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Edwynn -> RE: US unemployment applications drop to a 4-year low (2/16/2012 12:15:18 PM)
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quote:
ORIGINAL: Kirata
quote:
ORIGINAL: Hillwilliam
I'm sure one of the usual suspects will be along in a few minutes to make a sows ear out of this silk purse.
Not quite a silk purse, methinks. I'd say it is a sow's ear. But that's a better part of the sow than we were looking at before.
K.
Indeed. When recovering from a downturn, especially one like this, it is natural and to an extent desirable that prices rise a bit as coming out of it. Had we been swimming merrily along these last few years, prices would have risen at a rate such as to be accommodated by the growth in GDP and steady or gradually increasing employment. We had neither of the latter two at normal levels so prices got stuck too. An increase in demand for producer inputs is a good thing right now, and the resulting rise in prices thereby, if not distorted by derivatives trading, is a good sign of returning to normalcy. Recent increase in demand for inputs means that all that inventory sitting around these last three years is finally getting sold off, and means that layoffs are fewer and hiring is slowly increasing.
Strictly speaking, inflation is an increase in price level over a period of time. When we speak of "an increase in inflation" we mean an increase in the rate of inflation, not a simple increase in the price level. "Zero inflation" is impossible to achieve for more than an instant, just as a stock price or the DJIA cannot remain static. Since a deflation of, say, 1%, is much more damaging than an inflation of 2% or even 4% (just ask the Japanese), we'll take that sort of increase in price level any day, especially at a time like this. When coming out of a downturn, increase in employment and increase in price level go hand in hand. It means both 'consumers' (I hate that term) and producers are buying again.
So yes, some will take a natural constituent of recovery as a bad thing. No news there.
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