Re: [gang8] Re: The US Dollar, Inflation and the Outlook for 2004

["James Cumes" <cresscourt@xxxxxxxxx>]

Dear Sam and Gunnar,

This is great to see a sharp debate between two masters.

I loved this bit -

> > You are right on this one - in my 1976 copy of Samuelson' Economics, he
> > wrote that the "stagflation" problem remained to be explained.
> >
> > If some young economic scholar could figure it out, he added, he or she
> > would be on track for a Nobel Prize in Economic Science.

Even at that date - 1976 - I had been "on track" to gather in a Nobel award
for five years or more. Since 1976, another 28 years have passed.
Do you think I have run the full "track" by now and that shortly I should be
packing my bags to collect my prize in Stockholm?
I hope, Sam, that you and Gunnar both will accompany me and share in the
glory.
All the best.




James
http://www.authorsden.com/visit/author.asp?AuthorID=3473
http://members.chello.at/jamescumes/default.htm
http://www.kokodatrail.com.au/forums/?showtopic=54
http://members.chello.at/jamescumes/VOW/default.htm


----- Original Message -----
From: "Gunnar Tómasson" <gunnar.tomasson@xxxxxxxxxxx>
To: "Sam Vaknin" <vaknin@xxxxxxxxxxx>; <gang8@xxxxxxxxxxxxxxx>
Cc: <vow@xxxxxxxxxx>; <gang8@xxxxxxxxxxxxxxx>; <pkt@xxxxxxxxxxxxxxxx>;
<jozefimrich@xxxxxxxxxxxxxx>; "William Engdahl" <engdahl@xxxxxxxxxxx>
Sent: Thursday, January 15, 2004 5:58 PM
Subject: Re: [gang8] Re: The US Dollar, Inflation and the Outlook for 2004


