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Response to Odoreida (Original post)

Tue Jul 28, 2020, 11:14 PM

13. In a word. Inflation.

Inflation will fuck your economy up, something fierce. Then piss on you as insult to injury. And its never felt initially, but just like walking in what you think is a safe and familiar dark alley, out of nowhere, you get mugged.

Wages adjust and move slowly. In a salaried position, you get a review once a year and your pay increases if your lucky, 3%. If inflation is 10%...you are actually making 7% less. Hourly wages, businesses resist raising wages in order to keep a competitive edge, its the one cost they can control. Inputs (i.e. supplies to make your product)...not so much.

Prices of goods and services however, adjust rapidly. To compensate, the middle class, which was a one person working home....became a two person. Add the fact the minimum wage wasn't adjusted, etc.

Being on the gold standard of course, became a major liability. Every country in the world wanted US Currency in their National Bank Reserves...why not, it was backed in gold!

Funny thing is, Keynes proposed an international fiat currency to be exchanged between governments only. Had it been implemented, inflation would have been managed. However, the USA was having none of that. After WWII we were in perfect position to be the currency of choice around the world....which also meant, our banking laws were the worlds banking laws. We would have near absolute authority on influencing a country's economic and trade policy. Ironically, the USSR went to a form of fiat currency and thus, we had no influence there. To purchase goods abroad, they had to pay in gold.

But, like our interference in Iran, Afghanistan, making sure a nobody politician called Putin became the Russian President, etc. It eventually came around to bite us in the ass due to short term thinking.

This is why run away inflation is so freaking dangerous. It creates income inequality and will eventually destroy the economy. Nixon did some correct initial economic changes...albeit, very late. Hell, price controls were being openly debated, unheard of now (and of course would lead to Soviet style good shortages). But Ford didn't do jack shit. And Carter walked into a situation that no matter what he did, was going to make him a one term President if he implemented sever economic changes...of course, other shit around the world did him in anyway. He would have to fully implement Keynesian economic policies to get out of the mess. But it was going to hurt domestically for awhile....and it would mean we would lose some serious influence around the world...and given the Cold War, it was heresy to think that. Maybe Carter planned on doing so anyway if he got a second term, or only go part way in the hopes it would alleviate the issue for a time and leave it for someone else, who knows.

Then Reagan and Volkner came around....and purposely plunged the USA into a deep recession in order to force it to reset the economy. After that, they abandoned the hybrid Keynesian-Free Market system...and instead of going full Keynes...they adopted Milton Friedman's Monetarist theory. Having the Fed Reserve taking a more active approach in managing the economy. Got to hand it to them, they had some serious brass balls.

And it seemed to work initially....shit, I used to be big fan of Monetarism. But I don't follow ideology, I prefer the science. Granted it took some time, but Monetarism has resulted in greater income inequality, three separate bank bail outs and possibly a fourth on the way. So now I say, Fuck It. Lets go Socialist Lite.

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Arrow 13 replies Author Time Post
Odoreida Jul 2020 OP
LymphocyteLover Jul 2020 #1
Chin music Jul 2020 #5
Brother Buzz Jul 2020 #2
irisblue Jul 2020 #3
hunter Jul 2020 #12
Snake Plissken Jul 2020 #4
Chin music Jul 2020 #6
hunter Jul 2020 #7
Chin music Jul 2020 #8
calguy Jul 2020 #9
Goodheart Jul 2020 #10
JHB Jul 2020 #11
LineNew Reply In a word. Inflation.
Xolodno Jul 2020 #13
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