Tag Archives: president ronald reagan

Milton Friedman addressed the belief that inflation can cure unemployment, implicit in the Obama administration’s spending blowout “Friedman Friday”

Ep. 9 – How to Cure Inflation [1/7]. Milton Friedman’s Free to Choose (1980)

Cochrane’s Kinky Curves

Posted by Jim Powell

The doctrine that inflation can cure unemployment, implicit in the Obama administration’s spending blowout, goes way back.

The modern version originated with William Phillips, a New Zealand-born economist who, in 1958, wrote a paper modestly titled “The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861‑1957.”  Phillips suggested that when inflation went up, unemployment went down. Keynesian economists Paul Samuelson and Robert Solow popularized Phillips’ idea as a reason to ratchet up government spending and inflate the money supply.  That’s what the Kennedy and Johnson administrations did during the 1960s.

In 1967, Milton Friedman expressed a skeptical view about what had come to be known as the Phillips Curve, launching an extended debate.  Then in 1973, President Richard Nixon, who had famously declared “I am now a Keynesian,” leaned hard on Fed Chairman Arthur Burns to inflate the money supply and drive down unemployment, hopefully to improve Nixon’s prospects for re-election.  Well, as those of us who were around back then recall, both inflation and unemployment went up!  This was a bit of a problem for Phillips Curve aficionados.

As if the stubborn stagflation of the 1970s wasn’t bad enough, subsequent efforts by new Fed Chairman Paul Volcker and President Ronald Reagan to stop inflation cold delivered another hammer blow against the Phillips Curve: both inflation and unemployment went down!

Now fast-forward to January 2009: President Obama levitated the Phillips Curve from the dead when he repeatedly declared that it was urgent to enact his $825 billion stimulus bill so unemployment would go down.  But both spending and unemployment went up!  It became harder to deny that the stimulus spending flopped, though the New York Times’ Keynesian columnist Paul Krugman tried valiantly.  He claimed stimulus spending flopped because Obama didn’t spend enough.  Accordingly, several weeks ago, Obama proposed still more stimulus spending to fight unemployment, and he begged people to support it: “If you love me, pass this bill!”

There shouldn’t have been any surprise about Obama’s flop, since the underlying idea – the Phillips Curve – proved to be a dud long ago.  This would be a good time to review experience with the Phillips Curve.

Thankfully, Cato Adjunct Scholar John H. Cochrane, the AQR Capital Management Distinguished Service Professor of Finance at the University of Chicago Booth School of Business, has done just that.  He focused on the period from 1966 to the present.  That year, President Lyndon Johnson was going full bore, promoting runaway spending on new entitlement programs and on the Vietnam war simultaneously, and inflation reared its ugly head.

Cochrane charted what happened year-by-year to inflation and unemployment.  The result wasn’t a nice smooth curve dreamed about by Keynesians.  Rather, there was a kinky curve.  One year, inflation went up, and unemployment went down.  Next year, inflation went up again, and unemployment went up.  Then when inflation went down, unemployment went up again.  On and on as if we followed a drunk stumbling around a street.  Since a single chart would have become an unreadable tangle if it tried to cover the entire 45-year period, Cochrane developed two charts, 1966-1984 and 1985-2011.  Clearly, what we see is a random relationship between inflation and unemployment, that makes the Phillips Curve worthless as a policy tool.

The charts appear in an insightful article Cochrane wrote, published in the Fall 2011 National Affairs.  The article is important quite apart from the Phillips Curve charts.  Although the prevailing view seems to be that high inflation is most likely to occur if and when the Fed increases the money supply, Cochrane warns high inflation could occur as a consequence of soaring government debt.  Such inflation would amount to a default.  It would be triggered by a run on dollar-denominated assets, if and when investors conclude that the government cannot pay its debts.  Runs occur without warning, often after a succession of events have undermined investor confidence.

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Moammar Gadhafi captured and killed

 

Moammar Gadhafi Captured in Libya; Rebels in Sirte Claim Libyan Leader Killed

Uploaded by on Oct 20, 2011

Rebel leader says Libyan dictator Moammar Gadhafi was captured and shot by rebel forces.

___________________

Glad he is gone.