> Samuelson has 20/20 retrospective vision!
>
> Foresight is another matter - here is his Reagan-Bush Jr. fiscal policy
> prescription.
>
> First, Samuelson cited "the historian Lord Macaulay" as follows:
>
> "At every stage in the growth of [public] debt the nation has set up the
> same cry of anguish and despair.  At every stage in the growth of that
debt
> it has been seriously asserted by wise men that  bankruptcy and ruin were
at
> hand.  Yet still the debt went on growing; and still bankruptcy and ruin
> were as remote as ever...
>
> "The prophets of evil were under a double delusion.  They erroneously
> imagined that there was an exact analogy between the case of an individual
> who is in debt to another individual and the case of a society which is in
> debt to a part of itself.... They make no allowance for the effect
produced
> by the incessant progress of every experimental science, and by the
> incessant efforts of every man to get on in life.  They saw that the debt
> grew, and they forgot that other things grew as well..."
>
> Then, Samuelson surveyed recent U.S. experience in this respect:
>
> "Figure 19-3 dramatically exemplifies that the growth of our economy and
> price inflation since 1945 have drastically _reduced_ the ratio of United
> States public debt to gross national product.  (This chart, properly,
> excludes FRB and Treasury holdings; but the point would be the same if
these
> exclusions had not been made.)  This fact of growth explains why, in the
> United States, where money GNP doubles in about a decade, the public debt
> might increase by another two-thirds of a trillion dollars in that time
> without its relative percentage burden growing at all.
>
> "This would give the wildest believer in government spending an average
> deficit of tens and tens of billions of dollars per year before he would
> have to turn to such even more unorthodox financial expedients as printing
> money or selling interest-free bonds to the Federal Reserve Banks."
>
> Finally, Samuelson presented his conclusions:
>
> "Could a nation fanatically addicted to deficit spending pursue such a
> policy for the rest of our lives and beyond?  Study of the mechanics of
> banking and income determination suggests that the barrier to this would
not
> be financial.  The barrier would have to be political and self-imposed;
and
> the effects of such a policy would depend crucially upon whether it
impinges
> on an economy that is already inflationary or deflationary."
>
> Two final points.
>
> First.  Dick Cheney was wrong when he told O'Neill not to worry about Bush
> Jr's fiscal policy because "Reagan proved that deficits don't matter" -
that
> honor belongs to Samuelson!
>
> Second.  I wonder how Samuelson got the stagflation problem right WITHOUT
> going back to basics and rethinking (thinking?) through orthodox Monetary
> Economics as reflected, inter alia, in The Washington Consensus?
>
> Kind regards,
>
> Gunnar
>
>
> ----- Original Message -----
> From: "Sam Vaknin" <vaknin@xxxxxxxxxxx>
> To: "Gunnar Tómasson" <gunnar.tomasson@xxxxxxxxxxx>;
<gang8@xxxxxxxxxxxxxxx>
> Cc: <vow@xxxxxxxxxx>; <gang8@xxxxxxxxxxxxxxx>; <pkt@xxxxxxxxxxxxxxxx>;
> <jozefimrich@xxxxxxxxxxxxxx>; "William Engdahl" <engdahl@xxxxxxxxxxx>
> Sent: Thursday, January 15, 2004 10:40 AM
> Subject: Re: [gang8] Re: The US Dollar, Inflation and the Outlook for 2004
>
>
> > This is why it is always recommended to own the latest edition
(laughing).
> >
> > 1976 is almost 30 years ago! A millennium in terms of economic theory.
> > Stagflation was a new phenomenon in 1976.
> >
> > (See my earlier response to James with reference to the pages in the
> > Seventeenth edition of Samuelson's which deal with stagflation).
> >
> > Take care.
> >
> > Sam
> >
> >
> > ----- Original Message -----
> > From: Gunnar Tómasson
> > To: gang8@xxxxxxxxxxxxxxx ; Sam Vaknin
> > Cc: vow@xxxxxxxxxx ; gang8@xxxxxxxxxxxxxxx ; pkt@xxxxxxxxxxxxxxxx ;
> > jozefimrich@xxxxxxxxxxxxxx ; William Engdahl
> > Sent: Thursday, January 15, 2004 4:07 PM
> > Subject: Re: [gang8] Re: The US Dollar, Inflation and the Outlook for
2004
> >
> >
> > Re. the following:
> >
> > The other qualification concerns your suggestion that my analysis of the
> > cause of the inflation after 1969 is "the classic explanation for the
> > stagflation of the 1970s [and] appears in all textbooks (Samuelson's for
> > instance)." Samuelson would be surprised to note that...
> >
> > James,
> >
> > You are right on this one - in my 1976 copy of Samuelson' Economics, he
> > wrote that the "stagflation" problem remained to be explained.
> >
> > If some young economic scholar could figure it out, he added, he or she
> > would be on track for a Nobel Prize in Economic Science.
> >
> > Gunnar
> >
> >
> > ----- Original Message -----
> > From: James Cumes
> > To: Sam Vaknin
> > Cc: vow@xxxxxxxxxx ; gang8@xxxxxxxxxxxxxxx ; pkt@xxxxxxxxxxxxxxxx ;
> > jozefimrich@xxxxxxxxxxxxxx ; William Engdahl
> > Sent: Thursday, January 15, 2004 4:14 AM
> > Subject: [gang8] Re: The US Dollar, Inflation and the Outlook for 2004
> >
> >
> > Sam,
> >
> > Your responses are always acute and refreshing.
> > (I like them too because you so often agree with me - and indulge my
> > egocentricity!!)
> > However, just a couple of qualifications.
> > I am not anti-American.
> > I am strongly anti the Bush Administration. I think this administration
> has
