Let's disagree on inflation/deflation definitions

[gasull]

For the sake of clarity I modestly propose that we stop talking about inflation/deflation because everybody is using their own definitions so any debate is worthless. Instead of trying to agree on a definition for inflation/deflation I modestly propose talking instead about the following concepts:

1. monetary-inflation / monetary-deflation
2. debt-inflation / debt-deflation
3. goods-inflation / goods-deflation
4. asset-inflation / asset-deflation

Am I missing any other important kind of inflation/deflation?

To avoid:

1. inflation / deflation without any prefix. Too confusing. Nobody knows what you're talking about.
2. price-inflation / price-deflation: Do you mean assets (like housing) or goods?
3. currency-inflation / currency-deflation: If I'm right this is the same thing s monetary-inflation / monetary-deflation.

With the 4 definitions above, if I'm right, EJ/iTulip's forecast for the following months is, along with most contrarians in the inflationista camp:

1. monetary-inflation
2. debt-deflation
3. goods-inflation
4. asset-deflation
5. currency depreciation (mainly dollars) against gold and silver

While the deflationista forecast (Steve Keen, Mish, Robert Prechter, etc.) is, if I'm right:

1. monetary-inflation
2. debt-deflation
3. goods-deflation
4. asset-deflation
5. no significant currency depreciation (mainly dollars) against gold and silver, and possibly a slight currency appreciation

So the only disagreements are in goods-inflation / goods-deflation and in currency appreciation against gold and silver. Or more specifically, the disagreement is if the aggregate of monetary-inflation plus debt-deflation will create a currency depreciation and with it a goods-inflation.

The debate about goods-inflation / goods-deflation can be itself confusing since there isn't an agreement either about what a good is. Is housing a good or an asset? I think iTulip considers housing just an asset while most deflationistas consider it to be both an asset and a good. Anyway my understanding about the deflationista forecast is that even removing housing from goods, we will still have goods-deflation.

[jtabeb]

Re: Let's disagree on inflation/deflation definitions

For the sake of clarity I modestly propose that we stop talking about inflation/deflation because everybody is using their own definitions so any debate is worthless. Instead of trying to agree on a definition for inflation/deflation I modestly propose talking instead about the following concepts:

1. monetary-inflation / monetary-deflation
2. debt-inflation / debt-deflation
3. goods-inflation / goods-deflation
4. asset-inflation / asset-deflation

Am I missing any other important kind of inflation/deflation?

To avoid:

1. inflation / deflation without any prefix. Too confusing. Nobody knows what you're talking about.
2. price-inflation / price-deflation: Do you mean assets (like housing) or goods?
3. currency-inflation / currency-deflation: If I'm right this is the same thing s monetary-inflation / monetary-deflation.

With the 4 definitions above, if I'm right, EJ/iTulip's forecast for the following months is, along with most contrarians in the inflationista camp:

1. monetary-inflation
2. debt-deflation
3. goods-inflation
4. asset-deflation
5. currency depreciation (mainly dollars) against gold and silver

While the deflationista forecast (Steve Keen, Mish, Robert Prechter, etc.) is, if I'm right:

1. monetary-inflation
2. debt-deflation
3. goods-deflation
4. asset-deflation
5. no significant currency depreciation (mainly dollars) against gold and silver, and possibly a slight currency appreciation

So the only disagreements are in goods-inflation / goods-deflation and in currency appreciation against gold and silver. Or more specifically, the disagreement is if the aggregate of monetary-inflation plus debt-deflation will create a currency depreciation and with it a goods-inflation.

The debate about goods-inflation / goods-deflation can be itself confusing since there isn't an agreement either about what a good is. Is housing a good or an asset? I think iTulip considers housing just an asset while most deflationistas consider it to be both an asset and a good. Anyway my understanding about the deflationista forecast is that even removing housing from goods, we will still have goods-deflation.

Let's REMOVE the definitions ENTIRELY and stick with descriptions of events, THAT's EASY and everyone can understand what we are trying to convey without getting wrapped around the axle with semantic debate.