Libyan Dictator Moammar Gadhafi Is Dead, Rebels Claim

ABC NewsBy HUMA KHAN | ABC News – 21 mins ago

  • Libyans celebrate at Martyrs square in Tripoli October 20, 2011 after hearing the news that Libyan leader Muammar Gaddafi was killed in Sirte. Gaddafi died in an attack by NTC fighters, a senior NTC official said on Thursday.  REUTERS/Ismail Zitouny (LIBYA - Tags: POLITICS CIVIL UNREST TPX IMAGES OF THE DAY)

    REUTERS – Libyans celebrate at Martyrs square in Tripoli October 20, 2011 after hearing the news that Libyan leader Muammar Gaddafi was killed in Sirte. Gaddafi died in an attack by NTC fighters, a senior NTC 

Libyan dictator Moammar Gadhafi, the most wanted man in the world, has been killed, the country’s rebel government claimed today.

The flamboyant tyrant who terrorized his country and much of the world during his 42 years of despotic rule was cornered by insurgents in the town of Sirte, where Gadhafi had been born and a stronghold of his supporters.

The National Transition Council said that its fighters found and shot Gadhafi in Sirte, which finally fell to the rebels today after weeks of tough fighting.

Word of Gadhafi’s death triggered celebrations in the streets of Tripoli with insurgent fighters waving their weapons and dancing jubilantly.

The White House and NATO said they were unable to confirm reports of his death.

Gadhafi had been on the run for weeks after being chased out of the capital Tripoli by NATO bombers and rebel troops.

He had been believed to be hiding in the vast Libyan desert while calling on his supporters to rise up and sweep the rebel “dogs” away, but his once fearsome power was scoffed at by Libyans who had ransacked his palace compound and hounded him into hiding.

Gadhafi, 69, took over the top spot as the world’s most wanted man after Osama bin Laden was killed by U.S. troops in Pakistan.

At the height of his ability to threaten terrorism, President Ronald Reagan dubbed Gadhafi the “mad dog of the Middle East.”

He was accused of backing the 1986 bombing of a Berlin disco popular with American soldiers, reportedly funding the hijacking of the cruise ship Achille Lauro in 1985, and the 1988 bombing of Pan Am Flight 103, which resulted in the U.N. and United States imposing sanctions on Libya.

For years, Gadhafi refused to take responsibility for the bombing, but that changed in 2003 when he acknowledged his role and tried to make amends.

The eccentric leader, who amassed power and wealth by controlling the nation’s oil industry, held the title of being the longest-serving leader in Africa and the Arab world.

Over the years, Gadhafi earned an international reputation for his outlandish apparel and much-ridiculed phobias and proclivities.

In U.S. diplomatic cables recently released by WikiLeaks, Gadhafi was described as a “mercurial and eccentric figure who suffers from severe phobias, enjoys flamenco dancing and horse racing, acts on whims and irritates friends and enemies alike.”

He was “obsessively dependent on a small core of trusted personnel,” especially his longtime Ukrainian nurse Galyna, who has been described as a “voluptuous blonde,” according to the cables.

Among his other unusual behaviors, the Libyan leader reportedly feared flying over water, didn’t like staying on upper floors and traveled with a “pistol packing’ posse” of female bodyguards.

__________________

Earlier Osama bin Laden was killed and I had several posts on that. Links below:

Mike Huckabee to Osama bin Laden: “Welcome to Hell” (Part 8)Woody Allen’s movie “Crimes and Misdemeanors” is a perfect example of why hell the only “enforcement factor”

Crimes & Misdemeanors (pictured is Judah and his criminal brother, ultimately his brother hires a hitman to take out Judah’s girlfriend who threatens to turn Judah over to the cops) Crimes And Misdemeanors 1989 9/13 Adrian Rogers – Crossing God’s Deadline Part 4 crimes & misdemeanors Best scene of the movie!!!! _________________________________ John Brummett in […]

Mike Huckabee to Osama bin Laden: “Welcome to Hell” (Part 7)Woody Allen’s movie “Crimes and Misdemeanors” is a perfect example of why hell the only “enforcement factor”

Crimes And Misdemeanors 1989 7/13 Adrian Rogers – Crossing God’s Deadline Part 3 Crimes And Misdemeanors 1989 8/13 John Brummett in his article “Huckabee speaks for bad guy below,” Arkansas News Bureau, May 5, 2011 had to say: Are we supposed to understand and accept that Mike Huckabee is in hell where he has official […]