> > done the United States a great deal of harm and has split many people
> > overseas asunder from a country, a civilisation, a "culture" if you like
> to
> > which they have been deeply attached for decades and even generations.
> > I fought alongside the Americans after Pearl Harbour. Their performance
> then
> > and for many years afterwards deserved and continues to merit
recognition.
> I
> > like to think that the Bush episode is a bleak and, in some ways, even
> > terrifying regression from which they will soon recover
> > The other qualification concerns your suggestion that my analysis of the
> > cause of the inflation after 1969 is "the classic explanation for the
> > stagflation of the 1970s [and] appears in all textbooks (Samuelson's for
> > instance)." Samuelson would be surprised to note that and so would
> Greenspan
> > who too embraces quite a different theory and, in particular, the idea
> that
> > a hike in interest rates is the way to deal with actual or potential
> > inflation. The mainstreamers around the world, including the central
> > bankers, have been for decades and still are afflicted with this notion.
> > A man called Gibson - the "Gibson paradox" - thought otherwise way back
in
> > the 1920s and Keynes had a brief flash of understanding in the thirties
> but,
> > for the rest, it was left to me to tell the world, in 1970-71, that
you'd
> > get stagflation if you hiked interest rates. (The sad thing was that not
> > much of the world listened.) There are now a few, in Gang 8 and ICE, who
> > think as I do but we're a pretty select - though we try not to be
> > exclusive - bunch.
> > Thanks again, Sam, for your comments which are always appreciated.
> >
> >
> >
> >
> > James Cumes
> > http://www.authorsden.com/visit/author.asp?AuthorID=3473
> > http://members.chello.at/jamescumes/default.htm
> > http://www.kokodatrail.com.au/forums/?showtopic=54
> > http://members.chello.at/jamescumes/VOW/default.htm
> >
> > ----- Original Message -----
> > From: "Sam Vaknin" <vaknin@xxxxxxxxxxx>
> > To: "James Cumes" <cresscourt@xxxxxxxxx>
> > Cc: <vow@xxxxxxxxxx>; <gang8@xxxxxxxxxxxxxxx>; <pkt@xxxxxxxxxxxxxxxx>;
> > <jozefimrich@xxxxxxxxxxxxxx>; "William Engdahl" <engdahl@xxxxxxxxxxx>
> > Sent: Wednesday, January 14, 2004 2:06 PM
> > Subject: Re: The US Dollar, Inflation and the Outlook for 2004
> >
> >
> > > Dear James,
> > >
> > > Thank you for your kind words.
> > >
> > > You wrote:
> > >
> > > "My analysis differs from yours - and from that of everyone else of
whom
> I
> > > am
> > > aware - in that I relate the deficit, directly, to the inflationary
> > > pressures that arose in the late sixties and early seventies and to
the
> > > unwise policies that, then and after, were used in the attempt to curb
> > > inflation.
> > > Those unwise policies simply intensified inflation - giving us
> initially,
> > > you will recall, stagflation."
> > >
> > > Sam:
> > >
> > > Actually, the connection between the twin deficits, inflation, and
> > retarded
> > > economic growth as the classic explanation for the stagflation of the
> > 1970s,
> > > appears in all textbooks (Samuelson's for instance).
> > >
> > > What I find new and intriguing in your article is the novel linkage
you
> > > propose between capital investment and inflation:
> > >
> > > "Some countries avoided stagflation through policies of intense, real,
> > > fixed-capital investment. The outstanding economies in this respect
> were,
> > in
> > > the 1970s, (West) Germany and Japan."
> > >
> > > That - to the best of my knowledge - is a new and enlightening twist
on
> > > economic orthodoxy!
> > >
> > > James:
> > >
> > > "they thought that the "recovery" after 2001 was a real recovery.
> > > It wasn't and isn't, of course, and the pressures built up constantly
> > during
> > > those boom and bust years, plus the "recovery" years, to leave us in
the
> > > position we have today in which the Mother of all Boilers could now
> burst,
> > > unless we're lucky, with an explosive intensity and a global reach
that
> > > we've never imagined before."
> > >
> > > Sam:
> > >
> > > Couldn't agree more.
> > >
> > > James:
> > >
> > > So we must not make the mistake of ascribing the American "free lunch"
> to
> > > characteristic American villainy or, for example, to imperialist
> designs.
> > >
> > > Sam:
> > >
> > > This paradise of fools inhabited by both the USA and exporting
countries
> > > reminds me of another "coevolution" ---
> > >
> > > Reminds me of the collusion between greedy American investors and
> > avaricious
> > > rapacious American managers.
> > >
> > > When the bubble burst the former feigned innocence and blamed it on
the
> > > villainy and imperialist designs of the latter ...
> > >
> > > I happen to be a rabid anti-American and am following its inevitable
> > decline
> > > with ever-rising hopes and delight - but I think your brilliant
analysis
> > > hits quite a few nails on their proverbial heads.
> > >
> > > Take care.
> > >
> > > Sam
> > >
> > >
> >
> >
> >
> >
> > The gang8 list is devoted to Creditary Economics.
> > To unsubscribe, email: gang8-unsubscribe@xxxxxxxxxxxxxxx
> >
> >
> >
> >
> >
> >
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> >
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> >
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> >
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> >
>
>
>
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