Lok Sang Ho

7 Economic Fallacies

1979 was the date of the second major oil crisis. At the time, US GDP was even more dependent on oil than today because today we have almost 90% in services. The supply shock caused inflation was wrongly dealt with by Paul Volcker using a severe monetary policy(20% plus interest rates) that plunged the American economy into the deepest recession since WWII.


On Jul 16 10:51 AM Brandon211 wrote:

> My favorite is, "So there will not be much inflation in the foreseeable
> future because there will not be excessive spending." From 1979 -
> 1981 the U.S. saw inflation rates of 11%, 14%, and 10% per annum.
> This was in the midst of a major recession, when spending by businesses
> and consumers was actually DECREASING. The problem is that the author
> seems to think that spending actual paper currency is the only thing
> that leads to inflation, while the truth is, the easy availability
> of CREDIT is a much more important part of the equation.We don't
> produce assets in this country, we monetize assets. The government
> doesn't live within its means, it monetizes a massive debt. No, you
> cannot spend a treasury note, so does that mean it will never contribute
> to inflation?? Look, inflation isn't just a danger, it's the only
> possible outcome of this mess, whether or not we have "excessive
> spending" now or not.