From: robs@bcstec.ca.boeing.com (Robert Sipe)
Newsgroups: pnw.general
Subject: Re: Inflation (of fears, not prices)
Date: 6 Nov 92 01:21:28 GMT
Distribution: pnw
Organization: Boeing

In article <1992Nov5.163842.14833@u.washington.edu> monaghan@cac.washington.edu (Tracy Monaghan ) writes:
>In article <1789@rwing.UUCP> pat@rwing.UUCP (Pat Myrto) writes:
>>
>>Well, ya better hang onto yer wallet.  Those making purchases on time
>>payments, do NOT try to pay it off early - better to pay it off in cheap
>>dollars, and to hang onto any cash you have, when the inflation starts
>>spiraling.  
>
>Do you have any reasoned arguments for this shrill prediction?
>This is 1992, not 1976, and Bill Clinotn is not Jimmy Carter, and,
>presumably, energy prices will not triple (as in the 1970's).

Inflation was well underway before the oil crisis emerged.  The oil embargo
in fact was softened by the fact that the prices were regulated by the 
Fed's.  The major cost of the embargo was the longggg lines that caused
people to lose time from work, home, etc.  Of course, gas did increase because
of the supply and demand pressure.  What created the shortage was that
oil men who could not charge more for their older wells simply capped 
them and waited until government regulations were dropped.  Then, prices
shot up, competition became fierce and the prices began to drop as gas
became available.

During the Carter years we experienced inflation of 15-20%.  Debt was
good and cash was bad.  For those who had assets like homes, gold, etc.
made out in that they were able to protect their wealth since it
appreciated in value as well.  Those that really were hurt were those on
fixed incomes and people who didn't quite qualify for home, car loans
and the like.  The unemployement rate in those days was higher than it is today 
by about 2 percentage points.  However, the money supply was being flooded with
cash.  The philosophy was buy today and pay it back in cheaper dollars.
You had the item you wanted which only got more expensive and your payemts
were somewhat fixed.  Homes/real estate were a great investment for those
who could afford to put up the down and hold the loan for a year or two.

If Clinton holds the line on the economy he will not cause Wall street to
get too jittery thereby keeping interest rates down.  However, should he
even talk about policy that is just perceived by business as inflationary
interest rates will begin to climb causing capital to become more scarse.  If
that occurs he will have to begin to "prime the pump" by introducing
money into the economy.  If he does this with out increasing the goods and
services the country will experience a situation where we have more 
consumers with desposible cash than items to dispose it on.  Then the
demand becomes greater than the supply.  How can the president increase the
money supply.  He can tax or borrow or do a combonation of both.  To keep
inflation down he needs to tax.  That redistibutes the wealth.  But it also
keeps those who can afford products from spending.  To keep the economy 
from falling into a slump he can borrow.  That creates wealth for those
who don't have it.  That will certainly boost the economy in the short 
term.  

As in most things there is always a trade off.  It will be interesting
to watch the Clinton administration as they manuver through the next
four years.


-- 
Statement made by Oliver North when asked to comment on Clinton's draft
record.  "I would rather vote for Jane Fonda than Gov. Clinton!  At least
she has been to North Vietnam."
Newsgroups: pnw.general