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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 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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