Newspaper article THE JOURNAL RECORD

Greenspan Faces Old Nemesis Again: Inflation

Newspaper article THE JOURNAL RECORD

Greenspan Faces Old Nemesis Again: Inflation

Article excerpt

Sixteen years ago the chairman tried to tame inflation once and for all with a whip. As a member of President Ford's administration, he helped launch a campaign to Whip Inflation Now.

Now, critics say, he is using the same rope in another way: to tie up the economy.

To a very limited extent in the 1970s, it might be claimed, the chairman succeeded. Whereas consumer prices had risen 11 percent in 1974, the increase had dropped to as low as 5.8 percent in 1976.

Not everyone then was willing to credit the chairman with having succeeded because the campaign was atrociously planned. It was launched as the economy was plunging into a recession that would relieve pressure on prices.

And critics today are wondering again if something of the sort might be occurring. Once again the enemy is inflation, or the threat of it; the goal is to destroy it; and the risk is a descent into recession.

As before, the chairman is the same. In 1974, Alan Greenspan was chairman of the President's Council of Economic Advisers. In 1990, he is chairman of the Federal Reserve Board, which seeks to control the money supply.

Greenspan has a firm, almost unrelenting grip on it, and perhaps as a direct result - you can't buy and spend if you haven't got access to funds - there is growing evidence of an economy progressively weakening.

Consumer demand has shrunk. Real estate sales and building have almost stopped in some areas. Small businesses, especially those related in any way to real estate, have trouble borrowing. Corporate profits are on the skids.

The evidence shows up all over. Plans for investment in new plants and equipment have ceased to grow. And private-sector employment shows signs of shriveling, even when temporary Census Bureau jobs are included.

Money is the raw material that powers economic activity, and when the Fed tightens the spigot, the wheels of commerce slows. …

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