The Oil Drum

I have often wondered about how a strict money supply based definition of inflation/price increases handles the normally accepted law of supply and demand - that is, price changes to reflect supply and demand.

In other words, I don't think the price of grain is rising merely because of money supply issues - I think even if the money supply had remained completely static, the price of grain would have risen as the amount available on the world market declined - Ukraine's forbidding exports, for example, or Australian drought, or lowest stockpiles for several decades, or increasing imports from nations such as China and India.

I think 'inflation' as a money based concept is an attempt to hide reality, and not reality itself.