Best way to start, I figured, was by defining terms. The three that seem to be applicable here are "inflation", "disinflation", and "deflation". Okay, so I was just curious as to what the hell "disinflation" really meant, so I'm sharing. I couldn't think of a more politically neutral (in October of an election cycle, yet!) source than Wikipedia, so here we go:
- Inflation: "Economists generally agree that high rates of inflation, and hyperinflation are caused by excessive growth in the Money Supply." Think rising prices, decreased buying power.
- Disinflation: "...is a decrease in the rate of inflation - a slow-down in the rate of increase of the general price level [sic]... over time."
- Deflation: "...amounts to an increase in the real value of money, allowing one to buy more goods with the same amount of money." Sounds great, right? Also: "...may be caused by a combination of the supply and demand for goods and supply and demand for money, specifically the supply of money going down and the supply and demand for goods going up."
The macro idea behind pumping bajillions of dollars off the printing presses, ala Mr. Bernanke, is to flood the world with dollars, creating an environment where there is so much stinking cash around, we can pay off the bajillions we owe to everyone else. Sure. Got it. "Debase the currency" so that what we pay back with isn't worth what we borrowed. What a bunch of slick willies we are, huh? But, doesn't that lead to "inflation"? Even "hyperinflation"?
Well, according to the definition... YES. If you've watched the price of oil and other dollar-based commodities, you see it plainly: about a month ago, $74.00 bought you a barrel of oil; now it takes $82.69 to buy that same barrel. For our purposes, I'm going to assume you shop for food, and fuel up your vehicle. Where I live (in the Caribbean), our food bill has gone up by about 15% over the last two months. We tend to be the first in line for price increases, since most of what we get has to be shipped to us by boat. Feel free to comment if food prices are going up in your area; yours may be the most reliable barometer.
The other headlines: We are currently in a "deflationary" environment. This means, if our Wikipedia definitions are correct, that the prices of goods should be falling, and the money supply should be shrinking.
Umm, to quote Mark Knopfler: "Two men say they're Jesus, one of them must be wrong". Here's where I think the hose kinks: The CPI.
The published Consumer Price Index is a neat little number, released however often the Fed feels like it, that gauges the "price of stuff". Cool enough. However, the CPI - by its own admission - EXCLUDES food and fuel. Hell, even if you heat your house with oil, it ain't in the CPI.
Well, if you put it that way, things are pretty good... <sigh>... if you're on Social Security, though, you're screwed, for the second year in a row. Those COLA (Cost of Living Adjustments)'s have been suspended, because we're in a "deflationary" environment. "Hey, our CPI shows you don't need any more money; sorry, Grandma!"
The only other reason to debase a currency is to make exported goods more affordable for those folks overseas. Problem is, they're as up to their ears in debt - many more so - as we are. Hence the next set of headlines: "Blank (enter the name of a Central Bank here) Currency Intervention".
As long as a currency isn't tied to a standard - a true FIAT currency, literally meaning "faith-based" - we, and the other countries playing at this, can do these kind of parlor tricks.
Hence the term, "Currency Wars". It is, literally, a race to the bottom. The interesting part will be seeing who gets their first. The sad part will be the sheer numbers of good folks who go down with these idiots.
Don't be one of them.
Brutal Truth
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