US Dollar has sunk to record lows against Euro

http://news.scotsman.com/latest.cfm?id=3759014 ^ | me

[Toddsterpatriot]

Only when you don't answer the question. On prior threads I've agreed with you more often than not. In this case you're just wrong.

So, what causes inflation?

[Southack]

"In this case you're just wrong."

It's a 400+ post thread, could you be a bit more specific about your above claim, please?

[Toddsterpatriot]

Economic growth is deflationary.

What do you think causes inflation?

[Southack]

"Inflation is a monetary phenomenon."

[Toddsterpatriot]

Inflation

2 : an increase in the volume of money and credit relative to available goods and services resulting in a continuing rise in the general price level

Deflation

2 : a contraction in the volume of available money or credit that results in a general decline in prices

So, you see that if the money supply increases more than GDP, you get inflation. Everything else remaining the same, an increase in GDP would be deflationary.

[Southack]

"an increase in GDP would be deflationary."

An increase in GDP is *not* a monetary phenomenon.

[Toddsterpatriot]

Is an increase in GDP deflationary?

[Southack]

That's a useless question.

A somewhat more useful question would be if an increase in GDP causes deflation.

[BureaucratusMaximus]

U.S. manufacturing *will* return to the U.S. as the free market devalues the Dollar. It will simply become cheaper and quicker to make higher quality products here than over there, and the Invisible Hand of capitalism will do the rest...

I partially agree with your reasoning...a weaker, or should I say a "closer to reality" valued dollar will make American goods more attractive, it can revive certain manufacturing industries (steel, textiles, plastics, etc.) However...there are a few things that have been left out in your reasoning...what about oil that must be bought overseas. A weaker dollar would translate into higher oil prices no? How much of the benefit from a weaker dollar would be realized by U.S. industry when coupled with higher gas/diesel/jet fuel prices? I'm thinking that since U.S. companies would still be subjected to tyrannical taxation, ridiculous environmental regulations, and union overhead that this scenario would be a wash at best...no better than we were before. Secondly, how many of those said industries do we actually still have physical plants and infrastructure for? (i.e. companies will not simply be returning to old factories, flipping the switches back on, getting people hired, and getting back to work overnight).

[Toddsterpatriot]

A somewhat more useful question would be if an increase in GDP causes deflation.

Survey says........?

[txrangerette]

I didn't say I thought he should do anything to stop the fall, even if he could. My point was about John Q. Public's perception of events and what Bush says. So, they have unreal expectations based on their misperceptions...

[groanup]

Which brings up another dilemma for leaders: they can't say something to the effect of "don't worry about the dollar, it will stop falling one of these days." But they also can't panic investors by being panicked themselves.

"This biggest misperception the public has about investing is that the markets are supposed to make sense." Richard Dennis.

[Toddsterpatriot]

On the one hand you claim that economic growth is deflationary, but on the other hand you claim that deflation is strictly a monetary phenomenon.

Economic growth is different than "monetary phenomenon," thus, you are disagreeing with yourself.

Inflation is a monetary phenomenon.
Deflation is a monetary phenomenon.
GDP growth is deflationary.
GDP growth is not deflation.

That "ary" on the end of that word changes the meaning.

Maybe if you understood what the Federal Reserve did, you wouldn't be so confused.

[Southack]

"Maybe if you understood what the Federal Reserve did, you wouldn't be so confused."

Maybe you should stick to the topic at hand, rather than delving into the esoteric distinctions between "deflation" from that of "deflationary."

Not everyone wants to spin their wheels over mere symantics, after all.

[The SISU kid]

Bump 4 bookmark

[Toddsterpatriot]

Maybe you should stick to the topic at hand, rather than delving into the esoteric distinctions between "deflation" from that of "deflationary."

Esoteric? More like basic. Deflation (inflation) is deflation (inflation). Something that is deflationary (inflationary) causes deflation (inflation).

GDP growth is deflationary, causes (not is) deflation.

Not everyone wants to spin their wheels over mere symantics(sic), after all.

Semantics, is that what you call it when you use the wrong word?

[Toddsterpatriot]

Maybe you should stick to the topic at hand

I thought I said that inflation was a monetary phenomenon? In that case, the Federal Reserve is the topic at hand.

[Southack]

"GDP growth is deflationary, causes (not is) deflation."

No. In fact, the majority of the time GDP growth goes hand in glove with inflation.

Consider that office rents rise as a local economy heats up. Look at property prices in "hot" economic areas like Vegas.

It's only in the esoteric, academic world where one can filter out reality while focusing solely upon mere "theory" that anyone can really say with a straight face that GDP growth "causes" deflation.

Oh sure, in theory there can be cases where GDP growth actually causes deflation, but that's the exception. The rule is that most of the time we see higher prices as an area grows economically.