Tuesday 261103

 

Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.
PART 10 Money and Prices in the Long Run
Chapter 30 of 36 Money Growth and Inflation
Section 23 of 25
…
The U.S. deflation in the late 1800s.
ChatGPT:
The United States experienced a period of deflation in the late 1800s, specifically during the latter part of the 19th century.
This period of deflation is often referred to as the "Long Depression" or the "Great Deflation."
It lasted from the mid-1870s to the mid-1890s and was characterized by a prolonged decrease in the general price level of goods and services, leading to economic challenges and social unrest.
…
Several factors contributed to the deflationary pressures during this period:
1-Technological Changes:
The late 1800s saw significant technological advancements, particularly in agriculture and manufacturing.
These advancements led to increased productivity, which in turn resulted in overproduction of goods.
As supply outpaced demand, prices for many goods fell.
2-Gold Standard:
The U.S. adhered to the gold standard during this time, which meant the value of the currency was directly linked to a fixed amount of gold.
This constrained the ability of the government to respond to economic fluctuations through monetary policy.
Discoveries of new gold mines increased the money supply, but not proportionally to the growing economy, contributing to deflation.
3-Global Agricultural Competition:
Rapid growth in agricultural production in the United States and other major exporting countries increased the world supply of farm products.
This greater competition and abundant supply pushed prices for many agricultural commodities downward.
4-Monetary Policy:
The U.S. adopted a tight monetary policy during this period, with a focus on maintaining the gold standard and controlling inflation.
This policy limited the money supply and contributed to deflationary pressures.
5-Debt Burden:
Many farmers and agricultural workers were burdened by high levels of debt, often taken out to finance equipment and land purchases.
Falling prices meant their incomes were not sufficient to cover their debts, leading to financial distress.
The loans taken out by farmers had to be paid back in higher value dollars than the lower value dollars they had received from the loans.
…
The deflationary environment had significant economic and social consequences.
Falling prices hurt farmers and other debtors, contributing to social unrest such as the Populist movement, which advocated for monetary reform and policies to address the challenges faced by farmers.
The economic difficulties also impacted industrial workers and led to labor strikes and protests.
…
The Long Depression gradually ended in the late 1890s as economic conditions improved and the economy adapted to new technologies, expanding markets, and changing patterns of production and trade.
However, the deflationary pressures of this period left a lasting impact on economic and monetary policy discussions, influencing debates about the gold standard, monetary supply, and the role of government intervention in economic stability.
… …
economic recovery
景気回復期
keiki kaifukugo
… …