In A Day Of Deflation, we cited a day in which the US dollar gained in real value. Today we observe the opposite, a decline in the value of the dollar. In both cases we use the prices of a broad spectrum of assets as our frame of reference. Today almost everything rose in dollar terms. The breadth of this rise across assets as disparate as most Treasuries, stocks, gold, copper compels us to conclude that the bulk of the action was in fact our unit of measure.

If days like the first prevailed over a period of time, that period would come to be recognized as “deflationary”. If days like today prevailed, the period would be known as “inflationary”. Where we part ways with convention is by being consistent across the length of time frames. Why not?  If inflation happened over the course of a year, how could it not have happened on at least some of the days of that year?  How could you walk a mile without traversing feet along the way?  

In these pages, the same phenomenon gets the same name whether it occurs over a period of day or a year.

It’s clarifying.