Mike Huckabee to Osama bin Laden: “Welcome to Hell” (Part 6)Woody Allen’s movie “Crimes and Misdemeanors” is a perfect example of why hell the only “enforcement factor”

Crimes and Misdemeanors: A Discussion: Part 1 Adrian Rogers – Crossing God’s Deadline Part 2 Jason Tolbert provided this recent video from Mike Huckabee: John Brummett in his article “Huckabee speaks for bad guy below,” Arkansas News Bureau, May 5, 2011 had to say: Are we supposed to understand and accept that Mike Huckabee is […]

Osama bin Laden knew big body count on level of 9/11 was needed to get U.S. forces to withdraw

    Next Back BroadcastAs the U.S. fought wars in Iraq and Afghanistan, bin Laden periodically released audio and video recordings (like this one, from 2007) calling for the destruction of America and its allies. Kimberly Dozier of the Associated Press reported today in her article, “Bin Laden’s diary shows he eyed new targets, big […]

2007 Interview with Jane Felix-Browne concerning her husband Omar bin Laden (pictures included)

  Jane Felix-Browne, a 51-year-old grandmother and parish councillor from Cheshire has married a son of Osama bin Laden after a holiday romance       A British divorcee said Wednesday she has married Omar bin Laden, the al-Qaida leader’s fourth son, after they met in Egypt last fall.Jane Felix-Browne, a 51-year-old grandmother from Moulton, […]

Hamza bin Laden wants to keep his father’s family business of terror going

AP Osama’s youngest son, Hamza, is believed to have escaped the compound where his terror fiend dad was killed by SEALs. Chuck Bennett of the NY Post in his article “Osama’s youngest son escaped capture,” wrote this morning: Osama bin Laden’s youngest known son — a budding teen terrorist groomed since childhood to wage jihad […]

Osama bin Laden’s sons think U.S. broke international law

  Omar bin Laden, son of Osama bin Laden, in his apartment in Al-Rahad city near Cairo in 2008 The New York Times reported today: The adult sons of Osama bin Laden have lashed out at President Obama over their father’s death, accusing the United States of violating its basic legal principles by killing an […]

President Obama on 60 minutes yesterday

  Pete Souza / The White House   The White House, May 1, 2011 Vice President Joe Biden and President Barack Obama, along with members of the national-security team, receive an update on the mission against Osama bin Laden in the Situation Room of the White House on May 1, 2011. Please note: a classified […]

Details of how Osama bin Laden was caught

Bin Laden was born in 1957, reportedly the 17th of the 57 children of Mohammed bin Laden, the owner of the largest construction company in Saudi Arabia. He was raised under conservative Wahhabi tenets and, while enrolled at King Abdel Aziz University in Jidda, developed a belief in pan-Islamicism, a philosophy that stresses a united […]

President Obama: Osama bin Laden probably had support network in Pakistan

  Pakistani policemen walk Pakistani policemen walk past a compound, surrounded in red fabric, where locals reported a firefight took place overnight in Abbotabad, located in Pakistan’s Khyber Pakhtunkhwa province May 2, 2011. Al Qaeda leader Osama bin Laden was killed in a firefight with U.S. forces in Pakistan on Sunday, ending a nearly 10-year worldwide […]

CIA Chief Leon Panetta said harsh interrogation techniques yielded some of the information that led to Osama bin Laden

  George Bennett in his article “Waterboarding and the trail to lin Laden: CIA chief acknowledges, West supports,: May 3, 2011, PostOnPolitics.com , notes:    Panetta CIA Chief Leon Panetta told NBC News that waterboarding and other harsh interrogation techniques yielded some of the information that helped the U.S. find and kill Osama bin Laden.   Panetta said it’s […]

Mike Huckabee to Osama bin Laden: “Welcome to Hell” (Part 5)

Picture of former Arkansas Governor Mike Huckabee Adrian Rogers – Crossing God’s Deadline. Part 1 John Brummett in his article “Huckabee speaks for bad guy below,” Arkansas News Bureau, May 5, 2011 had to say: Are we supposed to understand and accept that Mike Huckabee is in hell where he has official duties as a […]

