09-27-2016, 09:38 AM
(09-26-2016, 09:29 AM)pbrower2a Wrote:(07-26-2016, 03:07 AM)Galen Wrote:(07-26-2016, 02:51 AM)Kinser79 Wrote: Indeed. I think this stems from a fundamental economic illiteracy caused by the ideology that inflation is merely rising prices and not that inflation is increases of the supply of money relative to the supply of goods and services.
In economics the definition of inflation has always been an increase in the money supply. Consumer price increases are only one of many possible outcomes. In the twenties there was massive inflation but it did not appear in the CPI and so economists of the time thought everything was just fine. Ironically, only Mises realized that there was going to be a bust part of the cycle. Curiously, a very prominent economist by the name of Irving Fisher managed to go broke along with everybody else because he thought the economy had reached a new era of permanent prosperity.
A word to the wise, when publications start talking about a new era of prosperity then get the hell out of the market and into some tangible assets. That little meme always marks the end of the boom cycle.
An increase in the money supply without an increase in production (even if the increase is solely the result of an increase in population) is inflation. An increase in productivity without an increase in the money supply (even if the only increase in productivity is from population growth) is deflationary. The gold standard practically ensures deflation with population growth.
The 1920s were not fine; they were a true slum of a decade. Living standards failed to keep up with productivity, the increase in productivity largely the result of electrification of manufacturing. Consumer demand failed to keep pace with productivity; that is one cause of the Great Depression, really a correction of that reality. Employers could drive wages down at will in the 1920s but could no longer get away with that in the 1930s. Note well the paucity of nostalgia for the Roaring Twenties even in the brutal early 1930s. People blamed the Roaring Twenties for their hardships.
Although securities prices were far down in 1939 from where they were in the speculative boom of 1929, life was generally better for Americans in 1939 than in 1929. Economic elites who had lorded it over the American worker in the 1920s? They were worse off, but who cared then other than themselves?
Our problem is that we produce lots of consumer goodies cheaply but basic needs dearly. We have huge imbalances between elite indulgence and mass hardship. Maybe things aren't quite as severe as in a plantation society, a feudal order, or a fascist regime -- but we may be headed that way (especially if we get Donald Trump as President and single -party government by people who believe that no human suffering is in excess so long as it rewards elites.
A wholesome society rewards difficult-but-necessary traits like toil, enterprise, innovation, and integrity. A sick society rewards birth, bureaucratic power, corruption, and connections. I can assure you that a vote for Donald Trump is not a vote for toil, enterprise (he simply exploits scarcity), innovation, and integrity.
Living standards improved in the 1920s, if not as fast as productivity. It was in the 1930s that wealth inequalities really started skyrocketing. Even then, unionization was about protecting what the unionized workers had by keeping the nonunionized workers down.