I've seen some talk of negative interest rates, etc. On this forum. Leroy has mentioned money with an expiration date before. But if you SET an expiration date, you are essentially declaring a future deflation date, why may be too soon or too late.

There's a more elegant solution: we can call them "inflater notes".

The basic flow is this:

1. The goverment prints the notes.

2. The goverment distributes the notes, via the IRS or some other rapid distribution method, to the people.

3. The people exchange the notes at banks of their choice for cash.

4. the banks hold the notes and treat them as "uncirculateable" reserves.(trades can be made from bank to bank, loans can be made, etc. The banks just can't turn around and hand the notes to some joe off the street)

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Then, over time:

5. governement raises taxes, or simply gets revenue boost via growth

6. government buys back the inflater notes and destroys them(deflationary)

Obviously, there are still details to flesh out, and safeguards to implement. But you guys are smart and can probably fill in those blanks. #4 is particularly un-fleshed, and may require special tweaks to banking laws to make work.

The elegance of the idea, I think, is this: the post inflationary deflation is GENTLE, and occurs when demonstrably needed most.

Then again... there may be some fatal flaw in such a plan. I'm not sure what, but there is no free lunch.

In my supermarket, everything has gone UP a lot in last 12 months. Soda, snacks, chips, maple syrup, pasta, fruit especially. At home, cable and electric are rocketing. On the road, take a look at Dunkin Donuts. Deli hot dogs went to $3.50 from $2.75! That has always been the best inflation measure! And health-insurance!

I would expect health insurers (too bad they aren't health ensurers) will hold the line on prices while the Administration and Congress are weighing their future. I don't think they would like to encourage any more public pressure for a fix.

EVERYbody with projectile misinformation on health-insurance has that concept. Back around 1980, the misconception even prevailed among the drunks and golfers then running the industry; and they lost $Billions.

Don't hold your breath. "Hold the line" is suicide.

Anyway, their biggest incentive is to RAISE costs -- for higher commissions and salaries. Premiums are deductible. Rich people have lavish plans.

Do I remember correctly? That was/is your industry. Got stock?

Dunno. Got milk?

Milk has been falling in price, along with automobiles, electronics (virtually everything electronic!), furniture, clothing, hotel rooms, airfares, restaurant meals, and some other things. Such as, er, homes.

Sovereign has a 'funny' way of calculating inflation. He deliberately, and I guess by definition, excludes anything that happens to be falling in price. And then he takes anything and everything that is going up in price (health-care, prescription drugs, college tuition, gasoline---well, lately, some kinds of food), adds them up, and says: Voila! Inflation!!

It certainly is an interesting statistical method.

Inflation is the need for more money to buy goods.

Houses are down for average people. But for NY, reports are FIRST coming in of a 16% drop -- after a runup of 100%-400% (in one large ethnic enclave).

So one must use a timeframe.

If you want 12 months, it seems to be inflating by 3-4% for total household goods but 7% for services and energy.

Sudden changes are challenging -- such as gas and houses in poor areas..

My inflation concept subjectively weights prices over 2-3 years and takes out sudden changes. You can get MORE house for your money now -- meaning in that sense that your money is worth more IF YOU BUY A HOUSE.

On cars, I see no price cuts in big ads unless a car is "a bomb" or currently a non-seller.
For big name Mercedes and even Toyota and Cadillac or Lincoln and Ford, I see no price drops.

Milk prices are sky high for organic and lactaid -- but there is a dump-market for I guess hormoned and sick milk.

Prices WERE rising 8-12% from 2001-7 as I counted household costs, with houses EXcluded. Now my figures indicate around 4%-a-year in the last three months. But many staple foods are running a sudden inflation spurt of 30% in six months.

So then what did the average dollar lose in last 12 months? I'd say it was a choppy compute, but it costs about 4% more this year in terms of cost-of-living-inflation; but there is no currently valid price index in a disrupted economy. Each product responds its own way, with no discernable major trend.

I suppose one real test of whether we're entering deflation is whether Whole Foods Market has to lower prices on their organic foods for yuppies. WFMI share prices have dropped, have they not?

Bear in mind that inflation is not really price rises so much as expansion of the money supply. By that definition we indeed do have inflation, but countered by demand destruction with falling prices in many sectors--though electronics have always seen falling prices.

Once the economy stabilizes, we'll probably have hell to pay in terms of inflation, and don't expect Ben Shalom to step on the brakes anytime soon.

It's always bothered me that people who believe in the importance of money supply tend also to believe in the importance of money velocity. It seems that, with the latter uncontrolled, the former is not terribly important.