Inflation and hyperinflation are gotten wrong by Mainstream economic theory too. - Page 2 - Politics Forum.org | PoFo

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#15113057
Rugoz wrote:
You avoid inflation by not servicing your debt with money creation, for starters. You always treat inflation as an afterthought, when it's at the center of it, because it is (or should be) a measure of capacity utilization.



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Your alarmist line about inflation isn't supported by the facts -- inflation hasn't been an issue in the U.S. in recent decades, except for rising food prices, and actually most of the U.S. economy has been the *opposite* -- *deflationary* due to capitalism's dynamic of *overproduction*.

Your nationalist alarmism about inflation in the U.S. harkens back to the *oil crisis* in the '70s, due to rising demand for oil and the geopolitical Arab oil embargo:



The 1973 oil crisis began in October 1973 when the members of the Organization of Arab Petroleum Exporting Countries proclaimed an oil embargo. The embargo was targeted at nations perceived as supporting Israel during the Yom Kippur War.[1] The initial nations targeted were Canada, Japan, the Netherlands, the United Kingdom and the United States with the embargo also later extended to Portugal, Rhodesia and South Africa. By the end of the embargo in March 1974,[2] the price of oil had risen nearly 300%, from US$3 per barrel to nearly $12 globally; US prices were significantly higher. The embargo caused an oil crisis, or "shock", with many short- and long-term effects on global politics and the global economy.[3] It was later called the "first oil shock", followed by the 1979 oil crisis, termed the "second oil shock".



https://en.wikipedia.org/wiki/1973_oil_crisis
#15113662
Steve_American wrote:You see they think that US labor is way under utilized...


Possible, but that doesn't hold for all countries at all times.

ckaihatsu wrote:Your alarmist line about inflation isn't supported by the facts -- inflation hasn't been an issue in the U.S. in recent decades


If the city isn't burning down that doesn't mean fire is not an issue, it just means you have an effective fire brigade.
#15113671
ckaihatsu wrote:
Your alarmist line about inflation isn't supported by the facts -- inflation hasn't been an issue in the U.S. in recent decades



Rugoz wrote:
If the city isn't burning down that doesn't mean fire is not an issue, it just means you have an effective fire brigade.



You're *still* being alarmist, and out-of-touch with the economic reality -- *deflation*, not inflation, has been prevailing in recent decades due to continued stagnant GDP growth. Profits are being *hoarded*, and *not* reinvested for lack of sufficient investment opportunities due to the stagnant GDP growth.



Year Inflation rate (in percent)

2020 (est) 0.62 %
2019 1.8 %
2018 2.4 %
2017 2.1 %
2016 1.3 %
2015 0.1 %
2014 1.6 %
2013 1.5 %
2012 2.1 %
2011 3.1 %
2010 1.6 %
2009 −0.3 %
2008 3.8 %
2007 2.9 %
2006 3.2 %
2005 3.4 %
2004 2.7 %
2003 2.3 %
2002 1.6 %
2001 2.8 %
2000 3.4 %
1999 2.2 %
1998 1.5 %
1997 2.3 %
1996 2.9 %
1995 2.8 %
1994 2.6 %
1993 3.0 %
1992 3.0 %
1991 4.2 %
1990 5.4 %
1989 4.8 %
1988 4.1 %
1987 3.6 %
1986 1.9 %
1985 3.5 %
1984 4.4 %
1983 3.2 %
1982 6.2 %
1981 10.4 %
1980 13.5 %



https://en.wikipedia.org/wiki/Economy_o ... tates#Data



This necessitates that the U.S. government has to keep *increasing* the money supply, but such hasn't been spurring inflation because many companies have been using the cheap government credit for *stock buy-backs*, to bolster valuations against the decreasing-prices regime of *deflation*, due to capitalism's dynamic of *overproduction*.

Also note the spread of 'zombie companies'.



Zombie companies are indebted businesses that, although generating cash, after covering running costs, fixed costs (wages, rates, rent) they only have enough funds to service the interest on their loans, but not the debt itself.[1] As such they generally depend on banks (creditors) for their continued existence, effectively putting them on never-ending life support.



https://en.wikipedia.org/wiki/Zombie_company
#15114878
ckaihatsu wrote:You're *still* being alarmist, and out-of-touch with the economic reality -- *deflation*, not inflation, has been prevailing in recent decades due to continued stagnant GDP growth. Profits are being *hoarded*, and *not* reinvested for lack of sufficient investment opportunities due to the stagnant GDP growth.


