Reader Sbitch kopitscommenting on current inflation and the situation after the Korean War:
Not even comparable. The comparison is to the Spanish flu period after 1918. The economy shut down, supplies were tight, and inflation was high; a sharp deflationary correction; followed by nearly a decade of economic boom.
If we talk about inhibition, that's the model to use.
Since Mr. Kopitz did not provide any kind of data to support his conjecture, I decided to look up and see what the behavior of inflation was like back then (101 years ago).
figure 1: Annualized CPI inflation six months now (blue) and 101 years ago (tan).Source: Bureau of Labor Statistics, and NBER MacroHistory Database (via FRED)and the author's calculations.
I've matched the minimum value of inflation to make the series correspond as closely as possible. For the paper forwarded by Mr. Kopitz, the year-on-year picture looks even less promising.
figure 2: Instantaneous CPI inflation now (blue) and 101 2 months ago (tan).instantaneous inflation calculation Eckhout(2023), T=12, a=4.Source: Bureau of Labor Statistics, and NBER MacroHistory Database (via FRED)and the author's calculations.
Therefore, it is uncertain whether the inflationary experience matches up. After all, with the entry of the First World War, inflation increased significantly and did not go negative at 12-month or 6-month inflation rates, and it was only reached in one month using instantaneous inflation rates negative value. In fact, by October 1919, year-on-year inflation was 13%.
As teaching is about to begin again, I reiterate my caution. Data will set you free (In this case, for saying stupid things).
