And off We ride!

I am going to get a little technical for some people, but this might eventually sound like fun as I explore tow Posts, here and here; which people should read to understand. Alex Tabarrok first details how nominal growth is relatively rapid, then Casey Mulligan provides a comparison between the 1981-2 Recession and the current Recession. Alex reminds people that the nominal economic growth will double in 14 years, if the growth rate is 5% per year due to compound interest. Casey makes the Case that the 1981-2 Recession should be viewed as the 1980-2 Recession if compared with the current Recession, as the 1981 Recovery was so Short that it was an actual false Reading. Casey fails to state that the 1981 Recovery was generated by the financial world failing in its first attempt to restart the economy effectively. Now I will explain Why I have combined the two Posts.

Alex Tabarrok is quite right in his evaluation of nominal growth first of all. He does not include the Concept that economic expansion is always only Partial, with many Sectors having reached their full potential in previous Periods–with little opportunity to actually expand their capacity or production–at least not as high or continuous as growth sectors. The later Sectors have excess potential compared to filled Sectors to expand, and their expansion applies inflationary pressure to the Resource markets–which are accessed by both filled and expanding sectors. The prices of Resources go up, and filled Sectors have to raise Prices to keep pace with the growth Sectors. It is here that We see the spread between Real and Nominal growth; one which will continue to widen throughout the economic expansion, and the element that may well bring on the next Bust in the economy. Consumers are fully provisioned by the growth Sectors, but only partially provided for by the filled Sectors; their money buying real value and partial value in that order. It is the basic source of Inflation in the economy, and the underpinning of the Bust cycle.

The real value for growth is the sustainable growth factor, while the nominal value of Growth is a false Reading; the spread being the Inflation within the filled Sectors. The only accurate measure of Inflation remains the value of increase in Resource prices during the Boom period, while it effectively remains hidden during the Bust period; though it will continue to increase as long as there is a disparity of productive Returns between filled and partial Sectors. I know that this discussion is somewhat Wonkish, but the Reader should have some realization of the impellent force behind Inflation. lgl