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Authors: Frederick Sheehan
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Bonds, Bills and Inf lation, 2000 Yearbook , p. 226, Table A-15.
Naturally, Time asked its Board of Economists for clarification of what was happening. Alan Greenspan did not have much to offer. In April 1973, he declared: “To slow this type of inflation requires strong action, and it is difficult to do that without tilting the economy down.” 63 One suspects that Chicago housewife Jean Salmon could have told us as much.
Time’s anonymous staff writers told us more. In February 1973, the magazine published a 4,579-word article in which the story of our times was stated clearly in a mere 24 words: “The root cause of dollar weakness is that ever since the early 1950s, the U.S. has been living beyond its means in the world.” 64
Greenspan’s forbearance was noteworthy. In a search through the archives, the author of “Gold and Economic Freedom” did not say, “I told you so” (at least, not in a major newspaper or magazine). Nor, did he mention the word gold or discuss the inflationary consequences of the Nixon administration’s policies. He did not stick up for the little guy and instruct the nation—which was badly in need of sound instruction—that “deficit spending is simply a scheme for the confiscation of wealth” and that “this is the shabby secret of welfare statists’ tirades against gold.” 65
58 “The Gut Issue: Prices Running Amuck,” Time , August 27, 1973.
59 Ibid.
60 Ibid.
61 Ibid.
62 Ibid.
Having demonstrated his tact, Alan Greenspan was a top candidate for a government job.
65 Alan Greenspan, “Gold and Economic Freedom,” in Ayn Rand, Capitalism: The Unknown Ideal (New York: Signet, 1967), p. 96.
4
President Ford’s Council of Economic Advisers
1973–1976
I pretended to be somebody I wanted to be and I finally became that person. Or he became me. Or we met at some point. 1
—Cary Grant
In 1973, Greenspan was nominated to head the President’s Council of Economic Advisers. He was fortunate that Nixon’s presidency disintegrated before his confirmation hearings in 1974. Whether fair or not, remnants of the Nixon administration operated under a cloud of public consternation, but the newcomers were accorded some leniency. Although Gerald Ford was under no obligation to stand by his predecessor’s nominations, he decided to proceed with Greenspan’s.
Greenspan phrased his detour into government service as a duty (“I could have a real effect”). He was, however, now pledging his allegiance to the administration that had dropped the gold standard. His 1966 “Gold and Economic Freedom” article read like it was written by a martinet preparing to lead a peasants’ revolt. Now he was conspiring with the enemy.
1 Benjamin Schwarz, “Becoming Cary Grant,” Atlantic , January/February 2007.
47
The 1970s: The Federal Reserve and Inflation
As Greenspan was well aware, his pipe-smoking mentor Arthur Burns had contributed mightily to the confiscation of private wealth. Before the Joint Economic Committee in February 1972, Burns intoned that unbalancing the budget by $40 billion only “gives me some pause.” 2 It was on the first day of Alan Greenspan’s doctoral training at Columbia University when the professor harrumphed: “Excess government spending causes inflation.” 3
In 1970, Greenspan had explained why this is so. He told the Times that higher budget deficits “would force the Federal Reserve ‘to at least partially accommodate, through money-supply growth, the flood of new issues emerging from the Treasury.’ The cost of such actions, [Greenspan] contended ‘could be devastating in terms of inflation.’” 4 Back when he spoke his own mind, Arthur Burns would have been hard pressed to offer a more lucid description.
In 1972, the monetary base grew by 10.4 percent. What banks receive, banks lend. President Nixon was reelected, but at quite a cost. (In Burns’s defense, some of those close to the situation think that “honest
Naturally, Time asked its Board of Economists for clarification of what was happening. Alan Greenspan did not have much to offer. In April 1973, he declared: “To slow this type of inflation requires strong action, and it is difficult to do that without tilting the economy down.” 63 One suspects that Chicago housewife Jean Salmon could have told us as much.
Time’s anonymous staff writers told us more. In February 1973, the magazine published a 4,579-word article in which the story of our times was stated clearly in a mere 24 words: “The root cause of dollar weakness is that ever since the early 1950s, the U.S. has been living beyond its means in the world.” 64
Greenspan’s forbearance was noteworthy. In a search through the archives, the author of “Gold and Economic Freedom” did not say, “I told you so” (at least, not in a major newspaper or magazine). Nor, did he mention the word gold or discuss the inflationary consequences of the Nixon administration’s policies. He did not stick up for the little guy and instruct the nation—which was badly in need of sound instruction—that “deficit spending is simply a scheme for the confiscation of wealth” and that “this is the shabby secret of welfare statists’ tirades against gold.” 65
58 “The Gut Issue: Prices Running Amuck,” Time , August 27, 1973.
59 Ibid.
60 Ibid.
61 Ibid.
62 Ibid.
Having demonstrated his tact, Alan Greenspan was a top candidate for a government job.
65 Alan Greenspan, “Gold and Economic Freedom,” in Ayn Rand, Capitalism: The Unknown Ideal (New York: Signet, 1967), p. 96.
4
President Ford’s Council of Economic Advisers
1973–1976
I pretended to be somebody I wanted to be and I finally became that person. Or he became me. Or we met at some point. 1
—Cary Grant
In 1973, Greenspan was nominated to head the President’s Council of Economic Advisers. He was fortunate that Nixon’s presidency disintegrated before his confirmation hearings in 1974. Whether fair or not, remnants of the Nixon administration operated under a cloud of public consternation, but the newcomers were accorded some leniency. Although Gerald Ford was under no obligation to stand by his predecessor’s nominations, he decided to proceed with Greenspan’s.
Greenspan phrased his detour into government service as a duty (“I could have a real effect”). He was, however, now pledging his allegiance to the administration that had dropped the gold standard. His 1966 “Gold and Economic Freedom” article read like it was written by a martinet preparing to lead a peasants’ revolt. Now he was conspiring with the enemy.
1 Benjamin Schwarz, “Becoming Cary Grant,” Atlantic , January/February 2007.
47
The 1970s: The Federal Reserve and Inflation
As Greenspan was well aware, his pipe-smoking mentor Arthur Burns had contributed mightily to the confiscation of private wealth. Before the Joint Economic Committee in February 1972, Burns intoned that unbalancing the budget by $40 billion only “gives me some pause.” 2 It was on the first day of Alan Greenspan’s doctoral training at Columbia University when the professor harrumphed: “Excess government spending causes inflation.” 3
In 1970, Greenspan had explained why this is so. He told the Times that higher budget deficits “would force the Federal Reserve ‘to at least partially accommodate, through money-supply growth, the flood of new issues emerging from the Treasury.’ The cost of such actions, [Greenspan] contended ‘could be devastating in terms of inflation.’” 4 Back when he spoke his own mind, Arthur Burns would have been hard pressed to offer a more lucid description.
In 1972, the monetary base grew by 10.4 percent. What banks receive, banks lend. President Nixon was reelected, but at quite a cost. (In Burns’s defense, some of those close to the situation think that “honest
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