Economic Outlook From 1976

A Small Word About Inflation

There’s a lot of political and economic talk making the rounds these days about how we’ve “whipped” inflation. Don’t you believe it. According to International Reports, Inc., the current annual rate of inflation in the United States is running at 6.2 percent.

This means that if you hide a dollar in the cookie jar today — and then dig it outjust five years from now — that dollar will buy less than three-quarters (only 72.4 percent) of what it can purchase right now. Or, to turn it around the other way, you’ll have to invest that dollar in something which– after taxesand handling fees — will guarantee you 6.2 percent interest (compounded annually) just to keep its purchasing power from shrinking.

Inflation, in short, is a long way from being “whipped”, and it is a mark of extreme economic naivete (on both his part and on ours) when a major U.S. presidential candidate–Jimmy Carter–can say without challenge that he intends to concentrate on jobs and “let inflation take care of itself”. Gerald Ford may bump his head a lot (and we’d certainly never endorse him, or anyone else, for President), but he at least has sense enough to leave his administration’s economic policy in the hands of men (Burns, Simon, Greenspan) who understand that inflation is, indeed, Economic Public Enemy Number One to any stable society.

So what are we gonna do? If the guys already in office know how to hold the line but can’t … and the guys trying to get in office don’t even know how to hold the line … what are we gonna do?

Stop expecting politicians to come up with magic answers. That’s one thing we can do. After all, you wouldn’t set a fox to guard your chickens, would you? Then why let the guys who got us into all this economic trouble have chance after chance after chance at getting us out (especially when they just keep on making everything worse)?