I believe ARTHUR B. LAFFER was an economic adviser to Reagan if I’m not mistaken.
I read his opinion piece in today’s WSJ
For months I have been saying we could expect to return to economic conditions of the 1970’s and referring to our president as Jimmy Carter (part 2).
Apparently I was mistaken. It won’t be like the 1970’s if Mr Laffler’s predictions come even close to reality IT WILL BE WORSE.
It’s difficult to estimate the magnitude of the inflationary and interest-rate consequences of the Fed’s actions because, frankly, we haven’t ever seen anything like this in the U.S. To date what’s happened is potentially far more inflationary than were the monetary policies of the 1970s, when the prime interest rate peaked at 21.5% and inflation peaked in the low double digits. Gold prices went from $35 per ounce to $850 per ounce, and the dollar collapsed on the foreign exchanges. It wasn’t a pretty picture.
The left has the likes of Krugman explaining that the current situation is not likely to cause stagflation because there are no immediate and abrupt commodity (like oil) shortages. But pound per pound, I tend to give more credence to Laffler. Krugman is an extremely bright guy, but he is a Keynesian and as such is likely to favor liberal policies above all else. He was also widely quoted as saying “George Bush’s legacy will be ENRON”.
For those of you who don’t remember the mid 70’s. Take my word for it, it was doom and gloom 24 hours a day for years….interest rates out the kazoo, and everyone was broke all at once.