Deflation is a negative inflation rate and has obviously not been prevalent. Since the financial crisis the US and Europe have, for the most part, not been able to achieve the targeted inflation rate. Not before however, when central banks were quite successful.
#15114940
[EDIT: 'inflation rates' instead of 'interest rates']


Rugoz wrote:
Deflation is a negative inflation rate and has obviously not been prevalent. Since the financial crisis the US and Europe have, for the most part, not been able to achieve the targeted inflation rate. Not before however, when central banks were quite successful.



Okay, for the sake of clarification, my 'deflation' claim applies to *most prices* (due to capitalism's dynamic of overproduction), but not to inflation rates, which are still in 'positive' territory, though lackluster compared to the *population* growth rate. (The size of the economy must grow at at-least the same growth rate of the population, to match it and its objective needs for a correspondingly-sized economy.)

Thanks for honestly acknowledging your error.
#15115726
late wrote:
I wonder how the eventual loss of reserve status of the dollar will influence these considerations?



The *timeline* for this, I think, will parallel the *decreasing* amount of militaristic force that the U.S. can continue to use, and will use.

For example, there's now hands-on *interference* with global 'free-market' type trade, between Iran and Venezuela:


US says it seized 4 Iranian fuel shipments headed for Venezuela




Presumably this won't be able to be maintained *indefinitely*, because of geopolitical forces (UNSC), and global opposition to U.S. sanctions.

All that countries have to do now is *barter*, since international trading transactional recordkeeping is no longer *dependent* on going through one currency, or another, as with the U.S. dollar (reserve currency). Current technologies allow for a more 'political' balance sheet of barter-type trade between any two parties, over the long haul.
#15121463

This is a crucial part of the inequality story in the United States. Under Paul Volcker’s leadership, the Federal Reserve consciously sought to overcome the high inflation of the late 1970s by breaking the bargaining power of U.S. workers, and reducing labor’s share of income. Thanks to the Reagan revolution, among other things, the central bank accomplished this objective too well. Now, instead of contending with inflationary pressures, the Fed must make increasingly audacious interventions in capital markets to ward off the perennial threat of consumer price deflation — even as asset prices rise to evermore spectacular highs.



https://nymag.com/intelligencer/2020/09 ... ty-us.html
#15121491
late wrote:
I suspect I will agree with most of that article. I talk a lot about income inequality.

But I did not care for his comments about Volcker. What he says happened did indeed happen. But it was the Reagan nuts that did it, not Volcker. The toolkit the Fed has is limited.



Volcker *was* a Reagan nut.



When Nixon removed the gold backing from the US dollar in 1971 his intention was to maintain the financial dominance of American capitalism. But by the end of the 1970s, that was far from assured. The value of the dollar fell sharply, profits were declining, the stock market was down and the US economy was in the grip of stagflation.

In October 1979 Paul Volcker—who has recently been selected by President-elect Obama to be one of his key economic advisers—was appointed to the position of chairman of the US Federal Reserve Board. Volcker embarked on a program of interest rate hikes under the banner of anti-inflation.

The "Volcker shock," as it became known, sent interest rates to record highs and led to the deepest recession since the 1930s. It was accompanied by an offensive against the working class, starting with the Chrysler bailout in 1979 and the smashing of the air traffic controllers strike in 1981 and continuing right through the 1980s. Millions of jobs were destroyed and whole sections of industry wiped out.

The result was a transformation in the structure of American capitalism. From the end of the Civil War in 1865, American capitalism's rise to power had been based on its industrial prowess. American methods of production had proven to be the most efficient and the most profitable in the world.

That was no longer the case. Thus the essence of the Volcker measures was to put in place a new regime of accumulation based on the expansion of finance capital.

The road to this new mode of accumulation was by no means smooth. The recession of 1981-82 was followed by a slow recovery, and while the stock market started to rise from 1982 onwards, it crashed in October 1987. The decade finished with a crisis of the savings and loans banks, requiring a bailout of between $150 and $200 billion, and the onset of another recession.

The liquidation of the Soviet Union in 1991-92 and the decision by the Chinese Stalinist regime to open the way for the integration of the Chinese economy, and above all the multi-millioned Chinese working class, into the circuit of global capital, marked a major turning point. It was these events that made possible a mode of accumulation based on finance capital.

The opening up of China, with labour costs one thirtieth of those in the US and other major capitalist countries, provided the basis for an expansion in the mass of surplus value extracted by capital from the working class. In a recent speech hailing the virtues of globalisation, European Commissioner Peter Mandelson noted that a Chinese manufacturing firm producing an iPod receives only $4 for a device that retails for $290 in the US.

Mandelson was pointing to a process in which surplus value extracted in China is then distributed to other sections of capital in the form of license fees, rents on shopping centres, and interest to banks and financial institutions.

This relationship with China formed a kind of virtuous economic circle. Cheap manufactured goods kept down the rate of inflation, allowing the Fed to lower interest rates in the US without worrying about inflation.

