Inflation Data Due At 9:30 Am

[nohpc]

Sellers as well as buyers. All it takes is two people with money to raise the bidding. If everyoen else on earth had nothing, thsi doesn't change.

And that woudl change his behaviour still further.

There was no deflation in japan.

Carry trade and so on.

If half the population becomes unempolyed there are far, far, far (etc) fewere people bidding on each product. This is simple supply and demand. The supply would increase and demand would decrease.

How would higher taxes cause the employed man with no expendable cash to spend more money? Given that my pay is taxed at source so I never get a chance to spend my taxable income higher taxes would make me spend far, far, far less (I need to stress the far because you don't seem to get it).

Japan did have deflatioin. Price deflation. For gods sake you should know by know that inflation/deflation threads are referring to prices of stuff.

Japanese stock market 40000 to 9000 over 15 years. House prices down 60% over 15 years. Prices of everything else pretty much down. It does not matter what the money supply is if prices are hugely down this is PRICE deflation which is what we are interested in here.

Edited September 15, 2009 by nohpc

[Guest Steve Cook]

1) more economic participant = inflation

If the the number of economic participants rises alongside a commensurate rise in economic activity, whilst at the same time the money supply does not also increase, then relative deflation of the money supply will ensue.

2) less economic participants = inflation

If the the number of economic participants falls alongside a commensurate fall in economic activity, whilst at the same time the money supply does not also decrease, then relative inflation of the money supply will ensue.

3) higher tax = inflation

If taxes are raised but are then immediately spent by government in the economy (roads, railways, health service etc), then there is neither a relative inflation or deflation of the money supply

However, if taxes are raised and are not immediately spent into the economy, then relative deflation of the money supply will ensue.

4) lower tax = inflation

If taxes are lowered, without a commensurate redfuction in the money supply from elsewhere in the economy, then relative inflation of the money supply will ensue.

[Injin]

If half the population becomes unempolyed there are far, far, far (etc) fewere people bidding on each product. This is simple supply and demand. The supply would increase and demand would decrease.

Sorry - there only need be two buyers.

Does the fact that you can't afford a maserati change the price when two rich folks go to buy one?

Nope. You don't matter. Neither will the unemployed and skint.

Breads £150 and you only have £130?

Starve then, you cannot afford bread. Obviously this is the level where riots are in vogue.

How would higher taxes cause the employed man with no expendable cash to spend more money? Given that my pay is taxed at source so I never get a chance to spend my taxable income higher taxes would make me spend far, far, far less (I need to stress the far because you don't seem to get it).

I didn;'t say he'd spend it, I said his behaviour would change. how could be all kinds o fthings.

Japan did have deflatioin. Price deflation. For gods sake you should know by know that inflation/deflation threads are referring to prices of stuff.

Japanese stock market 40000 to 9000 over 15 years. House prices down 60% over 15 years. Prices of everything else pretty much down. It does not matter what the money supply is if prices are hugely down this is PRICE deflation which is what we are interested in here.

Inflation and deflation both refer to the money supply.

[Guest Steve Cook]

If half the population becomes unempolyed there are far, far, far (etc) fewere people bidding on each product. This is simple supply and demand. The supply would increase and demand would decrease.

How would higher taxes cause the employed man with no expendable cash to spend more money? Given that my pay is taxed at source so I never get a chance to spend my taxable income higher taxes would make me spend far, far, far less (I need to stress the far because you don't seem to get it).

Japan did have deflatioin. Price deflation. For gods sake you should know by know that inflation/deflation threads are referring to prices of stuff.

Japanese stock market 40000 to 9000 over 15 years. House prices down 60% over 15 years. Prices of everything else pretty much down. It does not matter what the money supply is if prices are hugely down this is PRICE deflation which is what we are interested in here.

The price of "stuff" is affected by the following:

1) A decrease in supply of stuff without a commensurate decrease in demand for it will cause prices to rise.

2) An increase in demand for stuff without a commensurate increase in supply of it will cause prices to rise.

3) An increase in supply of stuff without a commensurate increase in demand for it will cause its price to fall.

4) An decrease in demand for stuff without a commensurate decrease in supply of it will cause prices to fall.

Money is no exception to the above principles of supply and demand. Monetary-inflationary-driven price rises are caused by (2).

Inflation refers to the relative size of the money supply.

Prices are merely a consequence of the above.