Al Qaeda confirms Osama bin Laden is dead

  Not only do we have the word of President Obama that Osama bin Laden is dead, but now Al Qaeda sources have confirmed it.    CNN reported on May 6, 2011: Al Qaeda released a statement on jihadist forums Friday confirming the death of its leader, Osama bin Laden, according to SITE Intelligence Group, […]

Take a look at videos captured at Osama bin Laden’s compound

Osama bin Laden ‘Home Videos’ Released Videos were seized during the raid on the Bin Laden compound. 05/07/2011  Newly released videos show Osama bin Laden inside his hideout, watching himself on television and rehearsing for terrorist propaganda videos.  Kimberly Dozier, and Lolita C. Baldor of the The Associated Press reported today: The videos, released by […]

Osama bin Laden had plan for attack on 9/11/11

  The Associated Press reported on May 5, 2011: Some of the first information gleaned from Osama bin Laden’s compound indicates al-Qaida considered attacking U.S. trains on the upcoming anniversary of the Sept. 11 attacks. But counterterrorism officials say they believe the planning never got beyond the initial phase and have no recent intelligence pointing […]

Candidate #1,MN Gov Tim Pawlenty: Republican Presidential Hopefuls (Part G)Did he win first debate in Greenville, SC May 5, 2011?

First GOP Presidential Debate Part 1 The first GOP presidential debate for 2012 was held in South Carolina the evening of May 5, 2011. Participants were Rep. Ron Paul (R-TX), Minnesota Governor Tim Pawlenty, businessman Herman Cain, former Pennsylvania Senator Rick Santorum, and former New Mexico Governor Gary Johnson. May 5th in Greenville, SC was […]

Mike Huckabee to Osama bin Laden: “Welcome to Hell” (Part 4)

Mike Huckabee campaigns in Iowa Republican presidential candidate Mike Huckabee attends a rally at the Veterans Memorial Building during the final day of campaigning before the Iowa Caucus in Grinnell, Iowa on January 3, 2008. Iowa will hold its presidential caucus tonight. (UPI Photo/Laura Cavanaugh)   Adrian Rogers – [3/3] 5 Minutes After Death John […]

Al-Qaida wants revenge for Osama bin Laden’s death

Supporter of Pakistani religious party Jamiat-e-ulema-e-Islam A supporter of the Pakistani religious party Jamiat-e-ulema-e-Islam holds an image of Osama bin Laden during an anti-U.S. rally on the outskirts of Quetta, May 6, 2011.  REUTERS/Naseer Ahme The Associated Press reported yesterday:  Al-Qaida vowed to keep fighting the United States and avenge the death of Osama bin […]

Bounty for Osama bin Laden goes to who?

CNNMoney reported on May 2, 2011: The photograph of Osama bin Laden on the FBI’s Most Wanted Terrorists list has a new caption: Deceased. But it was unclear Monday how much, if any, of the up to $25 million in reward money offered on the terrorist leader has been granted.The man behind the worst terrorist […]

Mike Huckabee to Osama bin Laden: “Welcome to Hell” (Part 3)

Pictured above is Mike Huckabee and his family while he was governor of Arkansas Adrian Rogers – [2/3] 5 Minutes After Death John Brummett in his article “Huckabee speaks for bad guy below,” Arkansas News Bureau, May 5, 2011 had to say: Are we supposed to understand and accept that Mike Huckabee is in hell […]

Picture of Osama bin Laden’s wife Amal Ahmed Abdul Fatah and what actually happened during attack

     Amal Ahmed Abdul Fatah, Bin Laden’s wife Osama bin Laden unarmed when shot dead Brian Ross of ABC News reported May 4th: U.S. intelligence officials have been forced to reconsider many of their assumptions about Osama bin Laden and his terror network with the discovery that he was living in relative luxury not far […]

Mike Huckabee to Osama bin Laden: “Welcome to Hell” (Part 2)

Adrian Rogers – [1/3] 5 Minutes After Death We were convinced that it wasn’t so much the conservative Christian vote that catapulted Mike Huckabee to victory in Iowa as his bass playing. Huckabee played bass guitar with his band, Capitol Offense, at the Iowa Republican Party’s Lincoln Unity Dinner in Des John Brummett in his […]

