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VIDEOMarket Lingo: Inflation
Inflation is the expansion of money and credit supply.
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Expanding on the Minyanville dictionary to explain the jargon frequently used by Minyanville professors on the Buzz.
Minyanville profs often discuss inflation (here, here, here, here, here). Definitions of inflation generally follow one of two paths.
In its most frequent usage today, inflation refers to an increase in prices (here, here, here). While popular, this definition has its drawbacks. A disadvantage of a price-based definition of inflation is that it encourages people to confuse cause and effect of monetary system phenonmena.
The original concept of inflation, crafted over 150 years ago, was linked to expansion in the supply of money and credit. Although this definition is less popular today, viewing inflation in this manner can be beneficial because it maintains focus on a primary cause of undesirable monetary system problems: unbridled ‘money printing’ by government entities.
A related term to inflation is hyperinflation, which occurs when so much money and credit is forced into the system that people spend currency quickly (and rapidly bid up prices) before further devaluation occurs.
It can be argued that, at its core, inflation is a social phenomenon because it depends on society’s collective propensity to take risk. If this risk seeking propensity turns, then credit can’t be created.
Other terms related to inflation include deflation and stagflation.
For more on the semantics of inflation, click here.
Look up other terms at the Market Lingo Library
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