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Robert Stewart - de Jong

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What would it take to drive global inflation back to levels equivalent to the early 1900s?

Conventional wisdom would say it's impossible but this is merely a discussion at this point so why not get creative?
To put this in perspective I read a newspaper article fromThe Press (Christchurch, New Zealand) from about 1920 in which it stated that if you were thrifty you could live fairly comfortably in christchurch on $3 a week.
Now, by comparison, $20 would barely feed me for a day let alone provide board and bed. thats a quite substantial growth in under 100 years and I'm convinced that profiteering has played a substantial part in accelerating it. For example if a a litre of milk costs $1, it would be sold to the supermarket for a $1.50 and the supermarket in turn would sell it for $2 when it should be, say, $1.20. each handler as upped the price by 50c when they could afford to raise it only 10c and still turn a profit. That is, after all, supposed to be the point of 'super'markets; they deal with so many products that they can afford to sell items at a loss because it's made up for by other items.

Please discuss :)

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  • Aug 31 2013: What would it take to drive global inflation back to levels equivalent to the early 1900s?

    You can't. Sorry to disillusion you, but if you look at the role of the reserve banks, and the local 'high st' banks and the role they both play in creating the money supply, you'd realize what the problem would be. And how completely and utterly improbable the return is. Further the reality is that those often asking for the return just dont know how far reaching the changes have been since the 1900's.

    As for the milk example, that's profiteering, that's interesting too as it's not related to the above money supply directly only indirectly via the CPI.

    The harsh reality is because those are soft-linked, it effectively means that if you cant afford it.... go without.

    As for the "to be the point of supermarkets; they deal with so many products that they can afford to sell items at a loss because it's made up for by other items."...... i find that too, no insult intended, an incredible naive statement. One that supermarkets still like to make customer believe in, if only to get your feet through the door.

    The only business that does not make a profit, is the one going out of business.

    Supermarkets are no different. And they were not created for that reason. Ask yourself what existed before the supermarket? And what changes did it mean? Ask too why the pre-cursors to supermarkets where in place, and what role did the industrial revolution play?

    It's incredibly easy to say if only we could turn back time - somehow it would all be better. It's an incredibly distracting ideology as it too often means we don't deal with the reality of the here and now.
  • Aug 22 2013: When I was a boy, in the late 1950's, I saved money in an ordinary bank savings account. I did this because the interest rate on the savings account was about double the rate of inflation, and the promise of compound interest was very enticing. Just a few years later, I think it was in the 1960's, the rate of inflation exceeded the interest rate for a savings account, and it still remains higher.. This led to a huge shift of money from savings to the stock market, and enormous profits for the financial industry. When people could safely save money in a bank account, Americans saved a good portion of their income. Since then, Americans save less than most other developed countries. When inflation is high it makes sense to borrow and spend.

    I think the problem is obvious. We need the interest on savings accounts to exceed the rate of inflation. That would help restore some balance in the economy and provide greater security for the middle class. It would lessen reliance on Social Security and other government handouts, and make it much easier to balance the budget.

    Unfortunately, the financial industry is very much in bed with the Federal Reserve Bank, and is a huge source of political funds.

    If we want to fix ANYTHING in this country, FIRST we need to reform campaign financing.
  • Aug 12 2013: Are you willing to earn the average pay for 1920 which was 1200 per year. the average pay for a teacher was 850 per year.
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    Aug 12 2013: Robert, NZ is big ranch sheep country if I recall correctly. Lets take the process one step at a time. You want a ranch. Go to the bank for financing. Got the loan at 12%. Up the loan for a house, barn, truck, etc .... need sheep another loan. need feed. need vet. You get the picture. I am in up to my ears.

    Offer sheep to a broker. He arranges for transport ... at my expense. Puts in feed lot ... my expense. Sell is made. I just make a small profit and still owe a bunch and do it all over again. The chain that bought the sheep will have expenses prior to selling the meat and will make a small profit.

    In the end the two that made a bunch of money with little or no effort were the bank and the middle men.

    In the early 1900s you had a farmer who raised sheep and a butcher who sold meat. They talked and shook hands and both made a reasonable profit. Do you notice the absence of two profiteers? Costs were low, profits made, and the product was sold at a small mark up. Smiles all around.

    Yeah it is simple but pretty easy to follow.

    I wish you well. Bob.
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      Aug 17 2013: Hang on a sec, lets go back to the bank because at the end of the day thats where the problems start. The loan repayment accrues 12% interest per annum. 12% isn't particularly high by my understanding but as we're using made up figures I suppose thats heresay. My point remains that the banks can afford to charge less than 12% interest. If 0% represents the original sum, payed back in full, then the bank has not made a profit. BUT THEY HAVEN'T LOST ANY MONEY EITHER; They've got the exact amount that they put in back. Obviously we can't expect any business to run successfully at a loss. But if the bank charged only 6% per annum then that 6% is still going into the business' coffers, the original loan is easier to pay off and the bank has still made a profit (assuming other expenses are covered first)

      Now, it may be that in order to break even, the bank HAS to charge a minimum of 12% interest. 'Breaking Even' = after all expenses are payed, there is no money left over but you haven't lost any either.

      I somehow doubt thats the case.

      Banks can afford to charge less. but even if they did, that doesn't bring inflation levels down.

      I know how the economy works, I don't need a lesson in economy. The example in the original question was merely that; an example.
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        Aug 18 2013: Robert, for just a sec lets go back to the loan for the ranch I proposed ... say you get a loan for $100,000 @ 12% .... your annual interest payment is $12,000 on the first 12 months. The 12% is then charged on the remaining balance until payed off. That is how banks make money by loaning out your money.

        Banks would never use the term break even .... you deal with a bank you pay. Period. They are not your pal ... they are here to make money.

        A house for 20 years @ 12% sold for 120,000 will cost you 500,000 to 600,000 dollars. The banks would fire a loan manager who just broke even.

        Thanks for the reply. Bob.
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    Aug 12 2013: Actually you are talking about deflation. It is a matter of money supply which is controlled by the central bank. Typically this is done by dictating the reserve rate.


    Forget about the price control thing. The prices are exactly what they should be.

    Once upon a time there was company north of the equator called Montgomery Ward they had the best value because rural farmers could buy items by catalog at lower prices than the competition. They were replaced by Sears who not only had the catalogs but also had brick and mortar stores for the growing urban population. Along came Walmart who took advantage of computer technology and offshore manufacturing to bring the customer lower prices than the competition. Then along came Amazon that not only had lower prices but allowed you to have a huge selection in the convenience of your home and deliver the product for less than the cost of gas to get it yourself.

    As you can see selling product for lower prices is the most competitive activity on the market that is done by some REALLY smart fellers. What ever you come up with will have unintended consequences that will not result in lower prices. The beneficiary of this is the consumers as the aforementioned drive prices down. BTW this is a natural consequence of the economy without the "help" of the central bank is deflation.

    Hopefully this indicates where best to look to effect real change?
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    Aug 12 2013: .

    Practically,
    if we drive back our “inflation” of INVALID (harmful) HAPPINESS to 1900
    (without junk foods, big houses, shining cars, touring, etc.),
    we can be very happy today.

    .