© LIFEFreedom in peril 1941
Whenever we at the Automatic Earth explain, as we must have done at least a hundred times in our existence, that, and why, we refuse to define inflation and deflation as rising or falling prices (only), we always get a lot of comments and reactions implying that people either don't understand why, or they think it's silly to use a definition that nobody else seems to use.
-More or less- recent events, though, show us once more why we're right to insist on inflation being defined in terms of the interaction of money-plus-credit supply with money velocity (aka spending).
We're right because the price rises/falls we see today are but a delayed, lagging, consequence of what deflation truly is, they are not deflation itself. Deflation itself has long begun, but because of confusing - if not conflicting - definitions, hardly a soul recognizes it for what it is.
Moreover, the role the money supply plays in that interaction gets smaller, fast, as debt, in the guise of overindebtedness, forces various players in the global economy, from consumers to companies to governments, to cut down on spending, and heavily.
We are as we speak witnessing a momentous debt deleveraging, or debt deflation, in real time, even if prices don't yet reflect that. Consumer prices truly are but lagging indicators.
Comment: Nothing and no one is safe around cops.
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