johnbee

Commodities Will Lead the Recovery - Matt McCall

This is interesting comment. As I understand it what you are discussing is Stagflation where prices rise (e.g food/basics etc) because of a greater decrease in production (caused by low margins and lack of finance) over decreased demand, and so real asset values fall. The worst of all worlds.This happened in Japan. Why isn't there more comment on Stagflation?



On Mar 15 04:58 PM D. McHattie wrote:

> "[W]ithout a decent level of growing consumption there is no inflation."
>
>
> This makes a lot of sense and I almost agree with it. It might end
> up being right. But...
>
> The forgotten half of the inflation equation, to me, is production
> (stuff). You could have consumption decline but if production falls
> even further, meaning there is less 'stuff' on which to spend the
> money, then you could still have inflation, couldn't you?
>
> We typically think of inflation as more money chasing the same or
> less stuff, creating a rise in prices. But couldn't we just as easily
> have inflation from (approximately) the same amount of money but
> significantly less 'stuff'?
>
> I haven't read this notion anywhere else so, of course, I haven't
> read a strong rebuttal either.
>
> I'm not saying we'll get weimar-style hyperinflation, but I would
> give you weimar germany as an example where an inflationary spiral
> began, not because consumption and the money supply increased, but
> because production fell.
>
> Aren't we seeing a decline in production as unemployment rises and
> businesses and farmers fail to obtain loans to finance equipment,
> ventures, seed, fertilizer?
>
> Through unemployment insurance payouts (that are being extended),
> the unemployed have not reduced their consumption commensurate with
> their decline in productivity.
>
> Is this not a possible, though uncertain, pathway to inflation?