If re-elected in May 2008, Ken Livingstone will demand inflation-busting increases again.
After all, central banks usually cut interest rates in response to weak demand and low inflation.
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The spending and higher labor costs led to massive consumer and corporate demand that drove inflation.
Bernanke is looking to solve the problem via demand stimulation and inflation expectations, he has the support of most of the Federal Open Market Committee, the market remains expectant.
His broader theme is that insufficient demand has replaced inflation as the biggest danger to the world economy, but that policymakers seem to be ignoring the lessons of the Great Depression.
In the case of Brazil, firms appear to be confusing rising demand with rising inflation and, in the face of a record low unemployment rate, and a limited amount of qualified labor, hoard and overpay workers despite falling output.
Then, excess demand resulted in higher inflation, huge current-account deficits and rampant asset-price inflation.
Others blame weak demand, as high inflation, falling real wages and fears for the future discourage household consumption.
Mr. Abe and his supporters are hoping for "demand-pull" inflation, in which companies would increase wages to boost purchasing power.
During previous booms in commodity prices, as in the 1980s, central banks jacked up interest rates in order to choke off demand and so stifle inflation.
Unemployment has been higher in Ireland, but Iceland has endured a bigger drop in domestic demand, and saw inflation reach 18% (it is now back to normal levels).
It is thus worth noting that there is no cost-push inflation to work against or counter the reduction of demand-pull forces that would intensify inflation.
The market is pegging 30-year inflation at a slightly higher 2.0 percent rate, which is the spread between long-term 30-year Treasury nominal bonds and 30-year TIPS. Federal Reserve policy to increase the money supply has not led to inflation during this recovery because the demand for money has been lower than in other recoveries when inflation did occur.
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So in those countries there could well be rising demand for gold as an inflation hedge.
And if the future is Japanese-style stagnation, there will be no demand for a hedge against inflation.
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America's growing trade deficit is a safety valve: it has prevented domestic demand from spilling over into inflation.
But, of course, costs are rising with inflation while the demand for some services is also increasingly rising.
Right now, there is a huge demand for gold as an inflation hedge.
Then, the abrogation of the Bretton Woods monetary system in 1971 created an artificial demand for gold as an inflation hedge.
But given that higher energy prices generally boost inflation and shrink demand, it is not unreasonable to worry about the future.
Perhaps the main risk now facing emerging Asia is not feeble demand in the West but inflation or asset-price bubbles at home.
They assign less importance to the gap between aggregate demand and supply in determining inflation, and more importance to the stance of monetary policy.
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Sooner or later bondholders will demand an aftertax coupon exceeding inflation.
Growth like that means inflation pressures suggest demand is high in India, people and corporations are buying goods and services with interest rates that are next to nothing.
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So for neo-chartalism to work as intended, budget-makers must both tighten policy once demand has been restored and inflation threatens and also be credible in their commitment always to do so.
China is the incremental buyer of industrial commodities (here is a factoid: it is responsible for two-thirds of global demand for iron ore), so even if we have inflation, commodity prices will still decline with plummeting demand when China cuts back.
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And demand for goods and services means inflation, which is already 6%, its highest in around 8 years.
The government is using a host of measures to curb credit expansion and ease demand in an effort to keep inflation on target for next year.
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