Comments on: Liquidity & inflation, lessons from the 1940s http://blogs.reuters.com/great-debate/2009/04/24/liquidity-inflation-lessons-from-the-1940s/ Thu, 21 Jul 2016 07:57:19 +0000 hourly 1 http://wordpress.org/?v=4.2.5 By: Anubis http://blogs.reuters.com/great-debate/2009/04/24/liquidity-inflation-lessons-from-the-1940s/#comment-13461 Sun, 26 Apr 2009 13:53:11 +0000 http://blogs.reuters.com/great-debate-uk/?p=983#comment-13461 Thank you John. I was wondering when someone would address these ignored facts. There are other lessons to be learned. There is clearly over capacity for durable goods. We marshaled manufacturing to produce military hardware. We could do the same for alternative energy generating devices like solar panels, wind turbines and power cells for industrial and home use. A similar investment in public transportation would be useful as well.

Rebuilding the power grid will prove to be a herculean task. The future will depend on households and business to be energy independent. This will allow a greater time frame to revamp power distribution and reduce large public financial commitments as the power grid won’t have to be quite so large.

Lastly, let us not forget about wage and price controls that were in effect during the 30s and 40s. We produced everything we needed then. Today we are an import nation. Our most important import commodity is oil. This factor must be considered if we are to move in this direction. Not being able to produce enough oil for our own consumption makes for implementing such policies difficult and all the more urgent.

]]>
By: kbeatty http://blogs.reuters.com/great-debate/2009/04/24/liquidity-inflation-lessons-from-the-1940s/#comment-13441 Sat, 25 Apr 2009 18:52:48 +0000 http://blogs.reuters.com/great-debate-uk/?p=983#comment-13441 The US money supply contracted more than ten trillion dollars. The precise amount is a secret because of the enormity of the loss, and bank secrecy. No amount of government intervention can reflate the money supply. Hence inflation is a red herring. Deflation is the reality.

Corporations are slow to react to the new price reality. The auto industry is a poster child for sticky prices. GM sales were cut in half while GM raised $35,000 per vehicle prices 1% in the face of collapsing sales. Hyundai sales doubled while Hyundai offered a lineup in the range of $10,000-$15,000.

This is the year when retail prices adjust to clear the market. Quick thinkers like Hyundai grow fast in this environment. There is plenty of price elasticity in a dentifrice that costs five cents to manufacture, and ten cents to distribute.

]]>