For example:

Gold will go up.
Unenployment will go up.
Economic activity will decline.
Food prices will go up, energy prices up.
Wages will go down.
Budget deficits (State, Local, Fed) will go up.
FED's balance sheet will increase.
Consumer's will continue to retrench.
Dollar will go down.
Global Trade will go down.
More banks will fail.
More debts will default.
More rescues will ensue.
More bailouts will follow.
The Gov will take on even more debt.
Stocks will go down in real terms, flat to up, in nominal terms.

(See how simple and accessible the above examples are. They are also, importantly, Testible suppositions. They either happen or they don't.)

By sticking with the above formula and adding a time horizion (immediate, near, medium, and far) we have a pretty good way of characterizing what is going on. We can then work from that to conjecture what will happen in the future. And we will have a simple, measurable way of determining whether or not the forcasts have proven to be correct.


By focusing on the observable and predicting what will happen in this way we can be called to task if our forcasts are incorrect. (Much better than "no deflation, that was disinflation, disdeinflation etc.").

By keeping the debate on simple, accessible terms, we increase the value of the discussion and allow it to be easily vetted by even the lay person.

Keeping these discussions ACCESSIBLE is the key to broader acceptance. By allowing simple tests to determine if the predicted conditions manifested themselves as expected, we have an effective tool to validate the hypothesis.


So I would leave you with:

1. Skip the Definitions ENTIRELY
2. Talk specifically about what is happening in accessible terms.
3. Make testible predictions based on past observations.
4. Validate predictions with future observations.
5. Repeate

[gasull]

Re: Let's disagree on inflation/deflation definitions

Let's REMOVE the definitions ENTIRELY and stick with descriptions of events

I agree. That's even better.

[ThePythonicCow]

Re: Let's disagree on inflation/deflation definitions

Let's REMOVE the definitions ENTIRELY and stick with descriptions of events, THAT's EASY and everyone can understand what we are trying to convey without getting wrapped around the axle with semantic debate.

There is a reason for the heated, seemingly eternal, "inflation" vs "deflation" debate.

People are anxious because the future value of their dollars for the goods, services and taxes they anticipate purchasing is uncertain. The future expected purchasing value of their dollar denominated wealth (be that savings, retirement funds, real estate or discounted wages) is flapping around wildly. That's scary.

When a subsistent farmer is faced with the serious possibilities of droughts, floods and locust swarms, each seemingly quite more likely than usual, he might obsess on the weather.

Or perhaps he may determine that floods are the only one of these theats that is likely, and set about to build an ark for his family and farm animals. (A golden ark for jtabeb ?) Whether he is right or wrong will be secondary (to the rest of us, not to him) but it will change his mind from anxious debate to determined action.

Others who have had some success in the past with both their leadership and analytical skills may set about to lead a group of such people as they can reach to safety, whatever they perceive that to be. (A golden microphone for EJ?) They too may be right or wrong, but in the interim they seek to calm anxious debate with their determined leadership. If they are flexible enough in the face of changing circumstance, they can have widespread benefit.

Yet others, who have survived strange and diverse circumstances in the past by the strength of their wits might sit rather quietly in the corner, chatting with a few interesting neighbors, enjoying the opportunity to solve a new puzzle. (A golden chair for the Cow?) Once they are confident they understand the dynamics of the situation and they spot an opportunity well suited to their talents and interests, they will head off down a new path with determination.

Whether we agree or disagree on inflation/deflation definitions or agree not to use those terms (my usual preference) will not in either case calm the debate. This is not a logically fueled debate. It is an anxiety fueled debate.

[metalman]

Re: Let's disagree on inflation/deflation definitions

There is a reason for the heated, seemingly eternal, "inflation" vs "deflation" debate.

People are anxious because the future value of their dollars for the goods, services and taxes they anticipate purchasing is uncertain. The future expected dollar denominated value of their wealth (be that savings, retirement funds, real estate or discounted wages) is flapping around wildly. That's scary.

