Galen Wrote:Just like the definition of inflation is increasing the quantity of money in the economy and subsequent consumer price increases or various bubbles are the consequence
Increasing money supply is a definition of inflation. Most people experience inflation as changes in the cost of living which have more to do with changes in the prices of goods and services rather than monetary aggregates. A more useful inflation definition for most people is the rate of change in an appropriate price measure.
One can define a quantity in a variety of ways depending on the problem being addressed and the theoretical framework being employed. A certain kind of monetarist, or an Austrian would favor the definition you prefer. For other schools and applications the other definition might be more useful.
I am a Kondratieff fan and so I often think in terms of inflationary versus deflationary monetary environment.
The monetary environment is characterized by the change in price divided by the change in monetary aggregates as a fraction of GDP. So I use inflation defined as dP/dt. For example right now we are in a deflationary environment (Kondratieff downwave) because the rate of money growth relative to GDP is larger than the inflation rate. Back in the 1970's, (A Kondratieff upwave) it was the other way around.