Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: TobagoJack who wrote (90103)	1/4/2008 5:40:59 PM
From: GST	Read Replies (1) \| Respond to of 110194

LOL -- you cite Argentina, where inflation peaked at over 5,000% per year, etc, etc, as examples of deflation? Are you kidding or did we get our wires crossed? <<The following excerpts are from an article by Domingo Cavallo entitled "Lessons from the Stabilization Process in Argentina, 1990-1996," published by the Federal Reserve Bank of Kansas City in the proceedings from its 1996 symposium Achieving Price Stability. Hyperinflation exploded in 1989. It was the final stage of a chronic inflationary process that began in 1945 and lasted forty-five years. From the beginning of the century until the end of World War II, Argentina had been characterized by stable prices. Internal prices only reflected fluctuations related to events in the world economy, such as the two world wars and the Great Depression of the 1930s. After 1945, the combination of industrial protectionism, redistribution of income based on increased wages, and growing state intervention in the economy touched off the inflationary process shown in Table 1. After so many years of inflation, there is a general consensus among economists about the mechanics of this process. A persistent fiscal deficit, increasingly financed by monetary emission, caused more and more frequent devaluations of the local currency. The acceleration of inflation resulted from the demonetization of the economy as the public tried to avoid the inflation tax. During the last decade of this period of chronic and growing inflation, the social and economic costs of inflation became evident. In the 1980s, the economy, increasingly disoriented by inflation, declined at a rate of 1 percent per year. Employment continued to grow 1.6 percent per year but the 2.6 percent average annual decline in the productivity of the employed was the clearest evidence that only unproductive activities were expanding. This was especially the case of the public sector but it also existed in the private sector,which continued to be strongly protected from foreign competition and involved in financial speculation. Government expenditure during the 1980s represented, on average, 33 percent of GDP, while the fiscal deficit was about 5 percent of GDP. . . . The year 1989 was catastrophic. Government expenditure reached 35.6 percent of GDP and the fiscal deficit climbed to 7.6 percent of GDP. From December to December, inflation almost reached 5,000 percent; at the peak of March 1989 to March 1990, it was over 20,000 percent. Gross domestic product fell more than 6 percent and imports fell 21 percent that year. The government could not ignore the strong public demand for the price stability that had been absent for forty-five years. Table 1 Argentine Inflation by Decade (Annual rates of change in the consumer price index) Period Average Maximum Minimum 1920-1929 -1.7 17.1 -15.9 1930-1939 -0.3 13.0 -13.9 1940-1949 10.6 31.1 -0.3 1950-1959 30.3 111.6 3.7 1960-1969 23.3 31.9 7.6 1970-1979 132.9 444.0 13.6 1980-1989 750.4 4,923.3 87.6 academic.reed.edu

To: TobagoJack who wrote (90103)	1/4/2008 5:47:58 PM
From: GST	Read Replies (1) \| Respond to of 110194

en.wikipedia.org