Mike & Merritt... I think Nixon was
goosing the economy to get reelected in 72 (he was running scared of
McGovern :-)), possibly with some fed assistance, and that helped
fuel inflation, although Vietnam was still certainly a major,
lingering influence
(people involved with the fed at the time say Johnson was hiding
expenditures from them, I believe). Economic policies have substantial lag times before their effects are felt, which is
one thing that helps them get out of kilter, and makes it hard
to correctly apportion blame and credit, though.
This time, I think there's a serious problem from the seeming
inability of major countries like Japan and the US to use fiscal
policy against recession. If monetary policy is going to be the
sole weapon against a contractionary shock (and Greenspan is showing
he is using it), the results will be, IMHO, more inflationary and
than if fiscal policy were used as well.
Japan may be getting around to it, but the US seems fairly
resistant. I think a return to higher (moderate)
inflation (perhaps as
the US recovers from mild recession in a couple of years, though, rather than during it) is more likely than not... If not, and if we
aren't willing to run more of a budget deficit at the trough of
a recession, then the recession could get pretty grim.
Cheers,
HB |
