Wolf Money(book recommendation)
The book titled “The Inflation Myth and The Wonderful World of Deflation” by former legendary Templeton fund manager Mark Möbius discussed the topic on misinformation of inflation. The book was published before the current inflationary madness plaguing the world.
Another term to describe inflation is currency debasement. If one substitute inflation with currency debasement, the narrative become clearer. Over centuries many irresponsible government from the Roman Empire to the modern day political office went through period of overspending (books balancing skill lacking, accounting wise). During Roman Empire, government start chipping away the gold and silver content in coins to pass it off as full gold and silver coins. The full gold and silver content during Augustus reign was reduced to only one five of thousandth(equaling 0.0002) by Aurelian Reign, unable to reduce the gold and silver further, Aurelian increased the face value of new coins by 2.5 fold. It had an immediate impact on inflation, inflation went up 44x over the next 30 years or at an annual rate of 24%. High inflation was one of the main reason for the collapse of the Roman Empire.
In Mark’s opinion, inflation data are notoriously inaccurate, one shouldn’t focus too much on the numbers. One clear example was different countries might have different items in the basket when calculating inflation due to domestic circumstances. When UK calculated inflation, price of bicycle helmets were taken into consideration due to wide adoption of bicycle as mode of transportation after the British triumphant in the Tour de France. Gin was another item added to the basket recently due to increase popularity of the alcohol. The argument goes how does the inflation number gave a true representation on inflation if the person doesn’t drink gin or cycle or both? Central bankers can control inflation by limiting or expanding money supply. It is in the collective wisdom of central bankers to keep inflation at 2% which promote economic growth and price stability. Central bankers prefer to deal with inflation rather than the ills of deflation.
Mark mention the key to deflation is technology. Mobile phone once out of reach for millions had gotten cheaper, cheap enough to be a fast moving consumer goods with buying new mobile phone becoming a yearly affair for many. Data had shown Singapore inflation from 2001 to 2007 had more or less kept pace with income growth. People living near Johor can reduce their inflation by half by taking a day trip to Johor to shop for essential items. The changing shopping habits from offline to online also help to reduce inflation.
The book goes on Lone Wolf recommendation list for its in depth discussion on Inflation, disinflation and currency debasement.
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