Homestead mailing list

[Gene GeRue <genegerue AT ruralize.com>]

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.