Cost-Push, Demand-Pull, and other Meaningless Ideas

Intro: Concepts such as cost-push, demand-pull, second round effects, and wage-price spirals reflect proximate causes of inflation, rather than ultimate causes. In reality, inflation is the byproduct of the interaction between the production of real goods and services, the money available to purchase them, and the willingness of people to spend this money rather than…

The Link Between Currency Movements and Inflation

Intro: Does currency weakness cause inflation or does inflation cause currency weakness? While it may appear that currency weakness causes inflation, the opposite is true. Declining export competitiveness and falling real interest rates resulting from higher inflation necessitate currency weakness. Contrary to economic theory, higher inflation prints can sometimes lead to short-term currency appreciation in…

Why Interest Rate Cuts Rarely Stimulate Economic Growth

Intro: Despite the almost universal belief that central bank interest rate cuts provide a boost to the economy, most of the time they have little-to-no stimulatory effect. Rate cuts usually just reflect prior changes in the real economy’s savings/investment balance, and typically provide little insight into future growth. The financial media is fixated on interest…