At 1:54 PM +0000 1/8/03, olympus-digest wrote:
>Date: Wed, 8 Jan 2003 00:04:39 -0500
>From: "Jim L'Hommedieu" <lamadoo@xxxxxxxx>
>Subject: [OT] Revisionist history of the 70s economy (was Re: The coming
>generation of 35mm CCD digital)
>
>Funny. I thought he was the guy who invented deficit spending.
Oh, mercy no, it was Lord Keynes, who invented and provided the intellectual
justification for "pump primimg". Keynes died in 1946.
<http://www.econlib.org/library/Enc/bios/Keynes.html>
Not to mention some tax&spend Democrats who liked the idea very much.
It must be said that pump priming, in the form of massive WW2 deficit spending,
did pull the US economy out of what remained of the depression of the 1930s.
When one is in a depression, some inflation is a good thing. The problem was
that the deficit spending didn't stop, so the inflation didn't stop either.
>From: "Joe Gwinn" <joegwinn@xxxxxxxxx>
> > The highest inflation rate the US got was ~210er year, in the 1970s.
>Reagan put a stop to it.
The known facts: The US Federal Reserve Bank cut the money supply, and the US
economy fell into a recession, stopping the 21 0nflation within a year. The
recession was over in a few years, and the inflation never came back.
My theory: The strategy was simple enough. Upon being sworn in, Regan quietly
let the US Federal Reserve Bank know that it was OK by him if they cut the
money supply sharply, even though this would cause a deep and politically
painful recession even as it stopped the inflation dead in its tracks. Given
the likely political fallout, the Fed wouldn't dare do such a thing without
such support. One then blames the resulting recession on the misguided
policies of one's predecessor. Now, recessions usually take about two years to
run their course, so one comes into the re-election campaign on a rising
economy, for which one takes full credit, and nobody remembers what happened
three years ago anyway. This is exactly what happened. Regan was re-elected.
Joe Gwinn
OM content: Lots of news photographers used OM back then.
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