Schiff Debates Swonk on Inflation

MSN hosts a debate between Peter Schiff and Diane Swonk on Inflation: Fact or Fiction?. Schiff makes a number of very Austrian-sounding points:

• inflation is an expanion of money and credit, not rising prices
• inflation affected mostly financial markets in the 90s - money created here went abroad for goods, while foreigners sent the money back for stocks, then later bonds, and then in the lat few years, real estate
• this cycle is now leaking into commodities
• risking stock, bond, and real estate prices are all forms of inflation
• the Fed is trying to confuse the public about the true nature of inflation
• financial markets have been fooled about inflation
• inflation creates mal-investments and distorts economic thinking
• foreign central banks have inflated in parallel with the Fed to prevent their currencies from rising against the dollar
• A lot of China’s import demand for natural resources is an artifact of the export of US inflation
• US productivity growth is overstated by statistical manipulations
• the CPI is highly manipulated

Swonk makes a number of rather astounding counter-arguments:

• money supply growth is not relevant as a measure of inflation
• the Fed won’t figh asset-based inflation, so investors shouldn’t care about it
• the economy is “inflation-resistant” as long as profits are rising
• investors should be more interested in how the government defines inflation than in abstract theories such as inflation being a money and credit growth
• the Fed are “the experts” on inflation
• US productivity growth has been strong
• the US has the highest propensity to consume and invest of any country in the world

Regarding Swonk’s last point, how this could possibly be true is not clear, since the consumption and investment combined cannot exceed income, so the consumption can only increase at the expense of investment, and vice versa .