4 thoughts on “The cause of inflation and consideration of the term deflation”
I disagreed with you, saying that the central bank is the main cause of inflation depending on the knowledge of acquired about inflation it can be caused by various factors rather than the central bank.
The mistake here is treating inflation as if it can only come from “too much money” and ignoring what happens when real supply falls. If energy, food, housing or imports become scarcer or more expensive, the average price level can rise even without a simple demand boom. That’s not a myth it’s a supply shock passing through the whole economy.Cost-push inflation isn’t a myth. If energy, food, rent or imports rise across the economy, the average price level can rise because real costs changed. Money matters, but pretending inflation is only money supply ignores supply shocks, monopoly power and resource limits.
The only time a supply shock could raise an average level of prices is if total supply in the economy contracts and monetary demand was constant. This never happens in reality so the supply shock ends up changing relative prices not average prices.
jbhearn 
I disagreed with you, saying that the central bank is the main cause of inflation depending on the knowledge of acquired about inflation it can be caused by various factors rather than the central bank.
LikeLike
So we disagree. Keep thinking.
LikeLike
The mistake here is treating inflation as if it can only come from “too much money” and ignoring what happens when real supply falls. If energy, food, housing or imports become scarcer or more expensive, the average price level can rise even without a simple demand boom. That’s not a myth it’s a supply shock passing through the whole economy.Cost-push inflation isn’t a myth. If energy, food, rent or imports rise across the economy, the average price level can rise because real costs changed. Money matters, but pretending inflation is only money supply ignores supply shocks, monopoly power and resource limits.
LikeLike
The only time a supply shock could raise an average level of prices is if total supply in the economy contracts and monetary demand was constant. This never happens in reality so the supply shock ends up changing relative prices not average prices.
LikeLike