Re: investment and unemployment

["Harry Veeder" <veed0001@xxxxxxxxxxxxxxxx>]

----------
>From: GGard97342@xxxxxx
>To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
>Subject: Re: investment and unemployment
>Date: Thu, Apr 6, 2000, 12:20 pm
>

>In a message dated 03/04/2000 17:39:40 GMT Daylight Time, mosler@xxxxxxxx
>writes:
>
>> > snip:
>>  > >Deflation has been the norm in peacetime throughout most economic >
>> history
>>  > for the obvious reason that men and women are always improving >their
>>  > production skills. A three hundred year graph of inflation shows >that
>the
>>  > saecular trend of deflation of prices accelerated after 1801, >and only
>>  > turned to inflation when the use of high interest rates to >control
>>  > inflation was introduced. In Britain the graph changes >direction sharply
>>  > after November 1951 when the first rise in Bank Rate >for 20 years took
>>  > place. Interest rate policy subsequently ensured the >relentless rise in
>>  > inflation.
>>
>>  There was usually some kind of 'gold standard' for those 300 years?
>>  The deflation observed was therefore a drop in the relative value of gold?
>>
>>  http://www.warrenmosler.com
>
>Surely price deflation is a rise in the purchasing value of gold and money?
>
>But who cares about such semantics? The crunch is that price deflation puts
>every indebted trader in trouble. His nominal income falls, but his nominal
>debts remain the same. That is what matters, and that is why deflation is to
>be feared far, far more than inflation. Sadly those of us who are old enough
>to have direct experience of the truth of that are now few in number . Those
>of us who are still left must therefore shout it loud and often.
>
>Gepffrey Gardiner

Sorry for sounding flippant, but this "fear" is a silly response to
deflation. A smart trader who can handle deflation responds by making less
risky,
more conservative investments, not by demanding the government do something
to restore inflation. Inflation will return when investment as a whole
becomes
*too* conservative in terms of risk. In both cases the quantity invested is
not a relevant, but the nature of the risk is.


Harry Veeder