Dean: The inflation in the 1970s was fueled in large part by two huge rises in the price of oil. The first was associated with an OPEC oil embargo directed against the United States, which led to a quadrupling in the price of oil between 1973 and 1974. The second was associated with the Iranian revolution, which essentially stopped Iran’s oil exports. At the time, Iran was the world’s second largest oil exporter. There was also a sharp surge in food prices associated with massive sales of wheat to the Soviet Union in 1973.
But,but...
In 1972 we left he gold standard and let the dollar float. On the gold standard, the money market worries about gold mining and industrial demand for gold, two external shocks to money. After the dollar floated, the money market went to a statistical model of wealth management. That is a ten year effort, the new pricing mechanism had to reconnect all the pricing in the economy. The repricing was not finished until the entitlement adjustment under Reagan.
Magic Walrus says pricing is costless, constrained flow theory says the pricing industry is large and costly. Constrained flow says elasticity is local and systems not very subdividable.
What is a potential shock to banker bot?
Banker bot, the new money technology, along with smart card lowers the cost of pricing. It suffers a shock when folks fail to tap away at price beacons with their smart cards. The bot collective loses sight of what typical folks like.
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