Re: The Death of Inflation

[Basil Moore <bmoore@xxxxxxxxxxxx>]

Is it a surprise to participants of PKT that the Fed cannot control the
money supply?   I hope we don't have to go over this again?? Basil Moore





At 04:59 PM 10/6/97 -0700, you wrote:
>William F. Hummel wrote:
>>
>> "The Death of Inflation" is the title of a book by the British
>> economist, Roger Bootle, published in 1996, ISBN 1-85788-145-1.
>> He examines the history and causes of inflation in the
>> industrialized world, and argues that the era of consistently
>> high inflation of the past 40 years may be over for the
>> foreseeable future.  I think he makes a fairly convincing case in
>> support of that claim.
>
>He does, of course, provide a clear definition of inflation in
>making the assertion that growth in the CPI understates the rate
>of inflation. Perchance is this definition available for all to
>see?
>
>> Bootle considers the CPI growth in the range of 0 to 3 percent to
>> be in effect the absence of inflation since such measures are
>> imperfect and probably overstate the "true" inflation rate.
>> While he acknowledges that inflation always involves a monetary
>> component, he sees the root cause of inflation as sometimes
>> arising in quite different ways.  Certainly a great many
>> inflationary episodes can be directly traced to mismanagement by
>> the monetary authorities, leading to a too rapid growth in the
>> money supply.  But it would be simplistic to ignore other reasons
>> not directly related to such mismanagement.
>
>Simplistic to some perhaps, but it doesn't change the reality
>that by whatever measure one chooses to call inflation, there
>always comes as a result of a change in the quantity of money a
>change the value money would have had without the change in
>quantity. The "other reasons" being called a cause of inflation
>are better described as circumstances that alter the quantity of
>money required for a specific value of money. These circumstances
>are no different than a head wind or tail wind affecting the
>power required to maintain a given speed.
>
>The underlying cause effect relationship of more money less value
>per unit and less money more value per unit does not change by
>these circumstances. When economists learn to set aside there
>peculiar notion of confusing measures and controls they may come
>to realize that one measure and one control is all that is needed
>to maintain the value of
>money. The rest of their monetary analysis is nothing but foolish
>obfuscation.
>
><<SNIP>>
>
>
>			-- jbod
>___________________________________________________
>Come visit and see a new economic perspective --
>       http://www.geocities.com/CapitolHill/1067
>           Comments/arguments welcome.
>.
>
>


Basil Moore, Department of Economics
Wesleyan University
685-2363