Perry Glasser

INFLATION HISTORY: A PRIMER FOR OBAMA

In Economics, Politics on November 19, 2008 at 2:13 pm

We cannot spend our way out of economic disaster brought on by thieves and liars.
Today in the US, we are making expenditures with little or no hope of return on investment. There is no talk of greater productivity. The US can and should always engage expenditures for the social good—medicine, social security, the “entitlement programs” whose only return is better lives. But when we engage expenditures by printing money with no tax basis for those expenditures, when we expect no ROI (return on investment), we invite ruin.
Most of us have come of age terrorized of inflation. The word is loosely bandied about and in the mouths of many means no more than “rising prices.”

INFLATION

But that’s only partially correct.
In an environment where wages and compensation rise at a pace equal to or greater than the rate of inflation, Citizens gather wealth. Rejoice! Old codgers who recall when an automobile cost roughly $1 per pound may be startling their grandchildren with strange tales of the good old days while gathered in the family manse in Levittown, a building purchased in 1952 for $8,000 now worth $750,000. Prices rise because wages rise when employment is high and skilled labor is expensive. The cost of cars and doughnuts may soar, but over the long term it all levels out, and adjusted for inflation the standard of living rises.
That’s a far different scenario than when a government prints and pumps money into an economy with no change in productivity. Governments inflate their currency by creating money with the stroke of a pen on a ledger, and if they do so to pay for non-productive goods and services, their economies eventually collapse. In a prolonged collapse, the society itself collapses.
Non-productive uses of government monies include debt service and military expenditures.
Dollar$ acknowledges that buying security is a necessary expenditure, but Dollar$ points out that while the military consumes goods and service, it does not create either. There is no economic ROI for military expenditure.
We see nations that spend 100 percent of their GDP on the military—Darfur, Angola, Nigeria—cursed nations where bandits eat and all else starve. These places do not want for natural resources: they have no economic infrastructure that creates ROI.

INFLATION KILLS

In Weimar Germany, when the Depression began, the country could no longer afford the debt service of reparations for World War I. The government printed money. Famously, workers demanded their pay on a daily basis, in cash, the better to run to markets to buy goods that would be far more expensive in a day. No one was working any harder; technology had not spurred innovation for new products or services. The price of bread soared, people were frightened. The government collapsed. Germany turned to a savior, Hitler.
The Soviet Union competed militarily with the United States after World War II in the Cold War. Surrogate hot wars were fought in Korea and Vietnam, but the main event was the ongoing arms race, really an economic tussle. Every military initiative had to be matched, equaled and then excelled by the antagonists. Missile gaps, nuclear warhead gaps, submarine gaps. The world watched two countries create and then maintain the balance of terror. When the Soviet Union’s foreign adventure in Afghanistan met unexpected resistance and the cost of that war soared in human and economic terms, the home population that for so long had done without creature comforts such as denim jeans and good scotch rebelled; the country collapsed into anarchy. Chechnya is in revolt. Putin is reinstating the police state—and in the US we never enjoyed any “peace bonus” because we never let up on our expenditures; our Republican leadership found us wars to fight. If there were no weapons of mass destruction, bomb shepherds to export democracy.

OBAMA’S LESSON

We do NOT need to fund:
• troubled financial firms that only buy less troubled firms to strengthen their balance sheets and then need to fire extraneous works as a matter of “efficiency”;
• troubled financial firms that buy small financial firms so that the acquiring firm qualifies for bailout money, the welfare to the rich;
• the US auto industry’s horrendous mismanagement. Jobs won’t be lost—if Toyota and Honda and Volkswagen gain the market share GM once had, they will have to hire workers to meet the demand. Let’s not save Rick Wagoner’s arrogant, sorry ass;
• two foreign adventures. Though Mr, Obama has pledged to end Georgie’s War on Shepherds in Iraq, our only goal in Afghanistan is to find and kill Bin Laden.
Where the hell is James Bond when we need him?

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  1. world war II created enough jobs in america too end the depression, or take part in ending the depression anyway. The Iraq war has brought billions to the Carlyle group and Bechtel, but the money doesn’t go back into the US economy, it goes to CEOs. Now the US is 10 trillion in debt. Afghanistan is slipping away to the Taliban who control wide areas and key roads. So if we kill bin laden and leave we leave a friend of al Qaida in power in Afghanistan… better learn from the Russians before its too late.

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