Wednesday, March 16, 2005

Full circle

Rummaging, I found Michael F. Bryan's October 15, 1997 "On the Origin and Evolution of the Word Inflation" Luckily, the Cleveland FRB's "Economic Commentary" series is maintained online.

Why can't textbooks be this clear? Bryan's piece includes a fascinating series of definitions of inflation offered by economists and others over many years.

His conclusions are worth repeating. "Without being tied to the money supply, any price increase seems to have an equal claim on the word inflation. Indeed, today we regularly read reports of a seemingly endless variety of 'inflations.' When the word is used as a description of the price level, an anti-inflation policy can easily be characterized as being against any price increase, including higher wages! This is simply not the case. An anti-inflation strategy is concerned with a particular type of price increase -- a rise in the general price level stemming from excessive money creation. When viewed in this light -- the light provided by the word's original meaning -- a zero-inflation objective for the central bank becomes a much more sensible goal."

Reading the full article shows that, having come full circle, we have covered a lot of ground.