Subject: Wages and Prices

The problem is that PRICES have inflated TEN TIMES in the last 40 years while WAGES have only inflated FIVE TIMES. What we need is a Central Bank which will stop inflating long enough to let wages catch up with prices. In other words let some of the air out of the PRICE balloon and let it equalize into the WAGE balloon. Better yet, GET RID of the Federal Reserve and go back to a ZERO INFLATION gold and silver standard and eventually the economy will heal itself.

You honestly think that inflation did not exist before 1913, or before the gold/silver/other precious metal standard was revoked?

What's so special about gold, anyway? Its value is only what other people say it is, right? Does that make gold-based currency fiat as well? Am I using the word "fiat" correctly?

Robert, if prices had held steady while wages had declined in strict dollar value, would that be any better?


BTW, I'm not too sure about your 2-for-1 price-to-wage-inflation ratio. Do you have something to verify this?


Be that as it may, the problem existed in a different form before the end of the gold standard. Instead of inflation, it led to the working-class oppression and periodic economic collapses of the prior saeculum. I don't see a return to that situation as preferable to what we have today.

Subject: Words of wisdom.

"Men, having experienced a period of inflation, long for price stability. Then having experienced stability, they long for inflation."

John Kenneth Galbraith

Wages: http://146.142.4.24/cgi-bin/surveymost

CPI: http://www.economagic.com/em-cgi/dat...cu/CUUR0000AA0

Date Wage CPI
Jan 1964 $2.32 93
Jul 2001 $14.35 532

Factor 6.19 5.74

The inflation Robert is taling about is the 20th century price revolution. They have happened before and yes you can have inflation with gold as currency. Here is a plot of the last four revolutions in Anglo-American prices

http://csf.colorado.edu/authors/Alex...ke/Image55.gif

Subject: Lies, Damned Lies and Statistics

I'm working off of personal experience guys. Back in the Sixties my father who had an engineering degree made 10,000 per year. He raised and educated two kids and built a really nice house for 20,000. And my mother stayed home with us so as a result we didn't wind up like wild animals as Generation X did.

I have an equivalent engineering degree and to do what my father did I would have to make at least 100,000, probably more with taxes (I make 50,000). The house he built for 20,000 was listed at 190,000 the last time it sold. The car he bought for 2,000 would cost me 20,000 now and wouldn't be as large or well built.

You can quote silly government statistics at me all day but I and my 48 years of experience know better. If things are so wonderful why is everyone up to their necks in debt even though both spouses work? Use your heads!

On 2001-08-27 17:39, Chris Loyd '82 wrote:
You honestly think that inflation did not exist before 1913, or before the gold/silver/other precious metal standard was revoked?

The 19th Century was a long price deflation in the main. HTH

Yes, Robert, some things can be true without clinical analysis and the accompanying 300 pages of documentation.....

Whatever you economists call them, individual fixed costs have ballooned.

The prices of goods and services cannot rise faster than the incomes of those who primarily buy them. The prices of things like gas, clothes, and food are set by the broad mass of Americans. Thus, these prices have risen about as much as median incomes. For example when I began working in the 1970's I was paid $2 an hour and gas was 55 cents. Today my daughter makes $5.50 at here first job and gas is $1.50. Its about the same. I went through this same exercise with my Dad back in the 1970's, except the example then was shoes.

The price of things like desirable homes and tuition at "good" colleges are set by the affluent. These prices rise in accordance with their rising incomes. Since the top deciles have seen a much greater percentage rise in income than the bulk of the population, we see that the price of desirable homes and college tuition has risen relative to the incomes of most Americans (but not to those at the top).

This process of desirable homes and college education becoming less and less affordable has *nothing* to do with money inflation, and *everything* to do with income distribution.

Subject: Credit Inflation

The prices of goods and services CAN rise faster than the wages of those who buy them IF they are purchased with debt.

You are right that credit excess can increase effective money supply leading to inflation. Here is an article I published at gold-eagle discussing this very thing.

http://www.gold-eagle.com/editorials...der051401.html

Some additional explanation is given in this post on the Longwave forum:

http://csf.colorado.edu/longwave/2001/msg01151.html

The effect of credit will show up in prices for everything, as credit is used to buy everything. Over the short run (within a single business cycle) prices can rise above incomes because of credit expansion. But over a longer term that covers several business cycles this won't be observed.

But the point I was discussing was how prices of *some* things like houses and college education have risen so much faster than other sorts of goods *over the long run* (this was what Barbara was refering to). This lopsided behavior isn't simple inflation due to credit excess, but rather a consequence of a lopsided income distribution.