Brothers Abdullah and Mubarak al-Harad of Al-Qaeda killed by US drone in Yemen today

Predator surveillance drone equipped A Predator surveillance drone equipped with Hellfire missiles. A US drone has killed two local Al-Qaeda members after launching an attack on a Saudi Al-Qaeda leader in southern Yemen, a security source and witnesses told AFP ____________________________________ Sounds like President Obama is really get after Al-Qaeda now. Yahoo News reported this […]

Pictures of Osama bin Laden’s body will not be released to public

WH press secretary Jay Carney speaks about President Obama’s decision to not release the graphic photos of Osama bin Laden’s corpse, saying it was against national security White House Press Secretary Jay Carney White House Press Secretary Jay Carney tells reporters that President Barack Obama will not release photos of Osama bin Laden’s body, Wednesday, […]

Osama bin Laden was not armed, but did not attempt to surrender

Residents surround the compound where al Qaeda leader Osama bin Laden was reported to have been killed in this ariel view in Abbottabad May 4, 2011. Bin Laden was unarmed when U.S. special forces shot and killed him, the White House said, as it tried to establish whether its ally Pakistan had helped the al Qaeda […]

Inside Osama bin Laden’s Compound

In the pantry, among the few untouched items are two cartons of eggs. (ABC News)   President Obama deserves a lot of credit for  sending the team in. I personally do not like many of the policies of this administration, but this raid was planned very well, and I am glad he made the decisions […]

Osama Bin Laden had several wives at Compound and one may have helped seals

The Los Angeles Times article, “Bin Laden’s wives are all alive; one may have identified him,” reported yesterday : Osama bin Laden may be at the bottom of the ocean, but all of his wives are alive, and one of them may have identified him to the SEALs. Time magazine reports that “a U.S. intelligence official […]

Will new Osama bil Laden video clip show up after his death?

CNN’s Drew Griffin reports on the chain of events that lead up to the death of Osama bin Laden. The Huffington Post reported last night: Osama bin Laden may be dead, but U.S. officials expect at least one new bin Laden tape to surface soon, according to multiple reports. According to The New York Daily […]

The process of finding Osama:”Ghul was the linchpin,” a U.S. official said, the CIA identified the courier’s real name: Sheikh Abu Ahmed

  A drawing, released by the United State Department of Defense May 2, 2011, shows the compound that Osama bin Laden was killed in on Monday in Abbottabad,Pakistan Adam Goldman and Matt Apuzzo of the Associated Press reported this morning: When one of Osama bin Laden’s most trusted aides picked up the phone last year, […]

Inside the Situation Room with President Obama as they watched live the operation to take out Osama bin Laden

Osama bin Laden, the elusive terror mastermind killed by Navy SEALs in an intense firefight, was hunted down based on information first gleaned years ago from detainees at secret CIA prison sites. Picture below from the Tolbert Report: President Barack Obama (2nd L) and Vice President Joe Biden (L), along with members of the national […]

Mitt Romney’s religion is becoming an issue

This issue concerning Mitt Romney’s religion is heating up.

Baptist pastor taken to task

Russ Jones and Chad Groening – OneNewsNow – 10/10/2011 11:05:00 am

Popular radio and television commentator Glenn Beck wrapped up the Values Voter Summit in Washington, DC, Sunday in a wave of anti-Mormonism comments lodged towards GOP presidential hopeful Mitt Romney.

 

 

The weekend gathering of conservatives provided GOP presidential candidates a platform to present their ideas. Robert Jeffress, pastor of the First Baptist Church in downtown Dallas, was asked by Summit sponsor Family Research Council to introduce Texas Governor Rick Perry. But the Texas pastor captured more headlines than the candidates themselves when, during an interview after the introduction, described Mormonism is a “cult” and said presidential hopeful Mitt Romney is “not a Christian.” (See related story)
 
Glenn BeckBeck, founder of Glenn Beck TV, delivered a 39-minute speech at the conclusion of the event. In a tearful moment, he defended his Mormon faith as he referred to Pastor Jeffress’ remarks.
 
“People have come onto this stage and been for and against, I guess, members of my faith,” Beck stated. “I celebrate their right to say those things in America. I am a proud member of the church of Jesus Christ. Jesus Christ is my Lord and Savior — he redeemed me.”
 
