Reply #6: Economic history [View All]

[econoclast]

Let's face it. The American economy just hummed right along in the post war years. Late 1940s. 50s. Even early 60s.

Why? Keynes? Partly. But mostly because most of the world's productive capacity was either a smoldering ruin or locked behind the iron curtain. America had a virtual monopoly on industry. THAT is the reason. When Asia and Europe rebuilt and retooled (say thank you to The Marshall Plan) America lost her monopoly. That's when things began to get less rosy for America.

And as for inflation of the 70's ... No less a liberal than Brad DeLong at Stanford disagrees with you. He says in part :

"it is hard to sustain the argument that the root of the U.S. inflation problem in the 1970s was the interaction of one-shot upward supply shocks with a backward-looking wage-price mechanism. The baseline inflation rate was some five percent per year in the early 1970s before there were any supply shocks; the baseline inflation rate was pushed up by perhaps two percentage points as a result of the collapse in productivity growth; the baseline inflation rate appeared to be eight or nine percent per year by 1980 "

the inflation began in the late 1960's and one way or another has been at the root of our economic problems ever since

60 and seventies high and higher inflation quashed in the early 80,s by Fed's high interest rates.
80's. But high interest rates killed off the S&L industry which made most of america's home mortgages
giving rise to the growth or mortgage securitization thru GNMA and Then Freddie and Fannie and then private securitizations
and here we are.

We are still living with the aftershocks of an inflation ignited in the late 1960's