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 Financial Collapse of 2001 Unwinding -- Ignore unavailable to you. Want to Upgrade?

To: DinoNavarre who wrote (8110)	10/19/2021 7:21:33 AM
From: elmatador	Read Replies (1) \| Respond to of 13784

To understand what is happening today, we can look at the oil shock of 1973 just after the end of the gold standard There are 2 views The Supply shock view The Global Monetarist view Cause or effect?Many economists all over the world debated the nature of the oil shocks. There were two diametrically opposed interpretations of the oil shocks, and the debate is still unresolved. Jeffrey Sachs, Michael Bruno and Barry Bosworth (among others) took the first position. Hans Genberg, Alexander Swoboda and Ronald McKinnon (plus Kenichi Ohno) took the second position. The supply shock view: the first--and more popular--view says that the oil shock was a supply shock caused by OPEC's political power. As the oil price was raised exogenously, the aggregate supply curve shifted up and to the left (think of the standard IS-LM-AS-AD model). This led to higher price and lower output, namely, "stagflation." Additionally, aggressive wage increases by trade unions contributed to the global inflation. In order to cope with this situation, the world must solve its supply side problems including energy shortage and wage rigidity. The global monetarist view: the alternative view argues that the high inflation was caused by global monetary expansion, which in turn was caused by the breakdown of the Bretton Woods fixed exchange rate system. As the Japanese and European central banks tried to buy up dollars to prevent the sharp appreciation of their currencies against the dollar during 1971-73, money supply was increased in all major countries. Global excess liquidity ignited commodity price inflation even before the first oil shock broke out. The oil shock was the final result and not the cause of high inflation which was generated by the oversupply of global money. The OPEC is always aggressive, but their attempt to raise the oil price succeeds only when there is too much global liquidity. Thus, the stagflation in the 1970s should be explained by the instability of the international monetary system. grips.ac.jp