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Opinion | The Real Legacy of the 1970s - The New York Times
"How different this was from previous economic crises! The Great Depression, the 20th century’s first economic emergency, made most Americans feel a degree of neighborly solidarity. The government wasn’t measuring median household income in the 1930s, but a 2006 Department of Labor study pegged the average household income of 1934-36 at $1,524. Adjust for inflation to 2018, that’s about $28,000, while the official poverty level for a family of four was $25,100. In other words, the average family of 1936 was near poor. Everyone was in it together, and if Bill couldn’t find work, his neighbor would give him a head of cabbage, a slab of pork belly.

But the Great Inflation, as the author Joe Nocera has noted, made most people feel they had to look out for themselves. Americans had spent decades just getting more and more ahead. Now, suddenly, they were falling behind.

Throw in wage stagnation, which began in the early ’70s, and deindustrialization of the great cities of the North. Pennsylvania’s Homestead Works, which had employed 20,000 men during the war, started shrinking, closing forever in 1986. Today that tract of land along the Monongahela River where the works once stood is home to the usual chain restaurants and big-box stores, those ubiquitous playpens of the low-wage economy.

Inflation also produced the manic search for “yield” — it was no longer enough to save money; your money had to make money, turning every wage earner into a player in market rapaciousness. The money market account was born in the 1970s. Personal investing took off (remember “When E.F. Hutton talks, people listen”?).

Even as Americans scrambled for return, they also sought to spend. Credit cards, which had barely existed in 1970, began to proliferate. The Supreme Court’s 1978 decision in Marquette National Bank of Minneapolis v. First of Omaha Service Corporation opened the floodgates for banks to issue credit cards with high interest rates. Total credit card balances began to explode.

Then along came Ronald Reagan. The great secret to his success was not his uncomplicated optimism or his instinct for seizing a moment. It was that he freed people of the responsibility of introspection, released them from the guilt in which liberalism seemed to want to make them wallow. And so came the 1980s, when the culture started to celebrate wealth and acquisition as never before. A television series called “Lifestyles of the Rich and Famous” debuted in 1984.

So that was the first change flowing from the Great Inflation: Americans became a more acquisitive — bluntly, a more selfish — people. The second change was far more profound.

For decades after World War II, the economic assumptions that undergirded policymaking were basically those of John Maynard Keynes. His “demand side” theories — increase demand via public investment, even if it meant running a short-term deficit — guided the New Deal, the financing of the war and pretty much all policy thinking thereafter. And not just among Democrats: Dwight Eisenhower and Richard Nixon were Keynesians.

There had been a group of economists, mostly at the University of Chicago and led by Milton Friedman, who dissented from Keynes. They argued against government intervention and for lower taxes and less regulation. As Keynesian principles promoted demand side, their theories promoted the opposite: supply side.

They’d never won much of an audience, as long as things were working. But now things weren’t, in a big way. Inflation was Keynesianism’s Achilles’ heel, and the supply-siders aimed their arrow right at it. Reagan cut taxes significantly. Inflation ended (which was really the work of Paul Volcker, the chairman of the Federal Reserve). The economy boomed. Economic debate changed; even the way economics was taught changed.

And this, more or less, is where we’ve been ever since. Yes, we’ve had two Democratic presidents in that time, both of whom defied supply-side principles at key junctures. But walk down a street and ask 20 people a few questions about economic policy — I bet most will say that taxes must be kept low, even on rich people, and that we should let the market, not the government, decide on investments. Point to the hospital up the street and tell them that it wouldn’t even be there without the millions in federal dollars of various kinds it takes in every year, and they’ll mumble and shrug."
1970s  economics  greed  inflation  selfishness  us  policy  ronaldreagan  joenocera  greatdepression  johnmaynarkeynes  newdeal  taxes  solidarity  miltonfriedman  liberalism  neoliberalism  regulation  supplysideeconomics  paulvolcker  michaeltomasky 
18 days ago by robertogreco
The World Economy Just Can’t Escape Its Low-Growth, Low-Inflation Rut
We’re still living with the aftershocks of the financial crisis 10 years later.

With the world economy heavily reliant on stimulus to achieve even meager growth, there is little cushion for a negative shock. In particular, it makes the United States more vulnerable to recession caused by any number of factors, including government shutdowns and trade wars.

There’s no “might have” about it.

There is the risk of a nasty feedback loop. The low-growth trap of the last decade — and the resulting stagnant incomes — might have contributed to dysfunctional politics in nations including Britain, Italy and the United States. Those dysfunctional politics in turn can create new risks of economic disruption, as we saw in the recent shutdown standoff in Washington.

The slow burn of stagnation. This isn’t just about financial policy. It’s also about lack of antitrust enforcement. A small group of cartel tech conglomerates essentially have a chokehold on innovation.

The world economy is not in crisis. Low growth is better than no growth — or outright contraction.

But what the last few months have made clear is that the forces that have held back the global economy for the last 11 years are not temporary, and have not gone away. And that, in turn, makes the world uncommonly vulnerable to a bout of bad luck or bad policy.

The low-growth world was not just a phase. It’s the new reality beneath every macroeconomic question and debate for the foreseeable future.
economics  FinancialCrisis2008  inflation  policy 
24 days ago by jefframnani
How much college tuition has increased from 1988 to 2018
Students at public four-year institutions paid an average of $3,190 in tuition for the 1987-1988 school year, with prices adjusted to reflect 2017 dollars. Thirty years later, that average has risen to $9,970 for the 2017-2018 school year. That's a 213 percent increase.
college  inflation  money 
4 weeks ago by craniac
Why deficits are sustainable and inflation has a life of its own — Roger E. A. Farmer
In contrast to both leading contenders, we show that the price level may fail to be anchored by economic fundamentals and, within certain bounds, the average price of commodities may wander aimlessly driven by the self-fulfilling beliefs of market participants.
inflation  economics 
5 weeks ago by yorksranter
Twitter
RT : Durch und : Deutsche erleiden 2018 Rekordverlust von fast 40 Milliarden Euro, zeigt…
Sparer  Niedrigzins  Inflation  from twitter_favs
5 weeks ago by tmmd

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