Mark, sorry for the bashing that will follow but do we really need more of the
crap economics? And do you realize what kind of people you're quoting? The
VP of some corp.! Am I dreaming?
Says "Policy Pete":
>But these arguments, while literally
>correct depending on which deflator is used, can be misleading because
>so many of the relative indicators of the price level have changed so
>much.
Good, good. (I had to insert one positive comment.)
>In 1980 the price of gold was more than three times the current
>price, so measured as a percent of the price of gold, current oil
>prices are high indeed, especially after years of fighting inflation
>instead of promoting it.
Vade Retro, gold maniacs!
What importance does the price of gold have? Even if I reason with a gold
fan's logic, one should say that it's low PRECISELY because inflation has
been fought. OTOH, with another logic you could simply argue that supply is
strong, that central banks are dumping it, etc.
So I officially declare this worthless. The oil situation is serious enough without
making fools of oneself making it up as worse than it is.
As to the quotation:
>At the time of the first OPEC price increase, in 1973, the
>United States had tangible capital assets with a value of about $3.5
>trillion -- more than two and a half times that years gross national
>product
Wow! Capital assets/GNP! Can one imagine a more meaningless statistic
made out of more arbitrary factors?
>These capital goods ... had all
>been built, designed and located on the assumption that, regardless of
>overall price inflation, a barrel of oil would be worth one or two
>bushels of wheat, or one hundredth of a ton of steel, or less than
>half an hour of skilled labor.
This is false or a twisted truth depending on how you look at it. What proportion
of the capital stock (production cost? actual value? marxian value? whatever?)
would be turned unprofitable by a change in oil prices? Come on... conditions
change all the time and capitalists know it!
>These changes have made it
>uneconomical to operate much of 1973's physical plant the way it was
>intended to be, or, in some cases, to operate it at all; much capital
>and labor goes unemployed or malemployed. OPEC's price increase is
>thus a principal explanation for the high levels of unemployment that
>we have experienced since 1973.
As if the only factor in the "economicality" of operating capital was relative
commodity prices... Gimme a break! What was the level of interest rates in
1981? And does this guy know that you don't redeem loans by giving back the
capital you bought at the price of purchase anyway? And he probably doesn't
know that in some countries sacking people will get you penalties.
To unemployment there is only two causes: bad policies and class war.
>And unemployment leads to more
>inflation. Government policy becomes more expansive to combat
>unemployment, and succeeds, in part, by inflating the prices of
>everything else ...
An expansive policy? I guess that an expansive policy is driving interest rates
through the roof like Volker did? Until now unemployment has been thought to
be deflationary, but with this rocket scientists we obviously need to change
theories. And I'm impressed at how the government was able to raise all
commodity prices except oil with an expansionary policy. This man should
give advice to the current governments. What a joke!
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