COVID-19 Inflation, Deflation or Both?

[rrr2015]

COVID-19 Inflation, Deflation or Both?
Should We Fear Post-Pandemic Inflation?
https://www.nytimes.com/2020/05/28/upshot/should-we-fear-inflation.html

FIGHTING DEFLATION NOW, CAUSING INFLATION LATER?
https://www.leggmason.com/en-us/ins...atc-fighting-deflation-causing-inflation.html

Terminal Deflation Is Coming
https://foreignpolicy.com/2020/04/2...demic-inflation-terminal-deflation-is-coming/

*****
Really confused how will COVID-19 leads the economy. How should we prepare ourselves?
Appreciate if any Gurus could to share their crystal ball Thanks!

 

[Hot_Dog]

Inflation first, which is already happening liao, then deflation. Cannot stop the deflation one. My worthless 2 cents

 

[BBCWatcher]

Inflation first, which is already happening liao....

Where do you see inflation?

 

[Hot_Dog]

Where do you see inflation?

I'm using MZM:

https://fred.stlouisfed.org/series/MZM

 

[d5dude]

I noticed that food prices have risen by quite a bit when I shop for groceries, looks like it has to do with greater demand due to more people cooking at home. Seems to be the case in other countries like the US too.


https://www.usatoday.com/story/money/2020/05/20/food-prices-soar-coronavirus-covid-19/5226969002/

 

[Hot_Dog]

I noticed that food prices have risen by quite a bit when I shop for groceries, looks like it has to do with greater demand due to more people cooking at home. Seems to be the case in other countries like the US too.


https://www.usatoday.com/story/money/2020/05/20/food-prices-soar-coronavirus-covid-19/5226969002/

I would like to state, I view inflation as the increase in money supply without corresponding increase in production and not necessarily the increase in prices.
Reason being, price increases are not an accurate reflection of changes in money supply and production.

 

[BBCWatcher]

I'm using MZM:
https://fred.stlouisfed.org/series/MZM

That's not inflation.

I noticed that food prices have risen by quite a bit when I shop for groceries, looks like it has to do with greater demand due to more people cooking at home. Seems to be the case in other countries like the US too.
https://www.usatoday.com/story/money/2020/05/20/food-prices-soar-coronavirus-covid-19/5226969002/

Food inflation isn't general inflation, and food prices are quite volatile anyway. Even so, we don't see anything like runaway food inflation -- not yet anyway. According to Singstat, food prices are up 2.2% in May, 2020, versus May, 2019. But that's within overall ("all items") -0.8% consumer inflation (i.e. deflation) year over year. And no, that isn't because of housing. Take housing out and there was more deflation over that period, not less.

OK, let's look at April, 2020, versus April, 2019: food +2.1%, all items -0.7%. How about March, 2020, versus March, 2019? food +1.5%, all items 0.0%.

I really don't think picking a single consumer expenditure category that's running along at ~2% inflation across 3 months is any reason to be alarmed about inflation. Central banks are supposedly targeting 2% as their inflation target, so they should be delighted with food inflation running exactly on target, so far. There's only one wee little problem: practically everything else is either flat or deflating.

....Is that the best anyone can do to find inflation?

 

[Hot_Dog]

That's not inflation.


Food inflation isn't general inflation, and food prices are quite volatile anyway. Even so, we don't see anything like runaway food inflation -- not yet anyway. According to Singstat, food prices are up 2.2% in May, 2020, versus May, 2019. But that's within overall ("all items") -0.8% consumer inflation (i.e. deflation) year over year. And no, that isn't because of housing. Take housing out and there was more deflation over that period, not less.

OK, let's look at April, 2020, versus April, 2019: food +2.1%, all items -0.7%. How about March, 2020, versus March, 2019? food +1.5%, all items 0.0%.

I really don't think picking a single consumer expenditure category that's running along at ~2% inflation across 3 months is any reason to be alarmed about inflation. Central banks are supposedly targeting 2% as their inflation target, so they should be delighted with food inflation running exactly on target, so far. There's only one wee little problem: practically everything else is either flat or deflating.

....Is that the best anyone can do to find inflation?

So what is your definition of inflation?

 

[BBCWatcher]

I would like to state, I view inflation as the increase in money supply without corresponding increase in production and not necessarily the increase in prices.
Reason being, price increases are not an accurate reflection of changes in money supply and production.

I suppose you can think whatever you want to think, but that doesn't make it real. Inflation refers to increases in prices, and there isn't any debate about this point. Generally when we use the single word "inflation" we mean general consumer price inflation, although there are a couple other important measures such as producer price inflation (via the Producer Price Index).

Increases in the money supply are probably necessary (or at least darn important) in order to get inflation, but they don't determine inflation, OBVIOUSLY. If they did then consumer prices in Japan would have increased tremendously, and for decades. They haven't.

 

[d5dude]

That's not inflation.


Food inflation isn't general inflation, and food prices are quite volatile anyway. Even so, we don't see anything like runaway food inflation -- not yet anyway. According to Singstat, food prices are up 2.2% in May, 2020, versus May, 2019. But that's within overall ("all items") -0.8% consumer inflation (i.e. deflation) year over year. And no, that isn't because of housing. Take housing out and there was more deflation over that period, not less.

