In a world of near-zero inflation, nominal prices are more likely to need to fall.
Nominal home prices, they note could push nominal prices in 2015 to exceed levels reached during the housing bubble.
FORBES: Beware The Bubble In Homebuilders As Housing Prices Rise
Note, for instance, that its vertical axes show nominal prices (dollars per ounce for gold, index value for the tech-stock Nasdaq).
FORBES: Nouriel Roubini Wrongly Compares Gold To Y2K Tech Bubble
Yet with property in many places looking so overvalued, that could imply a long period of falling real prices even if nominal prices stay flat.
In terms of this decade, currency weakness has driven up the nominal prices of commodities ranging from gold to steel to oil, and investment has followed.
Most economists suggest that central banks should stick to stabilising the nominal prices of a broad basket of consumer goods, and hold their tongue on share prices.
When currency weakens, nominal prices rise.
FORBES: Banking Trends Offer Clues To The Real Business Cycle
If the trade imbalance is sterilized and not allowed to affect the exchange rate, then there will be upward pressure on foreign prices and nominal incomes and downward pressure on U.S. prices and nominal incomes.
It would oblige Argentina to continue trying to adjust its real exchange rate by deflation (cutting nominal wages and prices in nominal terms), a process which has already forced the collapse of many businesses.
In Britain as a whole, for example, average nominal house prices are likely to drop by 20-25%, and in London by much more.
Many analysts expect another 10% drop across the country, which would bring the cumulative decline in nominal house prices close to that during the Depression.
The problem is that nominal incomes and prices are sticky in a downward direction.
In deflation the nominal value of debts remains fixed even as nominal wages, prices and profits fall.
Monetary velocity will pick up and nominal income and prices will rise.
FORBES: Bernanke Administers Another Cruel Dose Of Financial Morphine With QE3
However, as the economy regains steam and loan demand increases, those excess reserves will enter the marketplace and increase nominal spending and prices.
No analyst would claim that the oil sector's contribution to real growth could be reliably measured using nominal dollars with oil prices rising sharply over the last year.
Unlike the goods and services prices index, the GDP deflator measures change In compensation of employees, operating surplus (including mixed income), and consumption of fixed assets arisen from changes in prices and nominal net taxes.
The sharp rally to consecutive all-time nominal highs for gold prices on the back of concerns over problems in the European Union banks and dismal economic data this week in the U.S. has participants in the weekly Kitco News Gold Survey generally looking for higher prices.
FORBES: Higher Gold Prices Seen Next Week - Survey Participants
The idea behind this, roughly similar to the Carney argument for a nominal GDP target, is that the only way to stimulate activity, in a deeply deflationary environment is to convince people and businesses that you really will spend whatever it takes to ensure that prices and nominal demand will be higher next year than they are today.
QE3 would pummel the dollar propelling stock and commodity prices up in nominal terms.
Not only is the yen relatively weak in nominal terms, but falling prices in Japan have made it even more competitive.
ECONOMIST: It is time for the yen to climb and the dollar to fall
But there are reasons to expect prices to fall in nominal terms.
Workers are almost never asked to take nominal pay cuts, but when prices are rising, most employers do give their employees cost-of-living increases.
Unlike share prices, house prices rarely plunge in nominal terms.
The EFSF is such a handy device that this week has also seen renewed talk about its lending money to Greece so that the government there can buy back its bonds at today's depressed prices, which would lower the nominal value of its towering debt.
Note that the proposed Greek haircut is about where market prices are too: around 50% of nominal.
The path of prices, and hence the inflation portion of nominal interest rates fell, and as best we can tell will not be raised.
Considered from an investment standpoint, commodities such as oil and gold continue to rise in nominal terms while the dollar falls, but sticky consumer prices remain relatively stable.
Alternatively, the Fed could leave the monetary base alone, and allow prices to restore the balance between base money and nominal GDP.
应用推荐