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  • From: Gene GeRue <genegerue AT ruralize.com>
  • To: homestead AT lists.ibiblio.org
  • Subject: Re: [Homestead] What some of it means
  • Date: Wed, 26 Sep 2007 06:02:30 -0500


On Sep 25, 2007, at 10:40 PM, Wendy wrote:

Gene,
Does Greenspan give any explanation as to what happened during the Carter
administration? I have yet to see a good explanation that would cause the
sudden double-digit inflation and excessive hike in the prime.

"Jimmy Carter had no use for me--we met on only a couple of occasions and never hit it off. (Of course, I'd been part of the Ford administration and he'd defeated Ford.) . . . .

"The economy did not work in Carter's favor . . . .

"It's not that Carter didn't try. His administration proposed no fewer than seven economic programs. But none was strong enough to contain what was fast becoming a crisis. . . Carter felt compelled to be all things to all people. So he'd propose new social programs while simultaneously trying to reduce the deficit, lower unemployment, and cut inflation . . . .

"The Federal Reserve--by law independent of the White House--only seemed to mirror Carter's indecisiveness. My old mentor Arthur Burns and his successor, Bill Miller, kept trying to find a middle ground on monetary policy that would accommodate conflicting economic needs. . . . From what I could see, that middle ground they were looking for didn't exist.

"But I was in the minority."

There are several pages on that period. Greenspan notes that inflation must be dealt with as a primary economic issue; if it is not, then it can get out of control, as it did then.

Throughout the book he makes it apparent that there are often conflicts between what economists advise is best for the economy and what presidents do for political reasons. He is very high on Clinton because Clinton listened very carefully to economic advice and did what was often politically difficult but was best for the nation.

Another condition I was not aware of is how fast the economy can change, either in acceleration or deceleration. If people get the idea that things are bad then they stop buying and the economy crumbles. It is not so much the facts as the feelings. One might say that in this regard, feelings create facts.







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