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June 18, 1979
Hoarding Days
One lesson learned during World War II is that hoarding of one item can cause a run on another. In 1943 the rationing of shoes touched off hoarding of clothes, and the rationing of canned meats and fish started panic buying of canned vegetables and fruit. Another lesson is that scarcity is not essential to hoarding. In 1973, reporting a Congressman's fatuous remark that supplies might grow short, TV Host Johnny Carson touched off nationwide panic buying of toilet paper.
One key ingredient in all hoarding, explains U.C.L.A. Sociologist Ralph Turner, is public distrust. Says he: "The ordinary human being knows that Government authorities and business leaders give a lot higher priority to keeping the populace calm than to telling the truth."
Factors other than a loss of faith in government may also be at work: a competitive culture, high anxiety about the economy and conflicting reports on which shortages are long-term or temporary. Says Sociologist Jackie Boles of Georgia State University: "At times like this we need strong leadership to jolt people out of this competitive behavior. Unfortunately, our leadership has said, 'Yes, we have an energy shortage,' and 'No, we don't have an energy shortage.' People are operating in a vacuum of leadership." Adds Brenner: "The public will try to get the facts themselves, and when no reliable facts are available, they will create their own drama."
What you gonna do with all that junk?
You don't want no drama
Tuesday: Case-Shiller House Prices
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[image: Mortgage Rates] From Matthew Graham at Mortgage News Daily: Mortgage
Rates Start New Week With Some Hope
Last week wasn't great for mortgage rates....
9 hours ago
7 comments:
I call BS blaming "the public."
People can recognize when their savings are being confiscated by inflation. Anyone, no matter how poor, can counter-act that confiscation my moving otherwise mandatory purchases up. It's not hysterical, it's rational.
These pointy heads and their arrogance when they are essentially getting front-run by ordinary folk pisses me off. It's like they cannot conceive someone else can see through them, so there must be some other, certainly irrational, motive at play.
Oh, and so did Paul Volcker.
There's a very simple solution to run-away inflation: positive real interest rates.
allanf,
There's an alternative solution also - zero inflation or even a negative inflation rate. That was the norm in the U.S. from 1776 until 1913.
mab,
Not against zero inflation by any means. Though am personally a little skeptical of how it would work in a modern, tech/industrial innovation economy. I seem to recall they did have these little things, called Panics a couple-few times in the latter half of the 19th century.
Of course zero inflation would really make Congress Critters squeal. We'd be hearing their favorite bromide, 'turning back the clock' so much we probably have to start a new blog. Both of which probably make it well worth the effort.
AllanF,
There's a very simple solution to run-away inflation: positive real interest rates.
I'm a complete believer that negative real interest rates got us (back) in this mess (1970s style). That is the #1 reason I have hoarded and continue to do so.
However, it could also be argued that positive real interest rates simply "compounded" the problem. My 3.4% I-Bonds are up 65% since I bought in 2000, are earning 6.51% currently, and still have 22 years to go. Talk about exponential growth. The interest on the interest is nearly earning as much as the original principal. This is and was not sustainable. Fortunately, the government only lets me do it for thirty years total. Had it been a million years and had the I-Bonds been handed down to future generations then I'm fairly certain prices would eventually rise. Call it a hunch! (Something about having enough money to spend trillions of dollars for each hydrogen atom in the known universe doesn't inspire me to think long-term price stability is possible.)
In order to stop savers from hoarding goods over money (savers hoard, that's what savers do) we were offered extra money (through positive real interest rates) to defer our purchases. Now there's a lot more money because of it. So much money has been made off of money in the last few decades. I find that both scary and inflationary.
MAB,
There's an alternative solution also - zero inflation or even a negative inflation rate. That was the norm in the U.S. from 1776 until 1913.
I would be perfectly fine with inflation at 2% and interest rates pegged at 2.5%. Those in the 20% tax bracket would break even. It would be sustainable long-term (other than the paper costs of printing your one million digit bank balance someday, but perhaps we could switch to "exponential" notation). I wouldn't hoard if I could trust it to be a permanent condition.
Hoarding hard goods is not without its problems. First, insurance. If my house burns down, so goes the toilet paper with it. Second, no liquidity. I could not resell my unused toilet paper at anywhere near the price I bought it at.
2% treasury bills when inflation is about 4% is another matter altogether though. Compound that for fifty years and you'll lose 69% of the nest egg (in the 20% tax bracket). One would be a lot better off hoarding real nests and real eggs. Liquidity and insurance be damned.
Yeah, in the old days they used to get raises too. The problem is that wages aren't rising with inflation. They're sinking. I now seem to be able to buy even less with wages about the same as I made in the 80s. I'd say that anyone who isn't hoarding is missing a real opportunity. At least I have my guns and religion to cling to.
Teri,
Haven't you heard? Here's something from the link in my latest "Retail Sales" post.
"The landscape has completely changed with the report on retail sales," he said. "This just changes the whole picture."
I should change the name of my blog to be more in line with the new landscape. $50 billion in economic stilumus has generated $4 billion in retail sales.
1. Weeds of Prosperity
2. Roundup™ of Prosperity
3. Dandelionilocks Economy
4. The Greatest Story Never Mowed
So many choices. I like #2 best but doubt I'd be allowed to keep it.
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