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@RaoulGMI Reading the Deep Dive from 27 December, you've repeatedly mentioned that the inflation in the 70's was caused by the baby boomers entering the workforce. I skipped by it a couple of times but now reading that statement a fourth time I felt I had to discuss it w you all.
You seem to be referring to the rise in inflation as a demand shock, that now that the workers are in the workforce making money, they're going out and purchasing durable goods on a scale never seen before. That would make sense... if the supply of durable goods changed.
But other than shortages in energy, I haven't been able to find anything that shows a decreasing supply significant enough to cause inflation of that kind. Especially since our trade deficit was relatively low, US was producing goods themselves and people were using funds from...
working to purchase these goods. I think you're looking at the demand side, but in order for there to be demand, something has to be produced, and in my view there was plenty of supply to be consumed. So the view that this was demand shock inflation doesn't resonate with me.
In my view, in order to understand the inflation of the 70's we have to go look at what was going on in the 60's. This was the LBJ, guns and butter administration where the US was sending people to the moon, fighting the Vietnam War...
fighting the war on Poverty with new Great Society programs... That added up to a LOT of government spending/borrowing, in fact LBJ doubled the amount of debt that JFK added. To me, this makes much more sense about how the inflation was caused in the 70's, it was loose fiscal...
policy, and it would also make sense that the way we stopped the inflation was for Paul Volker to raise interest rates to 20%.
Tight monetary policy was able to stop the inflation from going any further. This is how I learned about it. Open to any rebuttals, please guys....
Tight monetary policy was able to stop the inflation from going any further. This is how I learned about it. Open to any rebuttals, please guys....
This is why Twitter is so good, we're all here to give and take a massive pool of collective knowledge. @RaoulGMI @SantiagoAuFund @LukeGromen @MetreSteven @JulianMI2 @LynAldenContact @edwardnh @rogerhirst4 @HedgeyeDDale @TgMacro @profplum99 maybe @SahilBloom has a thread 4 us
Maybe what we saw with government spending in the 60's portends what may come in the decade we have ahead of us... although I have to say, I'm a deflationist. Either way, I'd love to hear some of y'alls thoughts.
