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re: Understanding Inflation
Posted on 1/15/24 at 7:48 am to cadillacattack
Posted on 1/15/24 at 7:48 am to cadillacattack
quote:While inflation is not the same as price increase, price increase is the measure of inflation. Cause leads to effect, with inflation representing the effect. The question is one of cause. IMO manipulation comes in redefinition of the effect, e.g., in government definitions juxtaposing Core CPI with "inflation."
Redefining “inflation” as “rising prices” allows government people to shift the blame.
Determinative root cause of pansectoral price escalation is indeed increased money supply in most situations. So much so that as the world transitioned to fiat in the 20th century, economists like Freidman highlighted money supply importance by insisting it to be the only cause of inflation.
But as supply-demand determines price, and price is the measure of inflation, a monetary-injection demand-reset needn't always be causative. For example, a massive supply reduction across multiple sectors results in scarcity induced (demand-pull) inflation.
Given a "core CPI" basket packed with nonessentials, we can create hypotheticals where price escalation is matched by demand decrease in such as way as to negate any need for monetary injection.
In 2021-22, scarcity and failure of government to anticipate/mitigate demand-pull was the inflation catalyst. Government will happily blame-shift that away as well.
Posted on 1/15/24 at 11:43 am to NC_Tigah
quote:
In 2021-22, scarcity and failure of government to anticipate/mitigate demand-pull was the inflation catalyst. Government will happily blame-shift that away as well.
It was kind of both demand-pull and cost-push at the same time. Only Congress could pull off that level of retard
The CARES Act and the entitlements that are indexed to CPI can’t be ignored in the cost of living increases.
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