IMF - World Economic Outlook Oct 2009

Enough bullshit. Back on topic, no?

Are you for real? Inftation happens when print off a load of soon to be useless paper currency. Defation is when you restrict it.

When did I ever play the man… aye? Are you a politican?

Can I put the peculiar exchange above to bed? Actually I went to a bit of trouble to scan this in earlier on today.


This printing press rhetoric is a bit off methinks.

Better we say that we have inflation whenever means of payment increases more rapidly than the total output of goods and services. (eg. equity release on appreciating houses would be included as means of payment)

But, there are different degrees of inflation.

Roughly, incipient inflation is when firms and households use the extra money to pay down debts and strengthen cash positions.

Which is the situation we are heading into now and for the forseeable future.

Advanced inflation proceeds from the situation above, when trade gets going again… and wild inflation is when the people lose confidence in their national currency…

But it’s not even as simple as that. The article above is a good introduction.

Mossy, you need to do some more research on the subject of inflation and deflation, appreciation and depreciation :wink:

It’s a bit late in the day so I’ll come back tomorrow if you have not figured it out by then.

Depreciation = Printing money
Appreciation = Burning money

Inflation = Increase money supply
Deflation = Restrict money supply

So as I understand it:

  • You get depreciation inflation by printing more and increasing the money supply.
  • You get appreciation deflation by burning currency and restricting the money supply.

Is this right?

Ah spoilsports.

My points are that a ‘printing’ definition of currency expansion and contraction is grossly simplistic. Currency in circulation amounts to only about 10% of ‘money’ at any one time. The rest is credit or imaginary money.

So, in monetarist terms, inflation is the expansion of currency and/or credit. Deflation is its destruction.

What I was trying to get at was that in the ‘printing’ conspiracy theory of money, deflation can only happen by people burning pound notes and them being replaced by printing at a lower pace. This is nonsense, but it suits the goldbugs because the logical conclusion is that there is always only inflation in a fiat currency.

The reality is that credit can be destroyed, composed as it is of IOUs. If the person who borrows the IOU is no longer good for it, the money that you gave to him and you have outstanding is, to some degree, destroyed. More particularly, if you bought a house and prices go up and you revalue the house, there is an asset gain there. This, whether it is recognised in the official figures, is inflationary. If house prices collapse, this is deflationary - particularly if you have revalued the asset over time and borrowed money against it.

If you want to criticise fiat money system, stick to asset booms, the non-recognition of asset inflation/bubbles, the over-emphasis on prices, fractional reserve lending and ridiculous leverage ratios.

If you want to talk about ‘printing’, except in a semi-jocular manner, you will be viewed as a nut (by this poster at least).