Subject: Steady State Economy

And this is the point I was trying to make about stopping inflation and allowing all the balloons in the economy to equalize pressure (think of the economy as a system of interconnected balloons blown up with money). We need a Federal Reserve Chairman who will refuse to buy any more Federal Debt and who will stop pumping more credit into the system. Of course any one who did this would only last for one term. Human nature being what it is the temptation to inflate is too great. This is why we need to get rid of the Federal Reserve and go back to a hard money system. We don't want INFLATION but we also don't want DEFLATION. We need a steady state economy.

FYI: Economy ready to rebound? A "frock coat" sounds off in the New York Times...

http://www.nytimes.com/2001/08/30/opinion/30SHEP.html


I just heard the same line from a "frock coat" via Bank One on Fox News.

Subject: Bad news.

There just doesn't seem to be any good news out there. GDP growth came in at .2 percent for the last quarter. With government statistician's proclivity for fudging and prevarication it was probably really negative, they were just afraid to tell us. The dollar dropped more than a percent today. The linchpin of our bubble economy is the dollar. Foreign dollar holders have kept us propped up for years. America's largest export is inflation in the form of dollars. It will get very ugly if those dollars are dumped and come home to roost.

Now having said all that I am by no means sure that this recession will devolve into a depression. It's always darkest before the dawn. I have been through three recessions in my adult life. At the bottom of each one the Doom & Gloom Crowd always yell that this is THE END and WE'RE ALL DOOMED. But we came out of it and maybe we will this time. It will be several years before we know for sure.

It seems like unions are all of sudden wanted. More people want to join unions, and feel that they need their protection and structure and organization. Could this be a sign of a mood change?
http://www.msnbc.com/news/622237.asp

Subject: Today's Rally

Today's rally was very peculiar. The Dow was up about 200 points, but then the sellers came out and sold into the rally so the Dow only wound up 49. The Wilshire 5000 finished down so the market had a losing day in aggregate.

Mutual fund redemptions are up. Perhaps the average person is beginning to realize it is impossible for everyone to get rich dumping counterfeit money into the stock market. The next few months should be interesting.

Mike Alexander posted:
"But the point I was discussing was how prices of *some* things like houses and college education have risen so much faster than other sorts of goods *over the long run* (this was what Barbara was refering to). This lopsided behavior isn't simple inflation due to credit excess, but rather a consequence of a lopsided income distribution."

Mike, I admit I wasn't specific in my reference to ballooning costs of goods and services, but I will be now. I really was referring to housing utilities and to the insurances (housing and transportation). They've become as fixed and basic as housing rent/mtg and food.

I had tried to trace the percentages changes of the cost indexes over the last 20 or so years online. Don't know if I found the most recent or not, but it looked to me like the housing has mucho increased, the last one I could find places that one at between 40-50%? (42). Still, I know families who pay a combined percentage of discretionary income of over 65%-70%. They're not living in mansions, either.

As far as college educations, all the latest reports indicate that Millies are and will be hitting the campuses in droves. SAT test takers are apparently at an all-time high. So, even though that isn't an official cost category (other than "Other"), realistically it may as well be one. And, if the money is borrowed with a non-equity loan, that's just in time for the higher consumer rates. The point of Robert's takes on even more meaning.

My oldest son ('50 Boomer) has two children departing for college over the next few years time span. He's grudgingly decided to take a loan from his 401K for it. He's been an avid supporter of harsh Social Security privatization, but he surprised me the other day by saying he's rethinking it. He says even if his 401K value holds up, he'll be able to pay off his house and educate his children, but will need that SS check. Had he not touched his retirement, he'd thought he could have done just fine, but that he was looking through rose colored glasses and forgetting he'd actually be growing old while he was alive. I had to chuckle at that, being both myself.

Madscientist Robert, I'm not at all surprised about growing union affiliations. I'd be worried if in these economic and generational times there WASN'T an upsurge. Most of the modern workforce have only their labor value to bring to the table, and a strong union is the way to sit at the table, if it's un-corrupt, that is, and it takes each union reincarnation a while to get that way.