Cheaper credit fueled various asset bubbles—the share market bubble, the dot.com bubble and the housing bubble—that financed the debt, while helping to sustain US consumption levels in the absence of real wage increases. At the same time, Chinese authorities invested their trade surpluses in US financial assets, in order to keep down the value of the yuan against the dollar and ensure the maintenance of export markets. This also helped keep US interest rates low and sustain the supply of cheap credit, which, in turn, sustained the asset bubbles.

In 1982 the profits of finance companies amounted to 5 percent of total corporate profits after tax. By 2007 their share had risen to 41 percent. This transformation—the financialisation of the American economy—has had vast implications for the process of capital accumulation and the growth of debt in the US economy.

In previous periods, debt was incurred by industry in order to finance its expansion. But with the growing importance of the finance sector, debt has been increasingly incurred to finance further financial activity.

The buying and selling of securities based on assets became the new road to wealth accumulation. In 1995 the dollar value of asset-backed securities stood at $108 billion. By the year 2000, at the height of the share market bubble, it was $1.07 trillion. It reached $1.1 trillion in 2005 and $1.23 trillion in 2006. In other words, in the space of a decade, the value of these securities had increased ten-fold.

In other words, the financialisation of the economy, that is, the appropriation of surplus value rather than its extraction in the production process, became the other key factor in the explosive growth of derivatives.



https://www.wsws.org/en/articles/2008/12/nbe4-d23.html
#15121540
Volcker was appointed by Carter.

I was around back then. The Fed before Volcker made a terrible mistake. The inflation was a long time coming, but the oil shock made it worse. We got stagflation when the Fed tightened the money supply in response to something outside the country. Problem is, Saudi Arabia could care less if our money supply was tight. IOW, it made things worse here without having a snowflakes chance in hell of making things better.

Look, I might not share your economic view point, but I agree 100% with where you are trying to go, you just picked the wrong guy.

Reagan broke Unions, undermined blue collar guys, and changed the tax system to not only cut the taxes of the rich, but help them cheat on their taxes.

There's a book, I even reviewed it here, about what Reagan did with taxes, can't remember the name.
#15121555
late wrote:
Volcker was appointed by Carter.

I was around back then. The Fed before Volcker made a terrible mistake. The inflation was a long time coming, but the oil shock made it worse. We got stagflation when the Fed tightened the money supply in response to something outside the country. Problem is, Saudi Arabia could care less if our money supply was tight. IOW, it made things worse here without having a snowflakes chance in hell of making things better.

Look, I might not share your economic view point, but I agree 100% with where you are trying to go, you just picked the wrong guy.

Reagan broke Unions, undermined blue collar guys, and changed the tax system to not only cut the taxes of the rich, but help them cheat on their taxes.

There's a book, I even reviewed it here, about what Reagan did with taxes, can't remember the name.



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A hard rain

The long boom came to an abrupt end in the autumn of 1973, as Western economies went into recession simultaneously for the first time since the 1930s and unemployment doubled. This was enough to produce panic in government and business circles everywhere. Mainstream economists had never been able to explain how the slump of the 1930s had happened, and none of them could be sure they were not facing a similar situation.

In the 1950s and 1960s they had convinced themselves that slumps were no longer possible because they could apply the prescriptions of John Maynard Keynes. Business cycles were a thing of the past, the author of the world’s best-selling economic textbook, Nobel prizewinner Paul Samuelson, had assured them in 1970. But when they tried to apply Keynesian remedies to the recession they did not work. The only effect was to increase inflation while leaving unemployment untouched. By 1976 they had abandoned such methods amid panic about the danger of escalating inflation. Economists and political journalists switched overnight to a belief in the completely ‘free’ market, unconstrained by state intervention—a theory previously preached only by a few isolated prophets such as Friedrich Hayek and Milton Friedman. Such a mass conversion of intellectuals had not been seen since the days when theologians changed their ‘beliefs’ on the say-so of princes.

The popularity of the prophets of the free market could not, however, restore unemployment levels to those of the long boom. Nor could it prevent another recession at the beginning of the 1980s, doubling unemployment again and affecting even wider areas of the world than that of 1974-76.

