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written by Adam Waitt , May 08, 2008

In the fourth article listed here on inflation the author, David Leonhardt, seems to be confusing inflation with market dynamics. The value of the dollar is not directly related to the value of a product. The instances where he shows prices have gone down are not due to deflation but rather a increase in supply or decrease in demand. Yes the housing market is falling and yes rent prices are going up, but this is because less people are buying houses and more people are looking to rent property.

The fact is that inflation has to do with the amount of currency in circulation. It is also affected by fractional-reserve lending. The U.S. Treasury does not release how much currency they print, and they no doubt are printing a lot to pay for this war (and the many other government programs). Price changes in consumer products can reflect a change in the value of the dollar but are ultimately determined by supply and demand.