I thought the non-adjusted prices were interesting. No idea what story it tells if you adjust it, but non adjusted, the prices were essentially the same from 1840-1925.
https://fred.stlouisfed.org/series/A939RX0Q048SBEA/
US GDP per person has grown about 1% per year on average.
Wages stopped increasing to match productivity in the early 1980s, and that trend continues.
1970s not 1980s:
"The World War I era and its aftermath, 1917–1920, then produced sustained inflation unmatched in the nation anytime since. Prices rose at an 18.5-percent annualized rate from December 1916 to June 1920, increasing more than 80 percent during that period."
[1] https://www.bls.gov/opub/mlr/2014/article/one-hundred-years-....
I'm not sure of what you are saying there, but it can be interpreted like war bonds is the cause of inflation.
It's exactly the opposite. At war, a government have to use all the available resources for the war effort. That will produce inflation, because the war spending is competing with the private spending for the same resources.
A way to avoid it, is for the government to retire money from the private sector. A way to retire money from the private sector is to sell war bonds to the population. If you buy a war bond, basically what you are doing is promising that you will not spend your money until after the end of the war. Normally you will get some interest for your patriotic sacrifice.
Also, for the gold standard fans out there, imagine what would happen if a government can not mobilize all the available resources of the country because it has not enough gold. That would be the most ridiculous way to loss a war.
I’d start by studying Bryan’s “Cross of Gold” speech to get some perspective away from people writing about their pet economic theories.
It’s an interesting period of history with many parallels to our current state of affairs.
What a useless response. Suggest instead how to check it out! What books should be looked up or terms googled?
Inflation defined as an increase in consumer prices.
Consumer prices are affected by many factors other than the money supply, for example if oil prices rise then it tends to push up consumer prices and therefore inflation even if the money supply were static.
Sure, you can build a money system without inflation but that doesn't change that you still have to represent the loss of value via unemployment caused by saving money. i.e. you will need money with an expiration date, negative interest rate or wealth tax.
I'd heard that there was no inflation in England in 1914 versus 1614. That's not quite right, but there was a remarkably stable period (for some value of "stable") between c. 1650 and c. 1750, and another from 1820 to 1914.
And then extending that, one could make the argument (and cryptocurrency maxis frequently do) that inflation is really only good for the existing upper class, who like it because it makes it easier to pay off their debt (of the "building a factory" variety, not credit cards) and because the wealthy own most real assets (e.g. property) that don't get devalued by inflation.
I haven't done enough analysis myself to say whether I think this argument holds water, but that is the argument I assume GC would make and I've done my best to steelman.
There were plenty of "periods of stagnation" in that time interval, though.
In general, stable money income flows promote economic resiliency far more than stable prices do. This means a rising price level (inflation) when the economy is hit by real-world constraints such as war or disasters, and stable or even falling prices when there is a lot of real growth. Pegging the value of the US dollar to gold led to an economic disaster in the late 1920s as the Banque of France was hoarding a lot of gold in a futile attempt to re-establish "sound" money after WWI. Widespread devaluation in the 1930s made it possible to stabilize nominal income flows again, which had beneficial effects even though it came with some mild price rises.
BTW, that's one of the things that make me so excited about DEFI – bringing even more financial instruments previously only available to the rich for wide masses.
The problem with many financial instruments being available is that, because there isn’t anything very interesting to say about “normal” investment, someone reading about investing (or talking to some financial advisor trying to sell them something) will think that it is sensible to be picking investments in various new or weird instruments. The incentives don’t work for the cover of every issue of Barron’s to say “yep, people should probably just invest in broad-ranged low-fee index funds”[2].
But maybe it is hard to stop people from foolishly getting involved in these sorts of schemes and instead of weird financial instruments they will be convinced to make “totally safe but high interest” loans to obviously dodgy companies.
[1] I might back down from this a bit and allow normal equities but not penny stocks and definitely not options. I’m not suggesting no one should be able to get involved but rather that it should be somewhat inconvenient to do so, eg maybe you need to turn up to some office in person or send in a form and wait 2 months (as opposed to the system of “accredited investors” who just need to be somewhat wealthy, a requirement that cuts out people who could make good decisions while still allowing plenty of dentists to be duped into stupid schemes.)
[2] Maybe Barron’s is a slightly bad example as their focus is on financial markets, but you could imagine instead the personal finance section of a regular newspaper.
It's pretty obvious what the problem is. If the value of the money is kept stable while the real world deteriorated (through unemployment) then A becomes a leech on productivity or productivity growth. I.e. the way he is maintaining his savings is by exploiting the slack in the labor force. Thus anyone who wants to save in USD is dependent on an underclass that willingly sacrifices their labor. I don't see how this benefits poor people. I can kind of see how this benefits a middle class founded on exploitation. I definitively don't see how reducing the savings until they reach their real value benefits an upper class. They are the ones that want their money to be stable because it means they can extend debts arbitrarily long into the future at their own whim.
Anybody know any good treatises on inflation?