Which is Better: High or Low Inflation?

Inflation or Deflation

It would seem intuitively obvious that low inflation is good for consumers, because costs are not rising faster than their paychecks. The problem with high inflation is that even with "cost of living" increases there is a time lag between when the cost of goods increases and when you get your raise. But recently commentators have been saying that "Low inflation introduces uncertainty". This is nonsense. During the high inflation "Eighties" I remember commentators saying "High Inflation introduces uncertainty". This is not quite true either. The truth is that steady inflation, whatever its level, if it can be relied upon to remain steady, does not introduce uncertainty. Changing … [Read more...]

Disinflation – What is it?

Definition of Disinflation By Tim McMahon To fully understand disinflation we need to first understand inflation.  The reasons this is trickier than it first appears is because the word inflation is actually used in two different contexts. The most common usage of the word inflation means rising prices.  Commonly "consumer prices"  so when you go to the gas station or the grocery store and the things you buy cost more than last month (or when it is really bad even more than last week) this is more precisely defined as "price inflation". The second meaning of the word inflation is actually the original meaning.  And that is an increase in the money supply that causes "price … [Read more...]