An extraordinary fact:
From 1789 through 1912, prices in the United States (so far as they can be reconstructed over that span) increased by about ten percent – not ten percent a year but ten percent over 124 years, albeit with sometimes startling short-term swings.
That’s from an article by The Hesparian blog where the writer looks at yin and yang of inflation versus recession, which is very topical here in New Zealand at present as hard times descend upon us in our struggle to get inflation back to the 0-2% range.
He notes an argument made by a labour leader representing low-income service workers in the US MIdWest to one Neel Kashkari, head of the Minnesota branch of the Federal Reserve, that inflation hurts the poor worse than a recession, which is contrary to economic thinking. The labour leader explained that in a recession you may lose your job and you struggle to pay the bills, but there are others who are still working who can help you out. Typically that’s family and friends. But high inflation hurts everybody at the same time. Your friends and family can’t help you out as much because they’re struggling to pay the bills also.
And recessions come to an end naturally. The article goes on to contrast the Great Depression – where the New Deal remedies (several of which were started by the Republicans, including President Herbert Hoover) actually lengthened and worsened the downturn that began in 1929 – with the sharp recession of 1920, which I’ve written about before (Why You’ve Never Heard of the Great Depression of 1920).
But the article also points that both the 1920 and 1929 economic crashes were triggered by the Federal Reserve first expanding the money supply too quickly and then hitting the panic button and throttling it too fast. The Hesparian is not encouraged that we’ve learned much when he quotes Kashkari saying that their economic models got it wrong in 2021 in forecasting inflation; they didn’t think it would increase much. Here in NZ I doubt that Adrian Orr and comrades even gave that much consideration to models when it came to approving of Labour’s bloated spending via maintaining low interest rates at the same time.
I’m no economist but even back in mid-2021 I could see what was going to happen with US inflation (and us too), and then again in early 2022 (I’ll take Manic Pixie Dream Girl for 5% inflation, Alex) If you understand Milton Friedman’s take on money supply it’s pretty easy to predict inflation. By contrast President Biden said several years ago that “Milton Friedman is no longer running the show.”, and although he’s a senile, ignorant, moron he was being advised by “experts” who were obviously also ignoring Friedman, including Federal Reserve people.
And of course that’s the point associated with the first quote about inflation not being an issue through the first half of America’s economic history, where the period of 1789 to 1912 is contrasted with subsequent times:
In 1913 the Federal Reserve Board was established to stabilize the value of the dollar. From 1913 through 2023, inflation averaged 3.16 percent per year, and the cumulative price increase was thirty-fold, three thousand percent. If your grandfather had put a dollar under his mattress in 1913, it would be worth about three cents today.
No Minister 