It does not rain because the ground gets wet. The causal arrow runs in the opposite direction.

Edited September 15, 2009 by Steve Cook

[Injin]

The price of "stuff" is affected by the following:

1) A decrease in supply of stuff without a commensurate decrease in demand for it will cause its price to rise.

2) An increase in demand for stuff without a commensurate increase in supply of it will cause prices to rise

3) An increase in supply of the stuff without a commensurate increase in demand for it will cause its price to fall

4) An decrease in demand for stuff without a commensurate decrease in supply of it will cause prices to fall.

Money is no exception to the above principles of supply and demand. Monetary inflationary driven price rises are caused by (2).

Inflation refers to the relative size of the money supply.

Prices are merely a consequence of the above.

It does not rain because the ground gets wet. The causal arrow runs in the opposite direction.

That's rather fabulously well put there, Steve.

Nice one.

[Guest Steve Cook]

That's rather fabulously well put there, Steve.

Nice one.

thanks injin

[nohpc]

Sorry - there only need be two buyers.

Does the fact that you can't afford a maserati change the price when two rich folks go to buy one?

Nope. You don't matter. Neither will the unemployed and skint.

Breads £150 and you only have £130?

Starve then, you cannot afford bread. Obviously this is the level where riots are in vogue.

I didn;'t say he'd spend it, I said his behaviour would change. how could be all kinds o fthings.

Inflation and deflation both refer to the money supply.

Comparing a maserati to a loaf or bread is hardly helpful. For one thing the bread will go off quickly so if the shop doesn't sell any it will lose it all. If all the super rich people in world lost all their money tomorrow and nobody was looking at maseratis the price would stay the same until the company went bust or the prices would drop to allow turnover.

[Injin]

Comparing a maserati to a loaf or bread is hardly helpful. For one thing the bread will go off quickly so if the shop doesn't sell any it will lose it all. If all the super rich people in world lost all their money tomorrow and nobody was looking at maseratis the price would stay the same until the company went bust or the prices would drop to allow turnover.

Bread isn't special and theres no reason for other people to make you any - unless you can pay them.

No money, no worky.

[Joey Buttafueco Jr]

If it's anything specific just ask I can probably help.

Would be good to know

1). Who the main players are

2). Are all tenors liquid

3). What is the best way for punters to get exposure (or is it institutions only - similar to credit derivs market)

[OnlyMe]

If half the population becomes unempolyed there are far, far, far (etc) fewere people bidding on each product. This is simple supply and demand. The supply would increase and demand would decrease.

How would higher taxes cause the employed man with no expendable cash to spend more money? Given that my pay is taxed at source so I never get a chance to spend my taxable income higher taxes would make me spend far, far, far less (I need to stress the far because you don't seem to get it).

Japan did have deflatioin. Price deflation. For gods sake you should know by know that inflation/deflation threads are referring to prices of stuff.

Japanese stock market 40000 to 9000 over 15 years. House prices down 60% over 15 years. Prices of everything else pretty much down. It does not matter what the money supply is if prices are hugely down this is PRICE deflation which is what we are interested in here.

All their commodity imports went up in price for a start - $10 -> $70 over the decade or so, which was exacerbated by the fall in the Yen over the period.

If you are in business selling goods the more you sell the lower margin you can afford to cover costs. If trade falls you either have to cut your costs or increase your margins. However that calculation works if your suppliers are not willing to accept the price you have want to pay in your currency then you are stuffed anyway and will need to charge higher to maintain profitability. It gets really dicey when you are dealing on the global scale as the currency can really screw you and your ability to function at all.

[RandomBear]

Would be good to know

1). Who the main players are

2). Are all tenors liquid

3). What is the best way for punters to get exposure (or is it institutions only - similar to credit derivs market)

1. Usual investment banks + pension funds + some retailers/property owners. * longer answer at the bottom

2. Not really, 2-10yrs is pretty illiquid.

3. Basically the short answer is it's like credit derivs. You can get some exposure if you want to be long inflation via an inflation linked bank account, I think that Britannia used to do one and Newcastle might do one too. If you want to be short inflation I'm not sure you can do that.

Basically retailers and some property leaseholders are long inflation and like to sell it and receive fixed rates instead. Pension funds are short inflation and like to pay fixed to receive inflation. Investment banks trade it and link up the buyers and sellers usual story.