patrick.net

Just so it's clear to everyone, Jimmy Carter left office in January of 1981.

The inflation was the legacy of LBJ. Remember inflation and war go hand in hand, it were not Carter that caused the inflation.

If I recall correctly, Carter's appointee Volker, raised rates to wring out the inflation from the Vietnam War and the New Society from Johnson and Nixon. Also, the Mideast wars of the middle and late seventies caused oil to go up to $31 a barrel for a while. The international market for oil finally dropped to as low as $3 a barrel in the early to mid eighties. So when Reagan took over, all of the heavy medicine had already been given to the patient. Reagan was born on third base and all of his devotees thinks he led the league in triples.

saroya says

The international market for oil finally dropped to as low as $3 a barrel in the early to mid eighties. So when Reagan took over, all of the heavy medicine had already been given to the patient. Reagan was born on third base and all of his devotees thinks he led the league in triples.

Yep. Well said. When Volker jacked up interest rates (to the moon), to kill inflation, it set up a long term market situation (interest rates falling) that no president could fuck up, no matter how hard they tried.

But, also, he called Nancy "mommy" in that cute voice of his. Give credit where credit is due.

saroya says

If I recall correctly...oil finally dropped to as low as $3 a barrel in the early to mid eighties.

marcus says

Yep. Well said.

With regard to the oil price history, your memory is off by a factor of four, but that's close enough to fool marcus/"humanity", who claims to be a math teacher:

Bellingham Bill says

Carter appointed Volcker, but nobody is taught what really happened in the 1970s.

Several things went wrong in the 1970s. Nixon expanded the war that he had promised to end, and the resulting spending forced him to take the USD off the gold standard (a decision that he blamed falsely on speculators) in 1971. That plus the OPEC embargo of 1973 (in response to Nixon's mideast policies) had a huge impact on inflation, especially since the American economy at that time depended even more heavily on oil than it does now. Carter coped through 1979 by basically raising prices on everything else, tolerating inflation in order to maintain employment, but his failures in Iran doomed his chances for a second term. Appointing Volcker in 1979, and the subsequent interest rate decisions implemented by the entire Fed and the financial markets, did set the stage for the subsequent recovery that Reagan gets credit for, but also the falling oil price helped a lot too. The oil price history tells a huge tale, including hugely significant peaks during the Nixon and Carter administrations, then plummeting real prices on Reagan's watch, a smaller peak during the Bush 41 administration, and an epic transfer of wealth to OPEC during the Bush 43 administration and continuing somewhat into the first years of this administration (when the primary focus was on maximizing medical spending and housing prices rather than improving energy policy and de-leveraging).

BTW, for those who swallow the current pro-inflation Flavor-Aid, please note falling oil prices helped the broader economy during the 1980s and 1990s. Deflation can help a lot, as falling tech prices have promoted the economy also. The OP has written elsewhere a (somewhat flawed) theory of rents, and the theory has at least partial validity: if housing and medical prices had been allowed to fall, then a lot of money currently consumed by those sectors would be available for saving and spending on other sectors. Instead, we have extend&pretend.

Credit where it's due: the Obama administration deserves a lot of credit for energy policies that have reduced oil prices last year and this year, although also some of the blame for the BP Macondo / Deepwater Horizon disaster.

curious2 says

BTW, for those who swallow the current pro-inflation Flavor-Aid, please note falling oil prices helped the broader economy during the 1980s and 1990s. Deflation can help a lot, as falling tech prices have promoted the economy also. The OP has written elsewhere a (somewhat flawed) theory of rents, and the theory has at least partial validity: if housing and medical prices had been allowed to fall, then a lot of money currently consumed by those sectors would be available for saving and spending on other sectors. Instead, we have extend&pretend.

Perhaps this deserves a new thread so as not to derail this one off it's original topic, but for now I will make a quick answer here. You have to be careful when using oil as a proxy for what falling prices in general would do to the US economy. Oil is a commodity produced mainly overseas and consumed heavily in the US. So, yes, falling oil prices are good for the US economy as it doesn't affect too many producers here and has a large effect on a great many items as a raw material. This is somewhat unique to oil (and even to the time period in question as falling oil prices now have less of a positive effect with the US being a larger supplier of oil). Overall deflation in the entire US economy would not have the same effect as falling oil prices.

As to your Flavor Aid comment, I'll just say that most reasonable people realize that you either have inflation, deflation, or unchanging prices. There are pros and cons of each. In my mind, the goals should be high productivity and real wage gains (low unemployment should naturally follow if you meet those two) and low levels of inflation seem to help achieve those goals.

Finally, I disagree that housing would have fallen any further--there were already lots of people buying up houses to rent them out. They put a hard bottom on housing prices. All that would have happened, absent any aid, would have been a transfer of wealth from former homeowners to new landlords.

Bellingham Bill says

end of the Carter admin had double-whammy double-digit inflation and double-digit unemployment.

That didn't sound right so I looked up:

America has never had low unemployment if you use Obamanamics.

Just how do you think Carter has been called the worst President until Obama showed America what a bad President really is.
He's was a freaking genuis in retrospect to the last two numb nuts.

I also need a list of Leftwing BS radio stations.
Listening to all the Left/Right intelligent banter will make one a genius.

This is an edit of a previous comment of mine that may have been too challenging for certain intellectually and emotionally challenged commentators.

saroya says

when Reagan took over, all of the heavy medicine had already been given to the patient. Reagan was born on third base and all of his devotees thinks he led the league in triples.

Yep. Well said. When Volker jacked up interest rates (to the moon), to kill inflation, it set up a long term market situation (interest rates falling) that no president could fuck up, no matter how hard they tried.

But, also, he called Nancy "mommy" in that cute voice of his. Give credit where credit is due.

What's wrong with calling your wife Mommy?

My Dad would have made the news if he could have ever gotten with in a haymaker's pace from Ronald Reagan.(Note to NSA I keed)
But seriously though my Dad hated Ronald Reagan and he told us 10 times a day, and woke us up in the middle of the night again to let us know.

It's Ironic I'm having the same fits, under a Democrat.

DieBankOfAmericaPhukkingDie says

Only when he watched her blow Frank Sinatra.

heh, didn't know that rumor.