The amount of money relative to goods and services within an economic framework governs the value of the currency.

More money = Inflation; Less money = Deflation; and that's all there is to it period.

The country (U.S. and almost everywhere else) has increased the money supply so the value of its currency will go down. Inflation/deflation is meant to speak of what happens to the money supply; not price.

The introduction of price into the definition was deliberate deception for there are many ways to control price apart from the amount of currency in the system. This way the governments can continue to rob the citizens of their accumulated wealth.

Where everybody gets it wrong is when they try to factor in the amount of debt in a system. Debt has nothing to do with inflation or deflation unless one is using the modern and totally incorrect definition of those terms.

Debt, loose money, whatever you want to call it; allows for mispricing within the above framework. If money is loose people will buy houses, prices will start to rise, others will think of housing as an investment and bid them up further. That is what we just witnessed. When it gets to unsustainability the prices crash and begin adjusting to reality....has nothing to do with deflation and affects many areas of the framework or system in question. The reverse also applies. If no one will lend money, prices fall and become undervalued because there are no buyers, which causes an opposite psychology where people defer buying hoping to get a still better price. And NO that isn't deflation!

You can't have inflation and deflation at the same time. Prices rising on houses and falling on flat screens have nothing to do with inflation or deflation per se, though it mimics the effects of them. It is price fluctuation based on debt availability (housing) and manufacturing efficiency, profitability, and competition (flat screens).

In a truely static monetary system (based on gold, with no gold or currency inventory changes and no population increase) prices would get continually lower for the vast majority products and services for the simple reason that there would be no inflation driver and people get more efficient in the things they do and make over time.

We are so used to governments continually inflating the money supply, altering definitions, defining things by the result rather than the cause that most people can't reason the thing out.

It's just like Keynes, or perhaps it was someone else, said it would be. The governments rob the people of their accumulated savings while it sits in the bank and not one person in a million will discern what it is happening to them. That's not an exact quote and I'm not even sure it was Keynes who made it. But the statement stands and is correct. This whole inflation/deflation debate is nonsense the only reason I keep posting on it is because the readership changes.

P.