War and Inflation

[Peter1469]

Government not interjecting too much money into the system, or otherwise debasing the value of the currency, will create zero monetary inflation.

[zelmo1234]

Much of the cost of war doesn't show up on any ledger because it's reflected in the cost of inflation, so there is no accounting or accountability for those indirect hidden taxes.

Any spending that the federal government does will never be absorbed and paid back by the economy.

You mentioned Roads, if it is a project using federal funding they have to pay prevailing wage costing the tax payers more to get the same project done! Thus not as many projects can be completed in the course of the construction season.

At best you get 15 cents on a dollar when the government is in charge of the spending.

People keep looking to government for the solution, and in the words of Ronald Reagan, "Government is the Problem"

[zelmo1234]

Great thread, lots of insights, I find nothing worth arguing about.
My only comment is that there are many other elements to inflation that are not ever discussed, mostly because they are sacred cows. In general, they share the characteristic with war of money spent on things that create less value than they cost. A couple of obvious ones are interest on loans, “profit” on goods and services (which I define as revenues in excess of costs), gambling (think casinos and the stock market) - practically anything where money becomes a commodity rather than a tool facilitating the exchange of things with actual material value.
The idea that growth is fundamental to Capitalism is also inherently inflationary.
This is the point where the warriors of sacred cows usually weigh in and people start to desperately and offensively begin arguing about particulars, with no relation to the whole picture - which is not a pretty one. I am not interested in indulging in those arguments because they are invariably circular dead ends (how’s that for a metaphorical conundrum?)
Fundamentally, inflation is baked into most of modern human culture, and we hate it, unless we are profiting from it.
What to do about it? Fukifino. We have to see it clearly before we can even attempt to fix it, but we really don’t want to see the roots of it. It’s more fun to pretend thar it’s somebody else’s fault.

I am a little concerned about you thoughts on Capitalism, If you want to see inflation, try socialism on for size.

AS for Business, there has really only been one true Monopoly in the History of the USA and that was Standard Oil. And of course the product at that time was kerosene, when the Government broke up Standard oil in to several new companies, the price of a gallon of kerosene went up by nearly 50%

And of Course made J.D. Rockefeller the richest man in the world. when the government tries to pick winners and losers, the public is the one that gets screwed.

[Dr. Who]

Great thread, lots of insights, I find nothing worth arguing about.

My only comment is that there are many other elements to inflation that are not ever discussed, mostly because they are sacred cows. In general, they share the characteristic with war of money spent on things that create less value than they cost. A couple of obvious ones are interest on loans, “profit” on goods and services (which I define as revenues in excess of costs), gambling (think casinos and the stock market) - practically anything where money becomes a commodity rather than a tool facilitating the exchange of things with actual material value.

The idea that growth is fundamental to Capitalism is also inherently inflationary.

This is the point where the warriors of sacred cows usually weigh in and people start to desperately and offensively begin arguing about particulars, with no relation to the whole picture - which is not a pretty one. I am not interested in indulging in those arguments because they are invariably circular dead ends (how’s that for a metaphorical conundrum?)

Fundamentally, inflation is baked into most of modern human culture, and we hate it, unless we are profiting from it.

What to do about it? Fukifino. We have to see it clearly before we can even attempt to fix it, but we really don’t want to see the roots of it. It’s more fun to pretend thar it’s somebody else’s fault.

In terms of money as a commodity, the most offensive to me is when money is traded, so it's value is constantly in play. It makes little difference domestically but does make a difference in terms of the price of imports and exports. Where the price of imports are affected by a drop in the dollar's value, it results in an increase in the price of imported goods.

[Dr. Who]

Any spending that the federal government does will never be absorbed and paid back by the economy.

You mentioned Roads, if it is a project using federal funding they have to pay prevailing wage costing the tax payers more to get the same project done! Thus not as many projects can be completed in the course of the construction season.

At best you get 15 cents on a dollar when the government is in charge of the spending.

People keep looking to government for the solution, and in the words of Ronald Reagan, "Government is the Problem"

On the other hand, would you really want federal roads being built with illegal labor, because that's ultimately how you get projects built for less.

[carolina73]

I seem to remember that despite all the worst efforts of FDR it was WWII that got us out of the Great Depression.

The New Deal had some great accomplishments but for the most part slowed the recovery from the Depression.

[Newpublius]

I seem to remember that despite all the worst efforts of FDR it was WWII that got us out of the Great Depression.

Let's see, let's take 8 million men out of the labor force and stick them in the military. Necessity demands it, but there was an opportunity cost to that of course, and we won't even look at the value of lost lives which itself was absolutely enormous. Then, back home, because production shifted to weapons, butter went to guns, consumers faced straight up rationing. Some Keynesian economists will look at official GDP stats, but when government imposes like that, its just numbers attached to a central order. The 'price' of a B17. Now don't get me wrong, war is wrong and to the extent war is necessary, well then it is necessary, but war IS bad for the economy.

If it were so great we absolutely could contrive a war economy right now. We could declare war against the 'penguin threat' of Antarctica and put the economy on a war footing. Draft 10 million people out of the civilian work force and have them invade Antarctica and occupy it. They can eat penguin and leopard seals too while they are down there.

War economies produce things that in ordinary times ordinary people really don't have any use for, there may be a necessity for it, but different thing.

[Newpublius]

Much of the cost of war doesn't show up on any ledger because it's reflected in the cost of inflation, so there is no accounting or accountability for those indirect hidden taxes.

Subject to your initial caveat of course:"The bottom line is that war always causes inflation, at least when it is funded through money-printing instead of a pay-as-you-go system of taxes and/or bonds."

[Chris]

Let's see, let's take 8 million men out of the labor force and stick them in the military. Necessity demands it, but there was an opportunity cost to that of course, and we won't even look at the value of lost lives which itself was absolutely enormous. Then, back home, because production shifted to weapons, butter went to guns, consumers faced straight up rationing. Some Keynesian economists will look at official GDP stats, but when government imposes like that, its just numbers attached to a central order. The 'price' of a B17. Now don't get me wrong, war is wrong and to the extent war is necessary, well then it is necessary, but war IS bad for the economy.

If it were so great we absolutely could contrive a war economy right now. We could declare war against the 'penguin threat' of Antarctica and put the economy on a war footing. Draft 10 million people out of the civilian work force and have them invade Antarctica and occupy it. They can eat penguin and leopard seals too while they are down there.

War economies produce things that in ordinary times ordinary people really don't have any use for, there may be a necessity for it, but different thing.

Yet prosperity returned not after the New Deal but after the war was won.

[Newpublius]

Yet prosperity returned not after the New Deal but after the war was won.

Indeed and people should be very cognizant of the high opportunity cost the MIC has had on the US economy. Its essentially a trillion dollars per year, every single year. Defense + VA.