Thursday, January 13, 2011

Chicken and Egg, or just stating that 2=2?

Consider the following title:

Higher commodity prices may spur inflation

I'm sorry, but isn't 'Higher commodity prices' the definition of inflation? Not the 'cause of it'. Sure, some economists define inflation backwards, by measuring money supply - however, it's pretty common to define it as "inflation means higher prices".

Anyways, this is not a case of what came first, commodity prices or inflation. Higher commodity prices is inflation, and movement in one side of the basket affects the other. Two equals two. The article simply meant to say that inflation will soon be felt by customers, as it is bubbling up from commodity prices.

The reader may say "thank you Mr. Obvious", or alternatively "zzz ... boring". Well - I'll try to do better next time.

Cheers!

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