At 7:07 PM 12/30/96, Robert Cherry wrote: > Doug Henwood wrote: > >> Hmm, but the 1989 price deflator was 1.7 points above the 1986 one - not as >> sharp a rise as the CPI, but still a 65% spike in the inflation rate. Not >> that that's alarming to me, but it is/was to creditors. > > This is hogwash. The price of crude oil fell from $440 in 1985 to $223 in >1986. Agricultural prices also fell. This is why the inflation rate for 1986 >was so low. (Not also the movement upwards of real oil prices from 1988 to >1990). Every serious analyst, especially Greenspan, knew this and that >is why they all knew that there was no trend whatsoever for the period >1983-90. For this reason, I stand by my previous conclusion: > >> Thus, the FED responded in 1989 and 1990 to financial interests which >>are tied to the CPI and not to any clear underlying evidence that there was >>an accelerating inflation rate. Here's how two CPI subindexes with minimal attachment to oil fared. Numbers are year-to-year changes in the indexes. CPI ex-food & energy bottomed 3.7% Feb 87 peaked 5.7% Feb 91 CPI services bottomed at 3.9% in Jun 87 peaked at 6.2% in Feb 91 Meanwhile, capacity utilization had been rising from the recession low of 76% in 1983 to almost 84% in 1989 (i.e. above the 82% inflation-danger level), and unemployment had fallen from almost 10% to just over 5% over the same period. For good Kaleckian reasons, even industrialists would have to view the tighter labor market with some alarm. This is real class-struggle stuff, not the figments of bond traders' and central bankers' imaginations. Doug -- Doug Henwood Left Business Observer 250 W 85 St New York NY 10024-3217 USA +1-212-874-4020 voice +1-212-874-3137 fax email: <[EMAIL PROTECTED]> web: <http://www.panix.com/~dhenwood/LBO_home.html>