When a subsistent farmer is faced with the serious possibilities of droughts, floods and locust swarms, each seemingly quite more likely than usual, he might obsess on the weather.

Or perhaps he may determine that floods are the only one of these theats that is likely, and set about to build an ark for his family and farm animals. (A golden ark for jtabeb ?) Whether he is right or wrong will be secondary (to the rest of us, not to him) but it will change his mind from anxious debate to determined action.

Others who have had some success in the past with both their leadership and analytical skills may set about to lead a group of such people as they can reach to safety, whatever they perceive that to be. (A golden microphone for EJ?) They too may be right or wrong, but in the interim they seek to calm anxious debate with their determined leadership. If they are flexible enough in the face of changing circumstance, they can have widespread benefit.

Yet others, who have survived strange and diverse circumstances in the past by the strength of their wits might sit rather quietly in the corner, chatting with a few interesting neighbors, enjoying the opportunity to solve a new puzzle. (A golden chair for the Cow?) Once they are confident they understand the dynamics of the situation and they spot an opportunity well suited to their talents and interests, they will head off down a new path with determination.

Whether we agree or disagree on inflation/deflation definitions or agree not to use those terms (my usual preference) will not in either case calm the debate. This is not a logically fueled debate. It is an anxiety fueled debate.

too complicated. here's how it went.

pregame...

deflationistas... 'the fed steelers will lose to the private credit market cardinals in 2008. they have james harrison, larry fitzgerald and cantonio holme'.

inflationistas... 'no they won't. the cardinals have 10,000,000,000,000 kurt warners'.

aftergame...

inflationistas... 'the steelers lost to the cardinals in 2008.'

deflationistas... 'no, no, no! the score has to be deflated by the square of the referee's shoe size...'

inflationistas... 'whatever'.

[jtabeb]

Re: Let's disagree on inflation/deflation definitions

too complicated. here's how it went.

pregame...

deflationistas... 'the fed steelers will lose to the private credit market cardinals in 2008. they have james harrison, larry fitzgerald and cantonio holme'.

inflationistas... 'no they won't. the cardinals have 10,000,000,000,000 kurt warners'.

aftergame...

inflationistas... 'the steelers lost to the cardinals in 2008.'

deflationistas... 'no, no, no! the score has to be deflated by the square of the referee's shoe size...'

inflationistas... 'whatever'.

Can we PLEASE stick with something productive? (Instead of going the more traditional route of hijacking Itulip threads?)

[jiimbergin]

Re: Let's disagree on inflation/deflation definitions

Can we PLEASE stick with something productive? (Instead of going the more traditional route of hijacking Itulip threads?)

MM, this is important. We keep having definition problems and jtabeb's solution looks like the best answer for everyone yet.

jim

[metalman]

Re: Let's disagree on inflation/deflation definitions

MM, this is important. We keep having definition problems and jtabeb's solution looks like the best answer for everyone yet.

jim

sorry... thought this was settled years ago. carry on.

[jimmygu3]

Re: Let's disagree on inflation/deflation definitions

I agree. That's even better.

Great idea, jtabeb! I recommend also making sure the denominator is clearly understood, e.g.:

the dollar will drop vs other currencies (or the DX index will drop)
gold will go up in dollars
stocks will decline 75% vs gold

It could also be assumed that the US dollar is the denominator in any price prediction unless specified otherwise.

-Jimmy

[Jay]

Re: Let's disagree on inflation/deflation definitions

Let's REMOVE the definitions ENTIRELY and stick with descriptions of events, THAT's EASY and everyone can understand what we are trying to convey without getting wrapped around the axle with semantic debate.

