inflation equation

Discussion in 'Forex' started by forexcranium, Apr 10, 2007.

  1. wanted to ask, has anyone heard of this new "Inflation Equation" ?

    In the past, the roots of inflation have stemned from too much money chasing too few goods. The mathematical equation that economists have used is the Equation of Exchange - prices are directly linked to the amount of money in circulation and the speed at which we spend it. Basically, the faster we print money than the economy grows - the value of the dollar falls. So apparently there is this "new model" that looks at inflation...and I'm wondering if anyone has caught wind of it?
  2. here it is:

    "A new formula emerges from an economic model being developed by the federal reserve bank in of dallas. it reveals something the traditional doctrine misses: inflation varies inversely with growth not only in the domestic economy but also with growth in other countries>

    So apparently - the importance of domestic/global growth depends on four factors:

    country size
    home bias
    ease of substitution
    production tradeoffs

    Gonna keep reading...see what else gives
  3. Mmmm...just out yesterday, the dollar edged higher against the euro - part of that came from the strong job report last week. Against the yen it continued to match its six-week high of 119.39 I think was the number.

    Was anyone surprised how well the CAD did against the dollar? Pretty much stayed even since Monday. I guess whats good news for American, is good news for Canada :)
  4. Curious, is this just me, or is anyone potentionally worried about a possible trade war between China and the US? I'm just imagining what could happen...the chinese government (mind you, the second largest holder of US Treasurys) could retaliate by selling a LARGE chunk of its US holdings, which would drive the dollar's value down!