Panderer to Power: The Untold Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession

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Authors: Frederick Sheehan
    Doubts about the stock market were not hard to come by. Shortly after Greenspan’s unqualifiedly bullish call, Time magazine discussed a chaotic series of “devaluations, revaluations and [currency] floats [that had] been coming with dizzying rapidity.” 50 Living costs rose 8.8 percent in the first quarter of 1973. 51 This report prompted AFL-CIO chief George Meany to announce: “In his Inaugural Address in January, the President [Nixon] advised Americans to help themselves. It is obvious that this is what unions are going to be forced to do at the bargaining table.” 52 One suspects that this was not the spirit in which the president’s advice was intended, but it is difficult to fault Meany, even though successful negotiations by steelworkers, autoworkers, and airline mechanics were to reduce these industries to minor-league status. As Meany (and Greenspan) undoubtedly knew—and Time reported: “[M]anufacturers decided long ago to serve foreign markets by building plants overseas rather than by exporting. The multinational corporations will profit from devaluation.” 53 Federal Reserve Chairman Martin warned of “extravagance, incompetency and inefficiency” in the 1950s. 54 Ever since, the costs of production had been pricing heavy industry out of the domestic market.
    50 “The Winners and Losers from Devaluation,” Time , February 26, 1973.
51 “Perils of a Breakneck Boom,” Time , April 30, 1973.
52 Ibid.
    Not that the presiding Fed chairman, Arthur Burns, was in the mood to lecture in such a manner. The surging inflation of 1973 was a component of Burns’s decision to open the floodgates of new money in early 1972. That was an election year, and Nixon appreciated the support of his independent monetary shop, although he may have had second thoughts by 1973.
    There is generally a lag between a looser Fed monetary policy and when it affects the economy. The Consumer Price Index rose 3.4 percent in 1972 and 8.8 percent in 1973. 55
    In April 1973, “Inflationary psychology [was] prodding people to buy all sorts of goods before the prices [went] up further.” 56 Time reported that shortages of rubber, silver, aluminum, copper, and lead were frustrating producers. Nixon wanted to sell materials from stockpiles to meet demand. Competitive American businessmen could accomplish much by “speculation.” A U.S. executive “may enclose a check with his order rather than wait until the steel is delivered and the dollar’s value may have fallen.” 57 By August, “many would-be house buyers simply [could] not get mortgage loans,” and “[i]nflation and shortages are turning some people to crime. Supermarkets are reporting rising thefts from meat counters: often a shopper will stuff a couple of steaks under his belt.… Professional thieves are increasingly hijacking meattrucks.” 58 California forest rangers tried to control the illegal hunting of deer, bear, and elk. In retaliation, park warden Kenneth Patrick was shot dead, with two darts from a crossbow through his chest. 59 False rumors of a rice shortage found frantic Californians dragging 50-pound bags of rice from supermarkets to their cars. 60 Shortages were not limited to food. “Newsprint, baling wire, tallow, sawdust, blue jeans, even toilets” were hard to come by. Time devoted a good portion of its news coverage to the inflation and to economic problems. Chicago housewife Jean Salmon told Time , “I don’t understand what’s happening. It seems to me that when one raises his prices, the other raises his in turn. It’s a vicious cycle.” 61 The old were particularly ill equipped in such circumstances. Time reported an elderly woman with a shopping basket full of cat food. She admitted to the supermarket cashier, “I’m the cat.” 62
    53 “Winners and Losers from Devaluation.”
54 Bremner, Chairman of the Fed , p. 132; Martin, testimony to Senate Finance Committee Hearings, April 22, 1958.
55 Ibbotson Associates, Stocks,

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