Tuesday, 10 November 2009

1930s Vs Today: Lots To Worry About

I have written an article about the similarities between now and the great depression, which I will post at a later date. However, for now, I just noticed another interesting parallel.

One of the reasons the GD was so bad was that, while the natural course of events should have caused price deflation, and this happened in spades in monetary terms, the authorities did all they could to prevent prices falling. While the fall in the money supply was not itself the problem (it simply was the necessary consequence of the credit boom and was in no way a cause of the crisis), the way the authorities tried to prevent prices themselves falling in spite of a lower money supply, was the source of much of the unnecessary damage.

By artificially propping up wages, commodity prices, and consumer prices, the government failed to let markets clear (particularly the labour market), prevented the reorganisation of labour and capital, and retarded the rise in the savings rate. Today, we have a similar situation. I’m not talking about the minimum wage. I’m talking about the policies to kill the dollar and encourage the dollar carry trade. By artificially elevating commodity prices, this is squeezing disposable income and reducing the ability of consumers and businesses to save. What’s more, the uncertainty over the outlook for prices (there is a range of possibilities from crushing deflation to hyperinflation) is no doubt hindering investment decisions as did the interventionist policies of the 1930s.

The fundamentals of the US economy continue to deteriorate, positive real GDP growth or no.

42 comments:

  1. When everything is coming your way, you are in the wrong lane.............................................

    ReplyDelete
  2. 人必須心懷希望,才會活的快樂,日子才過得充實,有意義,有朝氣,有信心。 ..................................................

    ReplyDelete
  3. 向著星球長驅直進的人,反比踟躕在峽路上的人,更容易達到目的。..................................................................

    ReplyDelete
  4. 一個人的價值,應該看他貢獻了什麼,而不是他取得了什麼.................................................................

    ReplyDelete
  5. 當一個人內心能容納兩樣相互衝突的東西,這個人便開始變得有價值了。............................................................

    ReplyDelete
  6. 來看你了~心在、愛在、牽掛在,幸福才會繁衍不息^^............................................................

    ReplyDelete
  7. 在莫非定律中有項笨蛋定律:「一個組織中的笨蛋,恆大於等於三分之二。」. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

    ReplyDelete
  8. 一時的錯誤不算什麼,錯而不改才是一生中永遠且最大的錯誤..................................................

    ReplyDelete
  9. 老天爺賦予了強者的能力,就是要他比弱者多擔待..................................................

    ReplyDelete
  10. 在莫非定律中有項笨蛋定律:「一個組織中的笨蛋,恆大於等於三分之二。」............................................................

    ReplyDelete
  11. Hi,
    I was surfing net for some finance articles when I got your site and found your articles very unique and interesting.

    I am impressed with your site as it is helping people in taking their financial decision. So, I would like to send an article based on your theme to post in your site. My article will be unique and quality one and also help your site to get more traffic. In return you will get a back link from a quality site.
    Waiting for your valuable response.
    Regards sandythomson09@gmail.com

    ReplyDelete