OK, let's look at April, 2020, versus April, 2019: food +2.1%, all items -0.7%. How about March, 2020, versus March, 2019? food +1.5%, all items 0.0%.

I really don't think picking a single consumer expenditure category that's running along at ~2% inflation across 3 months is any reason to be alarmed about inflation. Central banks are supposedly targeting 2% as their inflation target, so they should be delighted with food inflation running exactly on target, so far. There's only one wee little problem: practically everything else is either flat or deflating.

....Is that the best anyone can do to find inflation?

"Food prices soar to highest one-month increase since 1974" sounds like an explosive increase to me and I didn't say its "general inflation", I assume you mean the CPI which is mostly BS anyway. For example cinema ticket prices were assumed to have crashed even though cinemas were all closed due to SD measures so nobody could have visited cinemas, where did these fools get their prices from? Only idiots look at official statistics without scrutinising it for discrepancies.

 

[Hot_Dog]

I suppose you can think whatever you want to think, but that doesn't make it real. Inflation refers to increases in prices, and there isn't any debate about this point. Generally when we use the single word "inflation" we mean general consumer price inflation, although there are a couple other important measures such as producer price inflation (via the Producer Price Index).

Increases in the money supply are probably necessary (or at least darn important) in order to get inflation, but they don't determine inflation, OBVIOUSLY. If they did then consumer prices in Japan would have increased tremendously, and for decades. They haven't.

Yes there is, but I really don't what to argue with you about this. Prices don't accurately reflect changes in money supply + production. Increases in the MS without corresponding increase in production already reduces the purchasing power of every unit of currency, irrespective of money velocity. It's common sense dude.

 

[d5dude]

I would like to state, I view inflation as the increase in money supply without corresponding increase in production and not necessarily the increase in prices.
Reason being, price increases are not an accurate reflection of changes in money supply and production.

Inflation is price increases, everything else is irrelevant.

 

[Hot_Dog]

Inflation is price increases, everything else is irrelevant.

Well you could define it as price increase, but my definition is as posted above.

 

[d5dude]

Well you could define it as price increase, but my definition is as posted above.

Then its not inflation duh.

 

[Hot_Dog]

BBC i really don't want to argue with you man, don't have the energy leh especially when our definition is different.

 

[Hot_Dog]

Then its not inflation duh.

The original use of the word inflation is for the increase in money supply and not price increase.

 

[BBCWatcher]

"Food prices soar to highest one-month increase since 1974" sounds like an explosive increase to me and I didn't say its "general inflation", I assume you mean the CPI which is mostly BS anyway. For example cinema ticket prices were assumed to have crashed even though cinemas were all closed due to SD measures so nobody could have visited cinemas, where did these fools get their prices from? Only idiots look at official statistics without scrutinising it for discrepancies.

One month numbers are quite noisy, especially food and energy. That's the whole reason for "core inflation" measures.

OK, so you don't like the cinema ticket numbers in a particular report.(*) What makes you think a particular report's food numbers are more accurate?

Yes there is, but I really don't what to argue with you about this.

And yet you are.

Prices don't accurately reflect changes in money supply + production. Increases in the MS without corresponding increase in production already reduces the purchasing power of every unit of currency, irrespective of money velocity. It's common sense dude.

Well, if you want to pay more than the market price, you can volunteer to do that. Whereupon your purchasing power of your dollars will fall, voluntarily. That doesn't mean your voluntary reality is anybody else's.

(*) What might have happened is that many cinemas closed but some didn't. Some U.S. states and localities never really "locked down." Take New York's cinemas out of price surveys and you'll see ticket price deflation show up in the statistics more or less automatically. Ticket prices in Cheyenne, Wyoming, are not as high as ticket prices in New York City. But nobody really cares much since that bit of statistical noise will fade pretty quickly. Nobody who's serious about this stuff ever looks at one narrow spending category in one report.

 

[BBCWatcher]

The original use of the word inflation is for the increase in money supply and not price increase.

Do you have a citation?

 

[Hot_Dog]

Well, if you want to pay more than the market price, you can volunteer to do that. Whereupon your purchasing power of your dollars will fall, voluntarily. That doesn't mean your voluntary reality is anybody else's.

Locally for me I might have over paid,but that money don't disappear. They are still valid claims.And if the claims exceeds the availability of any goods or services prices goes up. The book always balance.

 

[Hot_Dog]

Do you have a citation?

Historical development of the definition

The term "inflation" as defined by the British Currency School was used strictly to denote an increase in the supply of money that consisted in the creation of currency and bank deposits unbacked by gold. It became accepted in the English-speaking world from the mid-nineteenth century.

However, because the writers of the British Currency School neglected to consider bank deposits as part of the money supply, their policies as adopted in Great Britain failed to prevent inflation and the business cycle. The School’s doctrines and policies fell into profound disrepute by the late nineteenth century, and its definition of inflation was replaced by that of the opposing Banking School, which saw inflation as a state in which the money supply exceeds the needs of trade. From there it was a short step to the currently prevailing definition of inflation as an increase in the price level.[7]

https://wiki.mises.org/wiki/Inflation