food would be demanded more while perhaps arable land stayed the same, so population can be a source of inflation. Take Honus Wagner baseball card (off a pack a cigs, so it was almost free at some point) before and after the MLB strike. Culture changed. Deflation in the market for this commodity had nothing to do with a reduction in money supply or credit, in fact it was going up wildly. Can you explain why my examples are invalid?
The effects of monetary supply are considered independently from other supply/demand factors. "ceteris parabis"
........................................................................................... One can view this issue with respect to total credit and currency.... Total credit and currency = economy.... The peak economy....$70 Trillion Reduced by $30 Trillion and falling Govt. imposes $12 Trillion unsustainable programs.... Economy now 70-30-12= 28 to price all products.... In addition....mark to market pending.....puts the economy at less than 15.... ........................................................................... Thus one now has 15/70's to price all goods and services in a relatively short period of time.... Can some prices rise....of course.... But NFL.....not for long..... Exceptions.....of course.... Overall ? Deflation....and in a big way..... ie How many $40, 000 units GM will sell ? not many.... Anyone forecasting that 70/70 prices are going to hold or climb will find themselves to be mistaken....at 15/70 etc... When will inflation happen...? When 70/70 is being approached.....ie...anything higher than the base that was established....
it is all a case of definition. in the end the outcome is the same the standard of living is diminished. this thread explains most arguments. http://www.elitetrader.com/vb/showt...=6&highlight=cost push inflation&pagenumber=1
..................................................................... Very true.....lots of easy credit allowed the masses to experience items they would not have otherwise.... However..... Make no mistake.... The first smart politician that enacts a 10/5C tax only will quickly ramp the numbers to 140/70....and much more.....given that there will be a tax free nongameable worldwide securities "all asset classes" direct access exchange....that charges no more than 20 cents per hundred units.... Then the future will be one whereby all will experience even more items than before.... versus the current outlook of rationing or ratcheting down.... The most probable with the current politicos is to tax more from less as well as adding VAT.....exactly the opposite direction....while constraining the exchanges more.... What a nightmare..... .................................................................................. If all were to shift down or up equally....there would be no effect.... Unfortunately in the real world there are pieces of paper called legal agreements about price...and hence valuations derived thereof....which establishes lots of new losers....and politiconics "hollywood economics"....
You are talking about the price level in a specific market, which is largely driven by supply/demand in that particular market. What Austrians are talking about is the general level of prices across an economy, which is largely determined by supply/demand of money.
I don't think you can look at the current situation as just a "money supply" issue. The huge amount of stimulus is going to be inflationary. It's going mostly to people that don't produce an offsetting item of value. Look how much of our workforce isn't producing a real good or service. So you have a lot of money going out in the form of wages, but those workers don't produce anything to buy. At the very same time, we have workers that make things or provide services people want and need going on the dole (UE benefits). The only way we don;t get inflation is if the govmnt fudges the numbers. And we all know they would never do that.
Inflation - increase in costs of what you need to buy Deflation - decrease in amount of money an employer is willing to pay you You don't even want to THINK about it in terms of money being created these days. You'd scare yourself to death if you did.
........................................................................... Now that's what I call a clear, simple explanation..... Perfect.....