One popular explanation for the crises of 1974-76 and 1980-82 blamed the sudden increases in the price of oil after the Arab-Israeli war of October 1973 and the outbreak of the Iran-Iraq war of 1980. But a fresh crisis broke at the beginning of the 1990s, at a time of falling oil prices. Another explanation claimed that the crisis of 1974-76 resulted from the impact of rising wages on profits. But this could not explain the later crises, since wages in the world’s single most important economy, the US, fell steadily after the mid-1970s.297

Something more fundamental in the system had changed, turning the ‘golden age’ into a ‘leaden age’. The US had been able to afford massive arms spending at the time of the Korean War, absorbing perhaps 20 percent of its total output and equal to half the surplus available for investment. This had provided markets for its own industries and for exports from states such as Japan, which spent very little on arms. But by the time of the Vietnam War competition from such countries meant the US could not afford its old level of military output. It still produced massive quantities of weaponry, but the proportion of output this absorbed was probably about a third of that at the time of the Korean War. This was simply not enough to ward off recurrent and deepening world recessions, even if they were not yet on the scale of the 1930s slump.298

This did not bring all economic growth to an end in the advanced countries. But growth was much slower and more uneven than previously, and the cycle of boom and slump had returned with a vengeance. Average output per head in the 1980s grew at less than half the rate of the early 1960s. Unemployment reached levels virtually unimaginable in the long boom, commonly staying above 10 percent for years at a time, and rising close to 20 percent in places such as Ireland and Spain. Lower rates in the US in the late 1980s and late 1990s were driven by welfare cuts which forced people to take jobs at poverty wages—the poorest 10 percent earning 25 percent less than the equivalent group in Britain.299

Generalised job insecurity became a feature everywhere. By the 1990s mainstream politicians were deriding the idea that people could have ‘jobs for life’. Yet that phrase had summed up what most people took for granted through the long boom. Of course, people changed jobs as some industries grew and others contracted. But except in a few ‘declining industries’, workers usually did so voluntarily, responding to the pull of better prospects, not the push of redundancy. Now the push became the norm, and opinion polls suggested fear of it weighed on the minds of about half the working population.

Capitalism is a more dynamic form of class society than any before in history. Its dynamism, its ever-changing character, is as typical of a slump as of a boom. Some firms go out of business while others prosper at their expense. Some industries contract while others expand. Even in the worst slump there would be growth sectors—such as pawnbrokers buying up the goods of the most desperate and security services protecting the wealth of the rich.

The dynamism remained in the ‘leaden age’, but instead of offering the mass of people improved lives, as in the long boom, it threatened to snatch what they had achieved in the past. Whole industries disappeared, and towns were reduced to wastelands. Welfare benefits were cut to the levels of 50 years earlier—or even abolished in some US states. Meanwhile, a new brand of hard right politicians known as ‘Thatcherites’ or ‘neo-liberals’ toasted the unleashing of ‘enterprise’, and found an echo among a layer of social democratic politicians who treated a return to the orthodoxies of 19th century politics as evidence of ‘modernity’.

The shift to the right had its impact on sections of the radical left, demoralised by the defeats of the mid-1970s—and in some cases by learning the truth about China and the bloody regime established by the pro-Chinese Khmer Rouge in Cambodia. Some drew the conclusion that the whole revolutionary enterprise had been misconceived. Some believed they had been too severe in their criticism of parliamentary reformism. Some simply concluded that the class struggle was a thing of the past.

In fact there were some very big and sometimes violent class confrontations in the 1980s, as workers tried to prevent the decimation of jobs in old established industries—the struggles by steel workers in France and Belgium, the year long strike of over 150,000 miners in Britain and a strike of similar length by 5,000 British print workers, a five day general strike in Denmark, public sector strikes in Holland and British Columbia, and a one day general strike in Spain.

But, by and large, these struggles were defeated, and one legacy of defeat was a growing belief that ‘old fashioned’ methods of class struggle could not win. This led a layer of working class activists to place their hopes once more in the promises of parliamentary politicians. It also encouraged left wing intellectuals to question further the very notions of class and class struggle. They embraced an intellectual fashion called ‘postmodernism’, which claimed any interpretation of reality was as valid as any other, that there was no objective basis for notions such as class, and that any attempt to change the way society operates would be ‘totalitarian’, since it involved trying to impose a total conception of the world on others. Postmodernists rejected notions of struggling to change society just as the dangerous instability of society became ever more pronounced.


Harman, _A People's History of the World_, pp. 586-589
#15121959
late wrote:
Not playing that game.

You've run out of steam...



I'm not playing any games.

Here's what happened -- you expected me to give you a personal reply to your rant, and instead I provided topical *subject matter*, from history, on the actual issue.

I'm here for the *politics*, late, and I *addressed* the topic, just not with my own words.
#15121961
ckaihatsu wrote:
I'm not playing any games.

Here's what happened -- you expected me to give you a personal reply to your rant, and instead I provided topical *subject matter*, from history, on the actual issue.

I'm here for the *politics*, late, and I *addressed* the topic, just not with my own words.



I see a lot of things as a game, esp. this.

You ran out of steam, and hoped that C&P would get you out of the bind you were in.

Didn't work.
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