02 Oct 2008

The Deflationists Have a Good Day

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Many people, including Austro-libertarian Gary North, have been warning of deflation. This is unusual, since Austrians typically decry the Fed and its inflationary fiat money.

Today is certainly a feather in the cap of the deflationists. The stock indices are all down 3% or more, and at the same time all the commodities are way down–silver is down 12% as of this writing.

In a future post I will clarify the relationship between the “money supply” and the “price level.” For example, if the stock market “loses a trillion dollars in value” on a given day, that doesn’t mean there are a trillion dollar bills–or even 50 billion $20 bills–floating around with no home.

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