Wednesday, August 20, 2008

Contra Stagflation

in the 1970s, the decade of 'Stagflation', interest rates went UP. house/property prices went UP. wages went UP. the banking sector's propensity to lend went UP. the Company Store's MO (particularly toward the end, under Volcker) was to melt the snowball of credit creation.

these days interest rates are are NOT going up, in fact they have declined significantly over the past year. house prices are going DOWN. duh. wages are NOT going up. the banking sector's propensity to lend has evaporated. the Company Store's MO is to revive the credit machine. in fact, they're quite desperate about it.

so the structural dynamics of the current era differ radically from those operative in the bygone era Known as Stagflation. few notions are more at odds with historical reality than the bromide that 'history repeats itself'.