Loading ...Financial and risk bubbles don’t pop in a vacuum–all the phantom collateral constructed with mal-invested free money for financiers will also implode.
If there’s one absolute truism we hear again and again, it’s that central banks are desperately trying to create inflation. Perversely, their easy-money policies actually generate the exact opposite: deflation.
By nominal I mean unadjusted: $1 is simply $1. It is not seasonally adjusted or adjusted for inflation/deflation or anything else. rI will leave the debate as to what constitutes deflation to my economic betters. My definition of deflation is simple: deflation is any increase in the purchasing power of nominal wages.
When your paycheck loses purchasing power–that is, it buys fewer goods and services– that’s inflation. When your paycheck gains in purchasing power–it buys more goods and services, even though you didn’t get a raise–that’s deflation in my terminology.
I find that purchasing power cuts through a lot of economic jargon and data-clutter: how much does your paycheck buy today, compared to last month or last year?
Since the economy is dynamic, purchasing power is constantly increasing or decreasing on a variety of goods and services. This bedevils any attempt to discern systemic inflation/deflation. Read more