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Blog
Days of future not yet passed
July 8, 2008
Fellow blogger Lane Cardwell provides an excellent analysis of the wildly inflationary period (and its impact on the industry) during much of Jimmy Carter's presidency. I urge you all to read it, and take solace. This performance, especially viewed against the backdrop of the subpar economic gains, high unemployment, and accelerating inflation of the 1970s, has raised hopes, and to some extent expectations, that basic structural improvement in the economy is under way that will provide the building blocks for sustained prosperity over time.
It's just too bad that history isn't likely to repeat itself in the aftermath, if there is one in the offing, of the economic mess were in today.
Does anyone recall what happened almost immediately after inauguration of Ronald Reagan? Things got better -- really better. The Federal Reserve trimmed the money supply, calming inflation. Then came the Economic Recovery Tax Act of 1981, cutting business and personal taxes. That helped to spark an expansion rivaling the post-war period.
Real disposable income grew and employment rose. Hope was in the air. Enthused Gary Stern, then president of the Federal Reserve bank of Minneapolis in a 1984 annual report:
As we now know it did, for the next 10 years anyway. Indeed, such prosperity created a demand for casual-dining restaurants and in so doing fueled a rash of public offerings and growth.
Can we expect a similar resurrection in economic fortune with John McCain in the White House? He says he wants to revive the economy with lower taxes. That might be a hopeful sign. But today's pressing issues -- including expensive health care, rising energy prices, and a slumping housing sector -- appear to require more government spending, not less. Just today, Treasury Secretary Henry Paulson announced the Treasury Department was eager to help existing homeowners, via "covered bonds," refinance loans to prevent foreclosure.
In any case, it seems unlikely either McCain or Sen. Barack Obama or Congress, for that matter, currently has a convincing answer for how to (again) discover "the building blocks for sustained prosperity."
Posted by David Farkas on July 8, 2008 | Comments (0)