Non-Tech
|
|
Rethinking Deflation "Highly Likely" for the U.S.
|
| An SI Board Since October 1998 |
| Posts |
SubjectMarks |
Bans |
| 1 |
0 |
0
|
|
The summary of Gary Shilling's book "Deflation" carried on SI gives this reader pause regarding Dr. Shilling's overall conclusions. Comparing the current changes in price levels to those prevailing between the Civil War and 1930 is a matter of apples and oranges. Subsequent to the Civil War, the United States undertook deflationary policies to undo the inflationary wartime policies. In 1865, money supply stood at $1624 million. Thereafter, Treasury policy reduced money supply to $1489 million by 1868. Contemporaniously, reinclusion of the southern states placed an additional burden on the shrinking money supply. Naturally, this monetary contraction precipiated a marked fall in price levels. Indeed, due to a need to maintain parity to a relatively fixed gold supply, price levels fell by 50% between the Civil War and WWI. The United States maintained fixed exchange rates and gold convertability until the depression and again after WWII until the fixed exchange rate regimes collapsed in the early 1970s. Since we have been operating under flexible exchange rates without gold convertability nor a gold standard since the 1970s, our current deflationary situation is of an entirely different origin than that which existed prior to the 1930s.
|
|
|
