No what I meant is that lowering interest rates encourages borrowing. If that borrowing is put to productive use, its not inflationary. Say I borrow money to build a factory which then improves productive output or fosters competition. That doesn’t tend to be inflationary.
However if I borrow money and pour ever more of it into something like housing, where the population is growing slowly or not at all, that becomes inflationary as ever more dollars chase ever fewer, or stagnant amount of resources.
Inflation isn’t an increase in prices, to me at least. Inflation is an increase in the money supply. Depending on what you do with that money prices can rise or fall. Our economy hasn’t expanded in productive capacity, at nearly the rate at which we have created credit, prices rise to compensate.
Falling prices aren’t deflation either. We happen to have deflation and rising prices (at least for now and in some areas) at the same time! I don’t have enough of an understanding to predict if this will stay so, or that deflation will actually strengthen the dollar causing prices to fall. I am pretty sure that whatever else happens deflation is accelerating and will continue to do so for the near term. The fallacy is that the Fed thinks it can stop it. The crime is that it is trying.