In earlier remarks, William Bennett, who served as Secretary of Education under President Ronald Reagan, also responded to Jeffress’ comments, saying the pastor had overshadowed the speeches of Rick Perry and all the GOP candidates who spoke at the conference.
 
“Do not give voice to bigotry,” said Bennett. “And I would say to Pastor Jeffress, you stepped on and obscured the words of Perry and [Rick] Santorum and [Herman] Cain and [Michele] Bachmann and everyone else who has spoken here. You did Rick Perry no good, sir, in what you had to say.”

 

Story continues below …

 


To what extent does a presidential candidate’s personal faith influence how you vote?

Vote in our poll

 


 
Dr. Robert Jeffress (First Baptist Church, Dallas)Speaking Monday on the Fox News Channel, Jeffress did not back away from his comments over the weekend.
 
“It was John Jay, the first Chief Justice of the Supreme Court, who said, ‘We have the duty and privilege as Christians to select and prefer Christians as our leaders,'” he said. “If I’m a bigot, then the first chief justice of the Supreme Court is also a bigot.”
 
Presidential candidates Mitt Romney and Jon Huntsman are both members of The Church of Jesus Christ of Latter-day Saints. Herman Cain and Michele Bachmann declined to answers questions about Jeffress’ comment; Rick Santorum and Rick Perry both say they do not consider Mormonism a cult.

 

Texas Congressman Ron Paul easily won the Summit’s annual straw poll, but Values Voter straw poll organizers suggested there was ballot-stuffing, making the results virtually irrelevant.

 

On Jeffress’ side
An author who grew up in the LDS Church says she agrees with Pastor Jeffress’ statements. Tricia Erickson is the daughter of a Mormon bishop who left the movement, and is the author of Can Mitt Romney Serve Two Masters? The Mormon Church Versus the Office of the Presidency of the United States of America. (Listen to audio report)

“The Mormon Church fits the definition of a cult,” she tells OneNewsNow. “They have secret rituals, they have charismatic leaders, they have false prophets, they believe things that are so irrational — but they cover it. [They] know it amongst themselves, but they understand enough to know that their beliefs, if they really came out …would be ridiculed more because they’re so outrageous.”

Erickson says she is thankful that Jeffress had the courage to tell the truth about Mormonism.

Related posts: 

Lt Gov. Mark Darr endorses Romney

I think that many evangelical Christians may have a problem with supporting Mitt Romney who is a Mormon. I think that Romney is a very good speaker and will beat President Obama easily. He is not my favorite candidate though. John Brummett rightly noted that this endorsement by Lt. Governor was sought after by Romney […]

Romney have a chance with evangelicals?

Dr. Richard Land on Mitt Romney Does Mitt Romney Have a Prayer with Evangelicals? By Amy Sullivan Friday, June 3, 2011 When Mitt Romney makes his appearance at Ralph Reed’s Faith & Freedom Conference Friday evening in Washington, he won’t exactly be headed into the lion’s den—but it might seem that way to him. A […]

Candidate #9 Mitt Romney, Republican Presidential Hopefuls (Part Four, 7 Questions Christians Must Ask Before Voting For A Mormon Part C)

Romney’s Faith & Politics Speech (Part 3) This is part 3 of 3 of Governor Mitt Romney’s speech on his Mormon Faith and Politics at the George HW Bush Presidential Library in Texas. __________________________________________________________ The following is written by Rev Sherwood Haisty Jr. of Santa Monica, California. Sherwood has pastored churches in Arkansas, Mississippi, Tennessee […]

Candidate #9 Mitt Romney, Republican Presidential Hopefuls (Part three, 7 Questions Christians Must Ask Before Voting For A Mormon Part B)

Huckabee Apologizes To Mitt Romney For Mormon Question At Des Moines University, 12/12/2007 __________________________________________ The following is written by Rev Sherwood Haisty Jr. of Santa Monica, California. Sherwood has pastored churches in Arkansas, Mississippi, Tennessee and California and currently he is the process of finishing up his Masters degree at the Masters Seminary.  I personally […]

Candidate #9 Mitt Romney, Republican Presidential Hopefuls (Part two, 7 Questions Christians Must Ask Before Voting For A Mormon Part A))

