retired aviator

Don't Expect Hyperinflation for U.S. Economy

Even the large money supply increases very likely to come need not cause price inflation at an unusually high rate. See my website.

Deflation Is Mostly Behind Us

John Polomny said: "It is a historical fact that the central banks can create inflation that will manifest in rising prices."



I am having a problem with the above statement. It makes the money supply/rising prices connection seem predictable and controllable when it is not. I believe such a correlation also is not a historical fact at all. Though rising prices and money supply have often been correlated, as often they have not. Certain economies at certain times, i. e. hyperinflation, yes the connection is clear.

But the causation during more stable inflationary times is much clearer in the exact reverse of what you claim.

For example, since money is created when banks write loans, higher prices will necessarily cause loan amounts to be greater, and therefore money supply creation to also be greater.

This would explain why the high price inflation of the 1970's and growth in money supply then correlate. It was the higher prices causing the increased money supply, not the other way around.

Other periods with more stable or slightly rising prices do not correlate much to money supply growth.



On Jan 19 10:34 AM John Polomny wrote:

> Yes there is inflation, MZM, True Money Supply, M2, M3 (as calculated
> by John Williams at shadow stats) are all increasing. Inflation is
> an increase in the money supply. CPI declines because of a collapse
> in energy prices is not deflation. It is a historical fact that the
> central banks can create inflation that will manifest in rising prices.
> read Mervyn Kings paper "No money, No inflation" for an explanation.
> In his article and the charts provided he shows the time lags involved
> in the process of inflation manifesting in higher prices..
>
> www.bankofengland.co.u...

>
>
>
> On Jan 19 05:52 AM constructe wrote: