Inflation is often used inconsistently in the press. For example, today's FT:
"China’s voracious appetite for commodities ranging from copper to corn is now lighting a fire in a new sector – timber. Businesses dealing in wood in Europe say the cost of timber is soaring amid an acute shortage of supplies. According to the Office for National Statistics in the UK – a big importer – the inflation rate for wood products hit 13 per cent last month – its highest level for more than a decade."
However, as described here by Mark Thoma, inflation can only be sustained if caused by an increase in the money supply. (and to be specific, in increase in velocity of money). Basically, if the money supply is increased, but the amount of goods that that money is chasing is constant, the price level will rise assuming aggregate demand is unchanged. However, in the article above refers to a price rise (or inflation as they call it) caused by "China's voracious appetite for commodities". This means that prices are rising because more people are buying, or trying to buy the product. This is not inflation in the true sense of the word. This is just a rightward shift in the demand curve for timber.
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2 comments:
I believe that there was considerable inflation in Spain, after the conquistadores got hold of the gold from South America and took it home. I don't have the details but it looks plausible
May I offer a stylistic point: when quoting someone at length (generally greater than 50 words), it is conventional for blogs, but in academic papers as well, to indent the quoted text. This makes it easier to tell where the quote ends and your words begin. It's not a problem in this particular post because the quote is short, but it is in the posts below.
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