Franke: Jimmy Carter Days Are Here Again
by Mark Franke
The bane of retirement is trying to live on a fixed income. At least that is what everyone who is retired believes.
I used to chalk this up to geezer whining. I am one, so I know their whining when I hear it.
No more. We fixed-income types have a real complaint these days.
Inflation is at its highest point since 1981 and heading higher. Those of us with long memories, when the memory synapses are actually firing, can recall how bad things were back then. Ronald Reagan had just taken office after defeating Jimmy Carter in part due to a recession with high inflation, something that contemporary economic theory said wasn’t supposed to happen. They had to invent a new term for it: stagflation. We’re hearing that word again these days, so beware.
My first exposure to the concept of inflation was in a high school economics class. Back in that Keynesian utopia, a little inflation was thought a good thing because it allowed wages to rise and modest price adjustments to occur. It also helped federal tax revenue as there were no inflators to kick in on the tax brackets.
So far, so good . . . until we got a student teacher one quarter who told us that “inflation is the cruelest tax of all.” I wasn’t quite sure what he meant but I filed that statement away.
Then I discovered Milton Friedman in college. Sixty years ago nearly everyone was a Keynesian, except for Friedman and friends at the University of Chicago. Since I was flirting with libertarianism at the time, Friedman’s focus on individual liberty drew me to him and his monetarist school of thought.
As an aside I must mention that there was a Marxist professor in my university’s economics department. He told me privately once that he and I were the only ones in the class who didn’t buy that Keynesian stuff. He didn’t say “stuff.”
Friedman’s genius was obvious to me but his arguments weren’t always easy to follow, given that much of what he wrote was for an academic readership. That changed with “Free to Choose,” cowritten with his wife. My favorite Friedman book is “Money Mischief,” written in 1991 but still the best history of U.S. monetary policy which can be understood by the layman. I reread it at least every five years. I’m halfway through it again as I write this.
I recently got up close and personal with today’s inflation while on a family trip to Massachusetts for a niece’s wedding. I calculated that the 2,000 mile drive cost about $150 more in gas this year than it would have last year. The two nights at a hotel each cost $170 rather than the typical $120 I am used to paying for a mid-range facility.
Fortunately I don’t do the grocery shopping for Franke Family Inc. My wife is the purchasing department; my role is accounts payable. Still, it doesn’t take my minor in accounting to tell me that she is replenishing her grocery debit card more frequently these days.
But I think what shocked me into recognizing where things have gone is having the gas pump shut off before the tank was full because it reached $100. We’ve come a long way from my high school days when I routinely pulled into a filling station to get a dollar’s worth, enough to get me through the week.
At least I now know whom to blame. Our Excuser-in-Chief assures us that the fault is Putin’s and the war in Ukraine. Or it is the evil oil companies. Or it is Covid. It certainly is not the binge spending in Washington or the $6 trillion the Federal Reserve “printed” to finance it. What would Uncle Milton say about this? “Inflation is always and everywhere a monetary phenomenon.” A rather pithy statement from a Ph.D.
Friedman’s incisive indictment of governmental mismanagement of the money supply was true when he wrote about it decades ago and even more so now. Despite what the proponents of modern monetary policy want us to believe, budget deficits and government borrowing do matter. Read “Money Mischief” if you don’t believe that.
That may seem like just one more esoteric economic theory and out of the control of us hoi polloi . . . at least until our purchases are rung up at the cash register. Then we get a practical primer in economic theory where it hurts most—in the pocketbook.
Speaking of my pocketbook, that gas-pump shock mentioned above went to outrage when my American Legion post raised the price of beer by a quarter. $2.00 for a single beer! Maybe I can economize somewhere else in the budget so that I still can make my semi-weekly visit to the post.
I think I’ll ask my wife to buy fewer groceries.
Mark Franke, M.B.A., an adjunct scholar of the Indiana Policy Review and its book reviewer, is formerly an associate vice-chancellor at Indiana University-Purdue University Fort Wayne.