_________________
"They always act so dirty/ they keep themselves so clean/why can't they find the answers/ to the questions that are right in front of me?" - Puddle of Mudd, 'Out of My Mind' (So Clean CD)



<font size=-1>[ This Message was edited by: Barbara on 2001-09-04 22:24 ]</font>

Subject: Deflationary Spiral

The Stock Market sure took a hit last week. I wonder how much it lost in Total Capitalisation? We seem to have a large amount of deflation going in the Stock Market Balloon. However the Real Estate Balloon is still inflating. People are still borrowing vast sums of money and are dumping it into real estate instead of stocks. When will the Real Estate Balloon begin to deflate? Probably when unemployment reaches about 10%, that's typically when the real pain begins to be felt at large in the public. When people loose their jobs they can't make their house payments and have to default on their mortgages. Back in the '91 recession even California real estate went down.

Since World War II we have been in an INFLATIONARY SPIRAL. People went out and spent all their money to buy assets because those assets were APPRECIATING. In a DEFLATIONARY SPIRAL people save their money because those assets are DEPRECIATING. Why buy something now when it will be cheaper next year?

If we are in a deflationary spiral there will be nothing to stop it until ALL the debt is wrung out of our financial system through repayments or defaults.

Yes, Robert, I was quite amazed at last week, particularly Friday (yesterday), after news of the almost 5% unemployment report. The CNBC talking heads were quick to note Friday's S&P drop was "only the 8th largest this year". The word "DISinflation" was bandied about ALOT; NEVER DEflation. I don't watch every day as all we possess is an ample cadre of XOM and that gently but slightly blows in the wind with a so-far massive, stable trunk, but they seemed particularly nasty yesterday towards Greenspan, some NOT wanting another interest cut, so as not to encourage "panic" on the floor. My husband called them ungrateful buggers.

I, of course, yearn for some good old-fashioned inflation (since I tend to suspect we've been experiencing it on certain goods for awhile now whether they admit it or not), if only to get a decent CD interest rate. It really is not right at all that credit card companies can charge what they do. I hear it can now be up to 30% now! What a loophole!

You posted "If we are in a deflationary spiral there will be nothing to stop it until ALL the debt is wrung out of our financial system through repayments or defaults."

Well, won't THAT take awhile....

BTW, heard a blurb about gov't backed loan payments (I suppose FannieMaes and the like) having an extraordinary or marked level of lateness per the most recent report. Your remark about loan defaults may be starting up. People apparently are having difficulting paying on time at present.


<font size=-1>[ This Message was edited by: Barbara on 2001-09-08 17:43 ]</font>

Subject: Disinflation and Deflation

DISINFLATION is when the rate of inflation is falling. If CPI inflation went from 9% one year to 6% the next year that would be disinflation. DEFLATION is when the rate of inflation is NEGATIVE. We definately have DEFLATION in the Stock Market Balloon. The Total Market Capitalization of ALL stocks got very much smaller last week. Of course the talking heads on CNBC don't want to say that. I would imagine we will have a short covering rally in the market next week though a panic and crash is still a possibility.

"We definately have DEFLATION in the Stock Market Balloon...Of course the talking heads on CNBC don't want to say that."

I have become increasingly suspicious that Wall Street has been disconnected from Main Street for quite some time. I haven't seen DE-spirals Out Here, to the contrary, all I've seen is wages and investment not keeping up with inflating costs. Wages driving the working man's "market" have evaporated for 3-4 years now; costs have lept to catch up in that time (in a sort of game of greedy catch-up) and are still leaping, though there's no related additional income to absorb them. Nothing to stop them now but an across the board collapse?

Robert, bringing back in theory Joseph Kennedy from the late twenties, would this now be the time he would be selling short and pulling out? Or are we past even that?

Subject: Short Sellers

When you go LONG in the market you buy LOW and sell HIGH. This is what you do to make money in a BULL market. When you go SHORT in the market you sell HIGH and buy LOW. What a short seller does is borrow shares of a weak stock he thinks is going to go down from his broker and sell the shares into the market. This will force the price of the stock down. If other shorts jump in they can ruthlessly drive down the price of a stock. This is what happened last week. The shorts were out in force driving the market down. At some point though, when the price of the shares are low enough, the broker will require the shorts to buy back the shares at the lower price and give them back. This is why a bear market is downward moves punctuated by "short covering rallies" when the shorts are forced in to buy back the shares they sold at a higher price.

Stock markets RARELY go sidewise, they are usually either INFLATING or DEFLATING (bad).

Where's that surplus banked?, asks Mr. Martin Gross in the 10 September 2001 number of the Washington Times.


That the Bush administration should wish to dip into a pool of money that has already been spent causes horror in the Progressive mind...and, yet these people usually scoff at things believed though unseen. HTH

To take a slight break from the attack, the economy has accelerated even more downhill this month, before the attacks.

http://www.usatoday.com/money/econom...nt-plunges.htm