I hate inflation of all kinds. I hate how it is used to steal peoples wealth.
I've recently begun to hate the word inflation. Price inflation and monetary inflation are vastly different things, yet people RARELY distinguish what kind of inflation they are referring to. The problem is that it doesn't help much even when you do distinguish, because it's often still too vague.
What is monetary inflation, increase in M1, M2, M3, M'(check globaleconomicanalysis.blogspot.com)? I would say it is any and all of these, but if you specify what monetary measurement you are referring to, then you don't really need to use the term inflation at all. You can just say M3 is growing at X % per year, that is specific.
Price inflation is very similar. Many people claim we are about to face deflation, because housing prices are starting to fall, many believe stocks are going to fall, etc. Well, what if energy prices and food prices rise at the same time assets are falling? Price inflation is simply not a useful measurement under those conditions. You must specify WHAT prices you are referring to.
The worst thing of all, is the stupid idea that we can somehow predict the relationship between price inflation and monetary inflation. The government uses CPI for it's guage of price inflation, but many people say that doesn't take into account most of the rising costs of the average worker, and I agree. But that isn't the point at all, even if you can guage the rate of change of costs for the average worker, that is still looking in the rear view mirror. It simply cannot be used to calculate the "right" level of interest rates, the "right" level of reserve requirements, etc.
The factors that determine the relationship between monetary and price inflation pretty much include all the details of the entire economic and monetary system.
Whether we end up with monetary deflation or hyperinflation is anybody's guess, not something that can be proven at this time. There are many ways the central banks can inject cash and liquidity if that is there resolve, there is also many ways people can reject credit, if that is their resolve. It's really all dependant on both the actions of the central banks, AND peoples reactions.
Which is why now is a time to play things safe, because YOU simply don't know how things will play out, so stop pretending you do.
