Thursday, January 13, 2022

The Rationality Index and Inflation - Part 2

 One of the titanic forces is basic human nature.  There is a great desire to accumulate power, and climb to the top of the dung heap.  There, you get 'Wine, Women, and Song'.  (wws).  

But, to get wws, every single person amplifies their little neck of the woods, into a 'Massive Issue'.  These are all pimples on the butt of an elephant (titanic forces), but that's how you climb.  

Into the stagflation of the 70's, caused by the titanic forces of government spending on war.  The central bankers decided to make their pimple move.  They convinced everybody that inflation could be stopped by increasing interest rates to horrible levels.  They did and the economy improved, but it had nothing to do with them.

Eventually, the 70's produced a high Rationality Index (ri).  Nixon, that ultimate rationalist and crook (not mutally exclusive) visited China.  Immediately afterwards, Walmart came into being, and lived by huge container loads of Chinese stuff.  Nobody else could handle these containers of junk.

That got Reagan into thinking about world trade.  They formed the world trade organization, and world trade increased, mostly from China.  This tide lifted all ships.

Once the world prospered again, the ri dived, and we went into philosophy, and heap-climbing.  It seems we can only do it when we are warm and comfy.  You might think that the desktop computer improved wealth, but you weren't in my old company.  It just produced more paper.

On a side note, Japan went nuts in buying real estate, just like Toronto.  That crashed, and no action by central bankers could lift it.  The titantic force was the 'third generation rule' and 'purism'.  They evenually lifted a bit with computer consoles.

-- to be continued.

No comments: