IPFS News Link • Economy - International
Guest Post: Central Banks Create Deflation, Not Inflation
• http://www.zerohedge.com, by Charles Hugh-SmithIf there's one absolute truism we hear again and again, it's that central banks are desperately trying to create inflation. Perversely, their easy-money policies actually generation the exact opposite: deflation.
I will leave the debate as to what constitutes deflation to my economic betters. My definition of deflation is simple: deflation is any increase in the purchasing power of nominal wages.
By nominal I mean unadjusted: $1 is simply $1. It is not seasonally adjusted or adjusted for inflation/deflation or anything else.
When your paycheck loses purchasing power--that is, it buys fewer goods and services-- that's inflation. When your paycheck gains in purchasing power--it buys more goods and services, even though you didn't get a raise--that's deflation in my terminology.
I find that purchasing power cuts through a lot of economic jargon and data-clutter: how much does your paycheck buy today, compared to last month or last year?