Comments on: Inflation and rising prices aren’t the same thing http://www.mightybargainhunter.com/2008/07/04/inflation-and-rising-prices-arent-the-same-thing/ Personal finance, commentary, and spending less the easy way Sat, 21 Nov 2009 01:23:30 -0400 http://wordpress.org/?v=2.8.6 hourly 1 By: Bill http://www.mightybargainhunter.com/2008/07/04/inflation-and-rising-prices-arent-the-same-thing/comment-page-1/#comment-143536 Bill Tue, 08 Jul 2008 17:46:27 +0000 http://www.mightybargainhunter.com/2008/07/04/inflation-and-rising-prices-arent-the-same-thing/#comment-143536 I disagree. Inflation IS rising prices. One method we use to measure inflation, or rising prices, is the CPI, or Consumer Price Index, which is the aggregate price, or cost, of a basket of goods. If in July the aggregate cost is higher than in June, we have experienced inflation. There are variants of inflation: Consumer prices, wholesale prices, commodity prices, etc. Some say (like Milton Friedman) that inflation is a monetary phenomenon. If the growth of the money supply is constrained, then there won't be any inflation. This, from a practical perspective, is poppycock. Our government could retrain the money supply and we could still experience inflation because of external shocks (imagine OPEC reducing output of oil to the extent that oil shot up to $500 a barrel). As for your quote of Howard Ruff: I'd suggest you read somebody else. He has been a bear for decades, and once in a while, he's right. The example doesn't make a lot of sense. Prices are determined, in a free market, by the forces of supply and demand. If the auction item is worth $1000 to somebody, that's the price it will fetch. Just because a billionaire is in the room doesn't make it so that a hamburger would cost $5000 at Burger King. It's a dubious argument at best. I really like your blog, and I've been reading it for quite some time, but I thought I'd give my two cents to set things a little straighter on this topic. I disagree. Inflation IS rising prices. One method we use to measure inflation, or rising prices, is the CPI, or Consumer Price Index, which is the aggregate price, or cost, of a basket of goods. If in July the aggregate cost is higher than in June, we have experienced inflation.

There are variants of inflation: Consumer prices, wholesale prices, commodity prices, etc.

Some say (like Milton Friedman) that inflation is a monetary phenomenon. If the growth of the money supply is constrained, then there won’t be any inflation.

This, from a practical perspective, is poppycock. Our government could retrain the money supply and we could still experience inflation because of external shocks (imagine OPEC reducing output of oil to the extent that oil shot up to $500 a barrel).

As for your quote of Howard Ruff: I’d suggest you read somebody else. He has been a bear for decades, and once in a while, he’s right.

The example doesn’t make a lot of sense.

Prices are determined, in a free market, by the forces of supply and demand. If the auction item is worth $1000 to somebody, that’s the price it will fetch. Just because a billionaire is in the room doesn’t make it so that a hamburger would cost $5000 at Burger King.

It’s a dubious argument at best.

I really like your blog, and I’ve been reading it for quite some time, but I thought I’d give my two cents to set things a little straighter on this topic.

]]> By: Link McGinnis http://www.mightybargainhunter.com/2008/07/04/inflation-and-rising-prices-arent-the-same-thing/comment-page-1/#comment-143169 Link McGinnis Sat, 05 Jul 2008 03:57:45 +0000 http://www.mightybargainhunter.com/2008/07/04/inflation-and-rising-prices-arent-the-same-thing/#comment-143169 Interesting thoughts. I've got a couple of questions: How is inflation measured? My understanding is that the government uses a price basket system (CPI) and actually compares the prices of "goods" in that basket to determine inflation levels. Why don't they just use L1 if it's based on the money supply? Also, the bidders in the example "could" spend more. But, we can't assume that they "would". So, if they don't spend more (they save 100) would you have a measurement of inflation? Interesting thoughts. I’ve got a couple of questions: How is inflation measured? My understanding is that the government uses a price basket system (CPI) and actually compares the prices of “goods” in that basket to determine inflation levels. Why don’t they just use L1 if it’s based on the money supply?

Also, the bidders in the example “could” spend more. But, we can’t assume that they “would”. So, if they don’t spend more (they save 100) would you have a measurement of inflation?

]]> By: carswell http://www.mightybargainhunter.com/2008/07/04/inflation-and-rising-prices-arent-the-same-thing/comment-page-1/#comment-143139 carswell Fri, 04 Jul 2008 20:26:31 +0000 http://www.mightybargainhunter.com/2008/07/04/inflation-and-rising-prices-arent-the-same-thing/#comment-143139 [ "Inflation is an increase in the money supply, or put another way, a dilution of its value. (Or put even more cynically, theft.) ..." ] .... Who is the thief ?? [ "Inflation is an increase in the money supply, or put another way, a dilution of its value. (Or put even more cynically, theft.) ..." ]

…. Who is the thief ??

]]> By: Momma http://www.mightybargainhunter.com/2008/07/04/inflation-and-rising-prices-arent-the-same-thing/comment-page-1/#comment-143101 Momma Fri, 04 Jul 2008 12:36:31 +0000 http://www.mightybargainhunter.com/2008/07/04/inflation-and-rising-prices-arent-the-same-thing/#comment-143101 I'm just learning all kinds of new things this morning! I didn't know that the terms weren't interchangeable, but seeing your explanation really helps it make sense in my head. Thanks for the great post :) Enjoy your day! I’m just learning all kinds of new things this morning! I didn’t know that the terms weren’t interchangeable, but seeing your explanation really helps it make sense in my head.

Thanks for the great post :) Enjoy your day!

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