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ls the American
Economy
Curable?
"...
he that eameth wages,
earneth wages to put ít ínt(! a
_
bag wíth holes.
"
(Haggaí 1:6)
by
Jeff Calkins
Bacl<
in
the heady, halcyon days of
the eatly 1960's wben unemployment
wa.s
dedining and inflation
was
a
tame
two pen:ent. govemrnent economists
en·
sbrined an ecooomic myth called tbe
uPbillips Curve."
Named after a promioent ·aritish
economist, it postulated that inftatióo
and unemploymeot canceled cach other
out.
It
was the ecooomlc power of posi·
tive thiolciog .
rr
you had high
• unemploymeot, Pbillips believcd, at
least you wouldo't bave inllation. and
vice versa.
Furthe¡:more, the theory produced the
notioo that inftatioo could be solved by
blgher uoeroployment. Last year's dis–
mal statistics of double-digit inflation
aod near-double·digit
un~mploym,ent
.
prove it doeso't always work.
Many of us remember the eady years_
of the Keonedy Presidency as a blissful
Camelot: the "best a od the brightest"
10
would lead the U.S. economy into eter–
na! fine-tuned prosperity through the
simple expcdient of unbalanced budgets
and lower taxes. There was no economic
ill the President's Council of &:ooomic
Advisers couldn't
diagnose
and cure -
!lSually through the opiate of printing
more money. The attitude was a
!so
re–
llected ip the feeling of self-conftdent
omnipotence that produced tbe national
quagmire ofVietnam.
One of tbc lirst signs that something
was
wrong i.o Camelot
was
the nagging
stagnatioo of Great Britain. Govemed
by essentially the same set of philosopb·
ically interventiooist
oostrums as
the
U.S. (only more so), the Uoited King·
dom had become bogged
down
in
a
stop-go series of booms and busts. The
Uoitcd States, it seems, was beaded in
the samc direction, but Britain seemcd ·
to
be getting thcre first.
Thc climax of U.S. involvement in
Vietnam around 1969 straogely coin·
cided with the puneturing of our
eco–
nomic bubble. The federal govemment
had
j
ust gone in
lO
the
red
by $2S billion,
an unprecedeoted deficit for that day.
Eight years · of cootinuous coonomlc
boom cndcd, and, with rising inJlation,
businesses began laying roen off. Reces–
sion set in.
Since that timé. a succession of bud–
get-busting deficíts and liberal IJI.Oney
management by the Federal Reserve in
the presidential electioo year
of
1972
combioed to show that the American
ecoilomy . can indeed follow
in
Briti$h
footsteps.
&:ooomists withio t.be Ford Admlois·
·tration oow project both
unemploym~nt
and inftatioo rates of
&
percent.
10
com–
memorate the oation's Bi<:entennial
Thls
is
the economlc eqwvalent of hav–
ing severe
cases
of both low blood sugar
and hypertensioo.
Tbe Dla¡ooslt
Sioce 196S, nearly
all
the extra wealth
the U.S. has geoerated has gone .into
transfer payments - welfare, sócial
securitj, uoe19ployn¡eot eompensation,
and food stamps.
To the ell'ect that the poor aod elderiy
bave beco helped, these programs
aw
morally laudable. But it's no use
prc.- ,,
tcoding tbat the massive
Sbift
of
rcsources from producers
10
oon.pro,. ,
ducers basn't worked a huge burden OJI
the economy
as
a Whole.
The American mlddle
class
is
no
bet·
ter off
oow
than it was in 196.S, even
tbough the economy has grcatly ex–
paoded since. Nearly aU the extra
wealth has gooe into the natioo:s
bloated public se<;IOr - where it b¡ts cov–
ered both good causes (social security
payroeots) and some oot so good causes.
Moreover, in the last ten years, the
country's ,economjc;_ cirj:uits••have
reached the poiot of óverload. lnJlatioo
was
only the blowiog of a fuse -
t.
FIGHT..BACK...
Fight inflation now by applying the tour principies of financia! stability in
this free booklet.
,
Managing Your Personal Finances pinpoints the common mistakes in
handling money and shows you how to cope wlth skyrocketing inflation.
Our price for tf:lis booklet hasn't changed.
Jt's still free.
Cail 800·423· 4444
·
toll-free for your
free booklet.
•California, Hawali
· and
Ala$lca
can
(213)-5n-5225
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WEEK ENDINO JUNE 7, 197S