Library of Mistakes EP 27: Seven Crashes (with Harold James)
Jul 8, 2024
Harold James, author of Seven Crashes, discusses the historical impact of supply shocks on globalization and capital flows. The podcast explores the responses to economic crises by influential figures like Keynes, the challenges faced by central banks in addressing supply side shocks, and lessons learned for a more optimistic future.
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Inflationary Illusion
- Negative supply shocks cause price rises, and governments may respond by allowing inflation.
- This creates an illusion of increased resources for citizens, but this is often a betrayal.
1970s Inflation and Hoarding
- During the 1970s, Harold James recalls inflation reaching 25% in the UK, leading to hoarding behavior.
- His parents, for example, stockpiled jam jars due to the uncertainty caused by inflation.
Globalization After Shock
- The 1970s oil supply shock spurred globalization by stimulating a search for demand.
- This led to increased capital flows, particularly the recycling of petrodollar surpluses.