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Posted: 6/17/2003 4:06:50 PM EDT
I have to do a presentation on the economic/political causes of the decrease/increase of inflation of the 90s. Frankly this is one of the most difficult classes I have ever taken. So can anyone help me out here?
Link Posted: 6/17/2003 4:22:03 PM EDT
Evidently not. Sorry
Link Posted: 6/17/2003 4:37:47 PM EDT
Last I heard inflation was the result of economic growth progressing too rapidly..Start with that...you can find some wild examples in the 70's..then include how Greenspan uses the interest rates to head off inflation..I would also include how the birth of the internet led to the boom of the late 90's...Not much but hope it helps..
Link Posted: 6/17/2003 4:51:58 PM EDT
here is a horrible macroeconomics note: [url]http://www.soa.org/eande/fall03_catalog/macroeconomics.pdf[/url]
Link Posted: 6/17/2003 4:59:59 PM EDT
[Last Edit: 6/17/2003 5:02:33 PM EDT by raven]
I'm your huckleberry. I majored in economics, I love this shit. Go in to detail what you've been asked to explain, I'll try to help.
Link Posted: 6/17/2003 7:48:14 PM EDT
I don't know much about inflation but I gots me a PhD in economics so email me or post here if you have a question. My understanding is that inflation was low in both the 1980s and 1990s, for some of the same and some different reasons. GunLvr
Link Posted: 6/17/2003 8:11:57 PM EDT
Well, I'm supposed to explain some events economic/political and what, how and why it had an effect on inflation during those ten yrs.
Link Posted: 6/17/2003 8:20:12 PM EDT
what have you got so far? give us some events you think influenced inflation in that time
Link Posted: 6/17/2003 8:39:41 PM EDT
Inflation... when your dollar buys less. Things that contributed to inflation in the 90's: The first gulf war temporarily caused about a one year increase in energy (NRG) costs. With such spikes in NRG costs you usually find a rippling effect much like we are experiencing now and will be for a while. Interest rates were low like they r now. Low rates usually mean super economic activity (at least in the 90's). High rates of economic growth are linked to inflation. POLITICS: Slick Willy passed two significant minimum wage increases in his eight years. Therefore cost of labor increased and the prices of products and services produced by that labor increased. U.S. Postal Service increased shipping rates dramatically... causing everybody from households paying utility bills to large businesses sending products and marketing to pay out the ass for shipping. Late 90's fake-market booming economy had a lot of disposable income -> out in the market... prices increase when people are willing to pay more. There are some specific and vague examples that you will have to do more research on to create an intuitive analysis. I could go in to more detail, but I've done my time, now you do yours.
Link Posted: 6/17/2003 8:44:05 PM EDT
Originally Posted By tac45: Well, I'm supposed to explain some events economic/political and what, how and why it had an effect on inflation during those ten yrs.
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I wish I could find you a link or a book to support this but the way I learned it a booming economy according to Greenspan brings on the risk of inflation, that's why he raises the interest rate to put on the brakes..The opposite of that is that during a slumping economy he lowers interest rates to ward off deflation. If you study the Greenspan era you'll see how he changes directions according to the economy..There hasn't been much in the way of inflation since the 70's so you don't have much to work with.
Link Posted: 6/17/2003 9:48:58 PM EDT
Ok, I found that in 1990 the percent of inflation was about 5.4 then in 1991 it fell to 4.2 after that it pretty much stayed right around the average of 3.0, except in 1998 it fell even further to 1.6. So if inflation goes up during an economic boom, that would mean our economy was good at the beginning of the decade but kinda took a slump at the end?
Link Posted: 6/18/2003 3:47:07 AM EDT
i think you better spend a couple of days reading your textbooks
Link Posted: 6/18/2003 4:31:33 AM EDT
[Last Edit: 6/18/2003 5:53:49 AM EDT by raven]
Originally Posted By tac45: Ok, I found that in 1990 the percent of inflation was about 5.4 then in 1991 it fell to 4.2 after that it pretty much stayed right around the average of 3.0, except in 1998 it fell even further to 1.6. So if inflation goes up during an economic boom, that would mean our economy was good at the beginning of the decade but kinda took a slump at the end?
