Thomas Tooke

Introduction

In Inflationary Period of 1913-1920 on April 22, 2012 at 2:45 pm

In this post and following, some extracts of a book from Edwin Walter Kemmerer who was professor of economics at Princeton. Similarities with the current period are striking, though Princeton was not lacking common sense at the time.

For student of  commodities investing, it is crucial to understand the root causes of the inflationary period and price spikes of  commodities. As you see in the chart below we are focused on the 1920 spike to better understand where we stand today.

As Kemmener wrote:

[…]

Coincident with these changes, problems of with these changes, problems of the first importance have developed in our economic life, problems which affect each of us to-day in a very vital manner and which demand intelligent study and correct resolution. Chief among these problems is that of the high cost of living, its causes and effects, and the question of what is to be to relieve the situation as it no exists. An enlightened public opinion on this whole subject is an urgent national need.

[…]

It sounds like Texan congressman Ron Paul today dubbed “extremist” but it came of a Princeton economist at the time.  How the world has remained the same and has changed at the same time!

He continues.

[…]

The increase in general prices throughout the world is the outstanding economic phenomenon of the period included between 1913 and 1919. In Australasia that rise was about 100 per cent;  in countries having a hold standard still, such as Scandinavian nations, Japan and the United States it varied from 150% to 250%, while in countries with a paper money countries, like Russia  and Austria it mounted to several thousand per cent.

[…]

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