Friday, April 20, 2007

What Actually Happened

Mark Thoma stands as an excellent Economist, and this Work proves he does his homework; the Question being does it actually describe what happened in the Great Inflation? One trouble with Economists lay in their becoming overwrapped in their economic models. One remarkable separation between the stability of the 1950s, and the Period of the Great Inflation was the great Cuts in Business taxation Worldwide. A second tendency starting about the time of the Kennedy Tax Cut was the Business attempt to double their Profits percentage in relation to total Volume of Sales. The Tax Cuts left more funds in the hands of Business, and their increased pressure for Profits sought to double the largesse of those Profits.

Along came a War, a War on Poverty, an acceptance of higher levels of Public Debt, more Investment capital, and rapidly rising Resource pricing; all within the spectrum of increasingly hard Consumer Products pricing to maximize Business Profitability at advanced expectations. Business practice quickly acclimated the lower Tax rates, and resisted varied attempts to limit the Profits percentages they desired to previous Decade averages. The surge in Resource Costs were rigidly passed on to the Consumer, plus the amplified percentage Profit demanded from that evolution. Increased Consumer Pricing quickly brought forward rapid Wage increase demands, which Business resisted by limiting Employment, and by shifting the increased Costs forward on Consumers; tacking on their insisted percentage Profit. The practice did not stop until there was a final Contraction in Consumer Demand in the early 1980s (this assessment will led to vast waves of denial from Economists, who utilize only bulk Economic data to assess Consumer Demand; though the real evidence was in shift to Maintenance purchasing by Consumers).

The real Cause for the Great Inflation was doctrinarian Business policy, and a Political process which would not endure an increase in Business taxation until Reagan could push through a sounder Tax policy in the mid-1980s. Actual sound Tax policy was continued through the intervening Period, until Clinton allowed erosion of Tax impact for Business after 1997, allowing the buildup of excess funds leading to the Tech Boom and Bust. The Bush Tax Cuts of 2001 and 2003 has again allowed an excess of Business funds, bringing on the Real Estate and Stock Market Booms of Today. We have yet to see the disaster of this Policy. lgl

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