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Actually, this is EXTREMELY interesting. Find data about the growth of the money supply during the 90's under Greenspan, then get data about the CPI inflation rate. Like you say, the inflation rate was nice and low and steady, but the money supply was growing by leaps and bounds. Monetary theory dictates we should have seen the CPI jump, but it didn't at all. So why wasn't there inflation? The answer is, there was inflation! It just wasn't in the basket of consumer goods the traditional CPI measures. It seems to have been manifested in the stock market and real estate prices. To support your argument, get Fed money supply, CPI, and market price data from the 1920's to see if the same thing happened. If I am right, you will probably see that the same thing happened during the boom of the 20's. Get the information from [url]www.nber.org[/url] Lots of quality economic statistics there. Another mystery is that during the Greenspan monetary bubble, the dollar was incredibly strong compared to other currencies, right up until March 2002. The supply of dollars kept growing, but the dollar kept appreciating, contrary to the law of supply and demand. I guess it was a function of foreign investors wanting to hold dollars and dollar-denominated investments like American stocks. There are also theories that the US treasury and Federal Reserve in collusion with American banks like Citigroup and JP Morgan and producer Barrick Gold manipulated the price of gold using gold derivatives in the 1990's. Why? Because gold is an alternative to fiat currencies, and a rising gold price indicates a inflating dollar. Takes more dollars (which can be produced at no cost) to buy the same amount of gold (which costs money to extract, and of which there is a finite quantity on earth). The US Treasury under the helm of Robert Rubin and Lawrence Summers and the Fed engineered the best of all worlds: Inflating the dollar and easy credit to spur economic growth, while artifically propping the dollar up, which would also press the CPI rate down, as increasing imports due to the globalized economy would remain cheap as they accepted artifically priced dollars. This scheme has unravelled lately, resulting in a plummeting dollar and new bull market in gold. The deatails can be found at [url]www.gata.org[/url] BTW, the gold-suppression theory is kind of a crackpot theory, but I have been watching the gold market for a year, reading their theories, and the opinions of a guy named Richard Russell who I esteem....and I have to say, their theories seem pretty consistent from what I've been seeing in the market. But they have the self-promoting bluster of con men. I would be reluctant to add them to your paper, but this article is another interesting, non-conspiracy gold/Fed angle: [url]http://www.nationalreview.com/nrof_comment/comment-luskin013103.asp[/url]
Link Posted: 6/18/2003 5:43:51 AM EDT
Not to hijack your thread or anything, but I have an economic project of my own. Please send money to Marvl, P.O. Box... [;D]
Link Posted: 6/18/2003 5:52:22 AM EDT
Originally Posted By marvl: Not to hijack your thread or anything, but I have an economic project of my own. Please send money to Marvl, P.O. Box... [;D]
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LOL, free rider!
Link Posted: 6/18/2003 6:06:04 AM EDT
Good explanations from everyone above. Definitely look at the money supply--M1 and M2. This is what really drives the infaltion rate although various types of "shocks" can also affect inflation. In grad school we were taught that a certain low inflation rate (1-3 percent) was desirable, and that it is extremely important that inflation be predicable. One other large factor which kept prices down in the 1990s is trade. We have vastly expanded our Chinese trade and they use a fixed exchange rate which means that prices of Chinese goods rarely rise. We also expanded trade with Canada and Mexico thru NAFTA which also keeps inflation down. Another factor which kept inflation down is the internet and computer technology. Computers raise productivity and the internet has brought down the cost of communication and made it easier to seek low prices. Probably the biggest factor in the low inflation, high growth 1980s-90s is that we have had only two Federal Reserve Chairmen (Volker, Greenspan), and both have been "inflation hawks". Hopefully the professor is "classically trained" and not some sort of Marxist wacko. GunLvr
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