> what's kept inflation low in the US has been low oil prices, low raw > > material prices in general, and the high dollar. > > JDevine
Paul Phillips: > And the excess capacity in manufacturing world wide that has > increased competition and prevented the excercize of monopoly > pricing. No? Steve Diamond: And that excess capacity was made possible by credit creation, according to Warburton. he's right that credit expansion allows the creation fo excess capacity, but the process of that creation (i.e., building factories, etc.) implies increased aggregate demand, which all else equal implies higher prices. The increased capacity arrives a few years after the increased demand. So supply-side issues -- i.e., why all else _isn't_ equal -- are quite relevant. -- JD
