From: rwojcik@atc.boeing.com (Richard Wojcik,snake)
Newsgroups: talk.politics.misc
Subject: Re: Inflation and Carter?
Date: 26 Aug 92 23:27:26 GMT
Reply-To: rwojcik@atc.boeing.com
Organization: Research & Technology

In article 5778@brownfield.glv.com, wl$wl$ writes:
>In article <81127@bcsaic.boeing.com> rwojcik@atc.boeing.com (Richard  
>Wojcik,snake) writes:
>... I wasn't writing a book on  
>the Carter administration, I was refuting the common misconception that a  
>rising commodity price increases inflation.

And I disagreed with you on the grounds that oil was not a typical commodity
in our society.  You totally ignored my argument.  Didn't even acknowledge the
point.

>I was not arguing that the oil cartel did not hurt our economy, but that is a  
>much different thing than arguing that it caused inflation.  When more of your  
>resources are dedicated to one commodity (or group of commodities), there will  
>be less to dedicate to other enterprises, and your standard of living declines.  
>I agree that the oil embargo hurt our standard of living, but it definitely did  
>not *cause* inflation (except perhaps that it influenced politicians to  
>pressure the fed into printing more money to *spur* the economy). 

Cause and effect.  Thank you, even if it was parenthesized.  The only disagree-
ment left is over the legitimacy of my definition of "inflation", another point
which you failed to acknowledge.  Most people think of inflation as a set of
price rises that decrease purchasing power.  Your definition was couched in 
terms of the money supply, but it amounts to the same thing.  You were splitting
hairs.

>Besides the fact that the money supply *did* increase dramatically in the  
>Carter administration (maybe *your* memory is a little weak :-) ), when U.S.  
>companies purchase foreign commodities,  they pay for them using American  
>dollars...

In fact, the price of oil is pegged to the dollar, unless you've forgotten. 
Inflation had the good effect of cheapening the cost of oil for the world in
general.  It was a natural reaction to the price gouging.  America acted as
something of a shock absorber.  But that brings me back to another point that
I made, and which you ignored.  If everything was Carter's (and politicians of
his ilk's) fault, then how come so many other countries suffered "inflation"
(read "price rises leading to purchasing decreases") as well?  Was Carter's
misguided monetary policy responsible for worldwide inflation?

>Again, I find it interesting that you accuse *others* of not remembering the  
>Carter administration.  Certainly Carter did hurt our national image, and he  
>blundered consistently in foreign policy issues, but the main reason for his  
>defeat was the atrocious way he handled the economy in his early  
>administration...

We just disagree on the character/economy issue.  I like your hyperbolic 
"blundered consistently".  In fact, Carter had some major foreign policy 
successes.  Perhaps his most notable was the Camp David Agreements.  But, hey,
you *remember* that, right?  ;-)

>Stagflation just proved that the Keynesian premise of pumping money into the  
>economy to give it a long term boost didn't work.

Jim, are you telling me that Carter was the first President to apply Keynsian
economic theory?  Was John Kennedy a monetarist?  Really?  ;-)  I recently heard
that an economist has called supply-side economics "warmed over Keynsian
economics".  It certainly looks that way--spend more money while taking in less
revenue.  Too bad Reagan didn't understand (or care about) economic cycles.  
The idea is to use deficit spending to counter cyclic downturns, not just to
use it all the time.

-----
Disclaimer:  Opinions expressed above are not those of my employer.

    Rick Wojcik   (rwojcik@atc.boeing.com)   Seattle, WA
Xref: sparky talk.politics.misc:43403 sci.econ:7331