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Noah Berlatsky, ed. Inflation: Opposing Viewpoints. Greenhaven, 2013. See here to purchase the book. See here to purchase the book.
This book contains different viewpoints on inflation. Here are some thoughts, observations, and questions.
A. Richard Salsman has an article, entitled in this book as “Deflation Is Not a Serious Danger.” Salsman argues that deflation did not cause the Great Depression and cites numerous other economic problems that contributed to it. One of the problems was the Smoot-Hawley tariff. That makes me wonder if the prices were high or low. Deflation is extremely low prices, whereas tariffs are controversial because they raise prices. Perhaps the prices were high, then suddenly low. Some have criticized the Federal Reserve for suddenly contracting the money supply, and FDR in his New Deal sought to increase prices, which may indicate that he thought the prices had become too low.
B. A conventional piece of economic wisdom is that nations try to increase their exports and decrease imports by debasing their currency. I am not entirely sure how one leads to another, but I can envision inflation at least discouraging Americans to buy imports, since a debased currency means prices in America are high on imports (as well as domestically-produced items, of course). A couple authors in this book seemed to question the conventional economic wisdom, for they argued that domestic inflation negatively affects exports. When prices are high, it costs more for companies to make a product, and thus there are fewer of those products to export.
C. Something that has puzzled me is that the Consumer Price Index indicates inflation is low, yet people continually complain about high prices at the grocery store. This book offered an explanation for this: the Consumer Price Index averages out high-price items (i.e., food) with low-price items. The CPI may be low, yet food still costs a lot. Lower-price items are pulling the CPI down.
D. If the Federal Reserve printing lots of money results in inflation, why do we not see hyper-inflation? One reason, of course, is that, just because there is more money out there, that does not mean that people are spending it. This was the case after the 2008 financial crisis. But that has passed, right? What other explanation is there? Peter Bernholz explains that most dollars are overseas, but how does that obviate hyperinflation? Is it because there are fewer dollars in the United States, meaning the U.S. in effect has a small money supply? But how relevant is that in a global economy, where the supply of something (i.e., oil) in the world affects its price in the United States?
E. One of the debates in this book concerns whether money supply is a primary factor contributing to inflation. It makes sense that it would be. More money out there stimulates demand, and, if the supply fails to keep up with that demand, the price goes up. The view that money supply contributes to inflation is related to the conventional supply-demand explanation for whether prices are high or low. Some contributors, however, acted as if supply and demand were the primary factors. If prices are high for one product, they may be low for another product, since high demand for one product may entail low demand for another product. People are spending a lot for that one product and thus do not clamor to buy that other product.
F. The editor explains how inflation can actually lead to an increase in consumption. People may purchase a car immediately rather than saving for it if they realize that the price will soon go up.
This is a good book, albeit difficult to understand, in areas.
I checked this book out from the library. My review is honest.
This book contains different viewpoints on inflation. Here are some thoughts, observations, and questions.
A. Richard Salsman has an article, entitled in this book as “Deflation Is Not a Serious Danger.” Salsman argues that deflation did not cause the Great Depression and cites numerous other economic problems that contributed to it. One of the problems was the Smoot-Hawley tariff. That makes me wonder if the prices were high or low. Deflation is extremely low prices, whereas tariffs are controversial because they raise prices. Perhaps the prices were high, then suddenly low. Some have criticized the Federal Reserve for suddenly contracting the money supply, and FDR in his New Deal sought to increase prices, which may indicate that he thought the prices had become too low.
B. A conventional piece of economic wisdom is that nations try to increase their exports and decrease imports by debasing their currency. I am not entirely sure how one leads to another, but I can envision inflation at least discouraging Americans to buy imports, since a debased currency means prices in America are high on imports (as well as domestically-produced items, of course). A couple authors in this book seemed to question the conventional economic wisdom, for they argued that domestic inflation negatively affects exports. When prices are high, it costs more for companies to make a product, and thus there are fewer of those products to export.
C. Something that has puzzled me is that the Consumer Price Index indicates inflation is low, yet people continually complain about high prices at the grocery store. This book offered an explanation for this: the Consumer Price Index averages out high-price items (i.e., food) with low-price items. The CPI may be low, yet food still costs a lot. Lower-price items are pulling the CPI down.
D. If the Federal Reserve printing lots of money results in inflation, why do we not see hyper-inflation? One reason, of course, is that, just because there is more money out there, that does not mean that people are spending it. This was the case after the 2008 financial crisis. But that has passed, right? What other explanation is there? Peter Bernholz explains that most dollars are overseas, but how does that obviate hyperinflation? Is it because there are fewer dollars in the United States, meaning the U.S. in effect has a small money supply? But how relevant is that in a global economy, where the supply of something (i.e., oil) in the world affects its price in the United States?
E. One of the debates in this book concerns whether money supply is a primary factor contributing to inflation. It makes sense that it would be. More money out there stimulates demand, and, if the supply fails to keep up with that demand, the price goes up. The view that money supply contributes to inflation is related to the conventional supply-demand explanation for whether prices are high or low. Some contributors, however, acted as if supply and demand were the primary factors. If prices are high for one product, they may be low for another product, since high demand for one product may entail low demand for another product. People are spending a lot for that one product and thus do not clamor to buy that other product.
F. The editor explains how inflation can actually lead to an increase in consumption. People may purchase a car immediately rather than saving for it if they realize that the price will soon go up.
This is a good book, albeit difficult to understand, in areas.
I checked this book out from the library. My review is honest.
