dante
07-03-2008, 12:24 PM
So after scratching my head at the many different definitions of inflation and deflation, and how no one can seem to agree whether we're in a runaway inflationary period (see commodity pricing) or a spiraling deflationary period (see housing collapse), minyanville has an awesome post on what's been going on the past 15 years (http://www.minyanville.com/articles/inflation-deflation-Fed-crisis-Credit-debt/index/a/17847).
They basically break it down as inflation is the expansion of credit (causing people to borrow more so that they can buy more, therefore increasing pricing) and deflation is the contraction of credit... Pretty good read, and makes a good argument that we're headed for a period of deflation, although it's scary thinking that nobody really has a firm grasp on whether we're in an inflationary or deflationary period, and whatever the Fed does could end up making a bad problem even worse...
They basically break it down as inflation is the expansion of credit (causing people to borrow more so that they can buy more, therefore increasing pricing) and deflation is the contraction of credit... Pretty good read, and makes a good argument that we're headed for a period of deflation, although it's scary thinking that nobody really has a firm grasp on whether we're in an inflationary or deflationary period, and whatever the Fed does could end up making a bad problem even worse...