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<p>[QUOTE=&quot;medoraman, post: 964520, member: 26302&quot;]Both can be caused by monetary effects, but the effect is the same. Suppose there was a major war in the middle east. Monetary policy has not changed, but gas is now $8 a gallon. Does the increase gas prices affect inflation? YES. Inflation/deflation is a measure of a set basket of goods versus a previous period, that is all. Causes can be argued forever, but the fact that the basket changed price, either up or down, is a hard fact. Yes, if gas went up to $8, but many other things in that basket went down, the basket could still be cheaper and you have deflation even though gas is triple what it was. This is the reason they strip food and energy out of inflation readings frequently, since they are more volatile. Yes, price increases and decreases ARE normal markets at work, but their net effect, due to shortages, demand changes, monetary policy, government borrowings, future expectations, currency revaluation, etc. IS inflation/deflation.</p><p><br /></p><p>The real danger is that you have an organization, the US government, that compiles this &quot;basket&quot; and makes &quot;adjustments&quot;. The danger is that they have a vested interest in reporting low inflation numbers. This is a major conflict, and I have seen their adjustments and disagree with them. I think inflation is systematically underreported in this country.</p><p><br /></p><p>&quot;In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.&quot; </p><p><a href="http://en.wikipedia.org/wiki/Inflation#cite_note-0" target="_blank" class="externalLink ProxyLink" data-proxy-href="http://en.wikipedia.org/wiki/Inflation#cite_note-0" rel="nofollow">http://en.wikipedia.org/wiki/Inflation#cite_note-0</a>[/QUOTE]</p><p><br /></p>

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