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sharpe

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Everything posted by sharpe

  1. On what basis did the US hit that mark? This must be a different definition from what you used to say only 2 hyper inflations before 1914?
  2. Not according to the definition I gave What I found interesting is many of supposedly high inflationary periods during the roman empire and in spain after the gold discoveries in latin america in the middle ages were 2 percent a year. To me it says monetary policy has massively advanced in terms of robbing the poor, but fallen off a cliff in terms of advancing humanity in the last 100 years
  3. Correct me if I am wrong, but none of those high inflationary periods met 50% per month
  4. It depends on your definition of hyper inflation. I was taking 50% per month. I find it telling on the role of central banks that all hyper inflations but 1 were after 1914. (Please let me know any examples you know of other than I stated that meet the definition I gave).
  5. The definition of hyper inflation I have used is from Philip Cagan 1956 The Monetary Dynamics of Hyperinflation. It is suggested there as 50% per month. Under this definition John Law's episode was not hyper inflation (please correct me if I am wrong). 47.4% was achieved in November 1779 by the US Continental currency so that was below the definition also.
  6. I had one after the french revolution. What is your other one?
  7. You are right - he has based his work on zero data points. This is slightly worse than basing theories on one data point... In the Roman era there were boughts of high inflation - which was effectively most the western world in those days. I understand all hyper inflations bar 1 have been since 1914.
  8. ok, but this does not fit with there was no mention of these other factors in that argument i think i am going to give up - I am not convinced, so arguments using the POT I am highly sceptical of. if one is empirically based rather than one of the economics religions, this seems the sensible approach
  9. so we are back to saving being the cause of recession - this contradicts some of your earlier comments...
  10. agreed. once you are in the recession it explains why the recession gets worse if people save - that is what POT is saying. for it to apply you have to be already in a recession. if everyone tries to save in a boom the POT does not apply so in 1933 we have to assume people are trying to save - is there any evidence of that? if there is then I might agree there is one data point. all the other recessions though savings rate has never gone negative. are we able to show people were not trying to save in those recessions - presumably if they were the POT would say they cannot
  11. Is the POT not saying that the attempt to save causes these problems, that is the part I struggle with. I agree in 1933 people would not have wanted to get poorer. In 2006 and 2007 I think people were in the middle of a boom blowing money on junk and did not seem to fear loss of wealth. Let's take a metallic standard (I know you love it). Would aggregate saving would be equal to metal mined each year, regardless of whether anyone tried to save or not.
  12. classic - what kind of old codger reply is that?
  13. I know, you provided it. Your interpretation does not seem in line with mine. I suppose the main point to agree on is there are significant questions marks over this theory.
  14. I am not sure I agree with your interpretation of POT according to the definition you gave. The definition suggests that savings themselves are at the heart of the problem. If this were true one would expect a spiralling decline in savings after any rise as the POT kicks in. Just to be clear - I am not espousing any economic theories - just trying to understand them Your graph shows negative savings in 2006 and 2007. That is before the credit crunch, when people were spending more than they earned. They were borrowing the difference as anyone who lived in the UK or US at the time knows. An explanation for 1933 might be that people were spending previously established savings just to pay the rent and for food, during times of unemployment etc...
  15. "The paradox states that if everyone tries to save more money during times of recession, then aggregate demand will fall and will in turn lower total savings in the population because of the decrease in consumption and economic growth." My interpretation of this is that savings rates go up, demand goes down, the economy shrinks and people cannot still save. I have not really understood your interpretation, as you are citing a -2% savings rates as evidence of POT. Even if your example were valid, which is not clear (at least to me). As you say it is one data point, with no other examples. I am not convinced - if it were true there would be many easily demonstrable examples.
  16. surely not working - there are important discussions to be had...
  17. The pattern of savings I understand to be symptomatic of the paradox of thrift is a rise in savings, which then spirals downwards. Is that fair? I am confused by the example. Are we saying a negative saving rate means people are saving more? Or a positive one?
  18. That is a very interesting graph. The savings rate went negative - I recall in the 2000s while people were massively borrowing more than spending during a boom period of profligacy (rather than after a concerted effort to save) - banks were phoning people at work and throwing money at them - this was followed by a sharp recession - which seems the complete opposite of the Paradox. You kindly highlighted the savings glut in WW2. My understanding of the paradox would be that after an increase in savings, they will gradually fall in some paradox of thrift downward spiral. This does not seem to have happened anywhere on the graph - indeed after WW2 there was a massive boom in the US - which seems totally against the theory. Even if there were 1 data point it would not be sufficient to prove the theory and could easily be an anomaly. In practice this one data point seems questionable. Based on what we have seen here, the Paradox of thrift is an unsubstantiated theory.
  19. So for your example to fit the definition there must have been a higher savings rate than -2 percent at some point before? Are you also arguing the depression was caused by the paradox of thrift? Presumably for you to accept this theory there must be a large amount of empirical data to support something so counter intuitive? I would be greatful if you could share some of it?
  20. Is that the same as the Paradox of Thrift. I understood the theory to be that people start to save and no one spends. Which leads to a deterioration of consumerism that causes problems in the economy. Your example seems to be people are spending more than they earned and not saving - this seems the opposite to the paradox of thrift?
  21. Ok thanks Just to be clear - savings were at -2%; so that means a negative saving rate - people were spending more than they earned?
  22. Thanks a lot for starting this thread. This is a concept I would really appreciate understanding from some of the economists on here. Is there any empirical data to support it? An actual example of the paradox of thrift in action - where a major economy crashed as a result? It is a theory so the default has to be that we need convincing of the concept based on empirical data. A counterexample might be the 1870s in the US which saw economic growth combined with deflation.
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