For example:

Gold will go up.
Unenployment will go up.
Economic activity will decline.
Food prices will go up, energy prices up.
Wages will go down.
Budget deficits (State, Local, Fed) will go up.
FED's balance sheet will increase.
Consumer's will continue to retrench.
Dollar will go down.
Global Trade will go down.
More banks will fail.
More debts will default.
More rescues will ensue.
More bailouts will follow.
The Gov will take on even more debt.
Stocks will go down in real terms, flat to up, in nominal terms.

(See how simple and accessible the above examples are. They are also, importantly, Testible suppositions. They either happen or they don't.)

By sticking with the above formula and adding a time horizion (immediate, near, medium, and far) we have a pretty good way of characterizing what is going on. We can then work from that to conjecture what will happen in the future. And we will have a simple, measurable way of determining whether or not the forcasts have proven to be correct.


By focusing on the observable and predicting what will happen in this way we can be called to task if our forcasts are incorrect. (Much better than "no deflation, that was disinflation, disdeinflation etc.").

By keeping the debate on simple, accessible terms, we increase the value of the discussion and allow it to be easily vetted by even the lay person.

Keeping these discussions ACCESSIBLE is the key to broader acceptance. By allowing simple tests to determine if the predicted conditions manifested themselves as expected, we have an effective tool to validate the hypothesis.


So I would leave you with:

1. Skip the Definitions ENTIRELY
2. Talk specifically about what is happening in accessible terms.
3. Make testible predictions based on past observations.
4. Validate predictions with future observations.
5. Repeate

Awesome, I dodged this thread initially because I thought it would be another dead end argument riddled with emotion posing as thought, but wow, take a bow, I really like it. Thank you both and Cow too.

[metalman]

Re: Let's disagree on inflation/deflation definitions

heresy! heresy!

a predictive model that works? not blah, blah, blah, blah, blah, blah, blah?

[Finster]

Re: Let's disagree on inflation/deflation definitions

Let's REMOVE the definitions ENTIRELY and stick with descriptions of events, THAT's EASY and everyone can understand what we are trying to convey without getting wrapped around the axle with semantic debate...

Uh ... not quite. I thought about that once, and decided that my posts would look ridiculous and be unreadable if every time I wanted to use the word "inflation" I had to say instead "that phenomenon where too much money is created so it depreciates and prices of stuff go up".


For example:

There was a lot of debate between inflation hawks and inflation doves, during the transition between the period of high inflation in the late 1970s and lower inflation in the following decade.

Becomes:

There was a lot of debate between that phenomenon where too much money is created so it depreciates and prices of stuff go up hawks and that phenomenon where too much money is created so it depreciates and prices of stuff go up doves, during the transition between the period of high that phenomenon where too much money is created so it depreciates and prices of stuff go up in the late 1970s and lower that phenomenon where too much money is created so it depreciates and prices of stuff go up in the following decade.

Argghhhh! :eek:

[ThePythonicCow]

Re: Let's disagree on inflation/deflation definitions

Uh ... not quite. I thought about that once, and decided that my posts would look ridiculous and be unreadable if every time I wanted to use the word "inflation" I had to say instead "that phenomenon where too much money is created so it depreciates and prices of stuff go up".

One can write clearly without such nonsense. For example, I might use the terms "monetary-inflation" and "price-inflation", perhaps with parentheticals the first time such as in "monetary-inflation (an increase in money supply)" and "price-inflation (CPI increase)" to clarify what I meant.

The same parenthetical clarifications are useful with TLA's (Three Letter Acronyms) (*) to remind the gentle reader what the acronym means at first usage.

(*) Or any other length acronym, of course .

[Finster]

Re: Let's disagree on inflation/deflation definitions

One can write clearly without such nonsense... (*) Or any other length acronym, of course .

I sure hope so, TPC! As any consultation with a dictionary will show, many if not most of the words in the English language have more than one meaning. That's why they number them. If the writing is clear, which meaning(s) is(are) being used is(are) apparent from the context. Words like "inflation" and "deflation" are no exceptions.

For example, if I were to say "I saw my wife yesterday.", most readers will not be confused into thinking I had committed murder with a sharp-toothed implement!

:eek:

;)