From: borden@head-cfa.harvard.edu (Dave Borden)
Newsgroups: alt.politics.clinton,alt.politics.bush,talk.politics.misc
Subject: Re: Double-Digit Inflation - The Real Story
Date: 15 Dec 92 18:37:43 GMT
Reply-To: borden@m5.harvard.edu
Organization: Smithsonian Astrophysical Observatory, Cambridge, MA,  USA

In article <visser.724367664@convex.convex.com> visser@convex.com (Lance Visser) writes:
>In <1992Dec14.174745.3017@m5.harvard.edu> borden@head-cfa.harvard.edu (Dave Borden) writes:
>
>+>A popular prediction among Republican "doomsayers" is that with a Democrat
>+>in office, we'll have double-digit inflation like we did under the last
>+>Democratic president, Jimmy Carter.  I've been doing some reading, and have
>+>discovered that the real story is somewhat different than the Republican
>+>die-hards would like us to believe.

>	Its too bad there are moronic party hacks like you around to spread
>yet more disinformation.

Calling names. now?  It doesn't do you much credit.  Prove me wrong with facts.
My source is an article in my alumni magazine, the Princeton Alumni Weekly.
The author, an older alumnus, whose name I don't remember, considers Volcker's
shutting off the money press to be the most important event in recent
financial history.  Volcker (another Princeton alumnus)  unquestionably
deserves the credit for stemming inflation by his actions on October 6, 1979.

>+>The roots of the large inflation of the seventies date back to the Nixon
>+>administration.  Nixon, pressured by dwindling gold reserves, took the dollar
>+>off of the gold standard in 1971 and announced to the world, in effect, that
>+>the dollar was backed only by our word.  Having no commodity limiting the
>+>money supply, the printing presses started to roll, the money supply increased
>+>faster than was appropriate for our level of economic growth, and inflation
>+>began to rise.  Inflation rose constantly, peaking under Carter at over
>+>13 percent in 1971.  The trend of an increasing rate of inflation was one
>+>which started in 1971 under Nixon and ended in 1979 under Carter.
>
>	And Arthur Burns at the FED, Wage-price controls, explosive federal
>spending and several oil shocks had nothing to do with it right?  Its all the
>"gold standard" right?  Sorry to also tell you that what your calling a gold 
>standard was nothing of the sort.

>+>Why did inflation drop?  In October 1979, during the Carter presidency, Paul
>+>Volcker, newly appointed Chairman of the Federal Reserve Board, stopped the
>+>printing presses.  Disinflation (slow-down in the rate of inflation) occured,
>+>and along with it the unfortunate but necessary temporary softening of the
>+>economy and increased unemployment which must accompany any lessening of
>+>inflation.
>
>	That "necessary, temporary softening" of the economy lasted until 
>1982. The other choice that Carter had was cutting government spending 
>back significantly.  He decided to let government spending and the income
>tax burden grow while the fed pushed up interest rates.

Read "Free to Choose", by Milton Friedman.  There's a conservative economist
if ever their was one!  He talks about the cause of inflation, and its cure,
and the side-effects of the cure.  The only way to inflate is to increase
the money supply, and the only way to stop it is to stop increasing the
money supply.  When you do that, the economy will take a while to recover,
but it's a necessary part of the transition.

>+>Hence, an examination of the facts shows that the root cause of seventies
>+>inflation was actions on the part of the Nixon administration, and that it
>+>was during the Carter administration that the necessary remedy for inflation
>+>was enacted.

>	Hence, an examination of the facts by you leads to a rewriting of
>history from the point of view of the democratic party.  "evil" republicans
>and "noble", hard-working democratics.

I give Volcker the credit for stemming inflation.  Do you credit someone else?

>	Sorry, but in the real world there is more than enough blame to 
>fall on everyones sholders and it would be better for everyone if you 
>party hacks would start thinking about solutions rather than trying to 
>portion out blame.

I've been listening to Republican "party-hacks" lay the blame for seventies
inflation on Carter, and I have presented information which proves that this
is an unfair assertion.  A great deal of the blame does indeed lie with the
Republican president, Richard Nixon.  I never said that all of the blame is
his, nor did I say that all of the credit lies with the Democrats.  But if
you look at the facts, you'll see that inflation was caused by a rapid
rate of increase of the money supply, which began with Nixon's decision to
take the dollar off the gold standard.  There is one and only one way to
inflate: to increase the money supply.  Nixon sped that up a great deal with
his actions, and Ford let it continue, and yes, Carter let it continue for
awhile as well, but he deserves fair credit for appointing the man who put
it to a stop: Paul Volcker.  You don't have to give Carter the credit for
Volcker's actions, but Ronald Reagan certainly doesn't deserve credit for
what took place during Carter's administration, nor does Carter deserve blame
for what started during Nixon's.

I'm repeating information I've gotten from authors on the subject of
economics.  If that makes me a "moronic party hack" then so be it.  But I
think before calling people names you would do well to think and read a little
bit more yourself.  If you choose not to do that, than perhaps it you who are
the "republican hack", masquerading as impartial in order to discredit the
democrats, who are spending all their time trying to discredit the impartial
republicans.

  - Dave Borden
    borden@m5.harvard.edu