Richard Land on Mitt Romney and Mormonism Hannity & Colmes. _____________________________ Deseret News reported yesterday Mitt Romney To Officially Announce Presidential : Mitt Romney will officially launch his presidential candidacy next week in New Hampshire. The Washington Post says: “Romney, who is regarded as the race’s (Republican) frontrunner, will formally announce his presidential campaign next Thursday, June 2 in […]

Candidate #9 Mitt Romney, Republican Presidential Hopefuls (Part 1)

Former Massachusetts Gov. Mitt Romney Possible 2012 presidential hopeful, former Massachusetts Gov. Mitt Romney speaks to a group of small business owners on the economy during a visit to Meetze plumbing in Irmo, S.C. Saturday May, 21, 2011 Jim Davenport wrote for the Associated Press on May 21: COLUMBIA, S.C. – South Carolina wasn’t kind to […]

Milton Friedman addressed the belief that inflation can cure unemployment, implicit in the Obama administration’s spending blowout

Ep. 9 – How to Cure Inflation [1/7]. Milton Friedman’s Free to Choose (1980)

Cochrane’s Kinky Curves

Posted by Jim Powell

The doctrine that inflation can cure unemployment, implicit in the Obama administration’s spending blowout, goes way back.

The modern version originated with William Phillips, a New Zealand-born economist who, in 1958, wrote a paper modestly titled “The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861‑1957.”  Phillips suggested that when inflation went up, unemployment went down. Keynesian economists Paul Samuelson and Robert Solow popularized Phillips’ idea as a reason to ratchet up government spending and inflate the money supply.  That’s what the Kennedy and Johnson administrations did during the 1960s.

In 1967, Milton Friedman expressed a skeptical view about what had come to be known as the Phillips Curve, launching an extended debate.  Then in 1973, President Richard Nixon, who had famously declared “I am now a Keynesian,” leaned hard on Fed Chairman Arthur Burns to inflate the money supply and drive down unemployment, hopefully to improve Nixon’s prospects for re-election.  Well, as those of us who were around back then recall, both inflation and unemployment went up!  This was a bit of a problem for Phillips Curve aficionados.

As if the stubborn stagflation of the 1970s wasn’t bad enough, subsequent efforts by new Fed Chairman Paul Volcker and President Ronald Reagan to stop inflation cold delivered another hammer blow against the Phillips Curve: both inflation and unemployment went down!

Now fast-forward to January 2009: President Obama levitated the Phillips Curve from the dead when he repeatedly declared that it was urgent to enact his $825 billion stimulus bill so unemployment would go down.  But both spending and unemployment went up!  It became harder to deny that the stimulus spending flopped, though the New York Times’ Keynesian columnist Paul Krugman tried valiantly.  He claimed stimulus spending flopped because Obama didn’t spend enough.  Accordingly, several weeks ago, Obama proposed still more stimulus spending to fight unemployment, and he begged people to support it: “If you love me, pass this bill!”

There shouldn’t have been any surprise about Obama’s flop, since the underlying idea – the Phillips Curve – proved to be a dud long ago.  This would be a good time to review experience with the Phillips Curve.

Thankfully, Cato Adjunct Scholar John H. Cochrane, the AQR Capital Management Distinguished Service Professor of Finance at the University of Chicago Booth School of Business, has done just that.  He focused on the period from 1966 to the present.  That year, President Lyndon Johnson was going full bore, promoting runaway spending on new entitlement programs and on the Vietnam war simultaneously, and inflation reared its ugly head.

Cochrane charted what happened year-by-year to inflation and unemployment.  The result wasn’t a nice smooth curve dreamed about by Keynesians.  Rather, there was a kinky curve.  One year, inflation went up, and unemployment went down.  Next year, inflation went up again, and unemployment went up.  Then when inflation went down, unemployment went up again.  On and on as if we followed a drunk stumbling around a street.  Since a single chart would have become an unreadable tangle if it tried to cover the entire 45-year period, Cochrane developed two charts, 1966-1984 and 1985-2011.  Clearly, what we see is a random relationship between inflation and unemployment, that makes the Phillips Curve worthless as a policy tool.

The charts appear in an insightful article Cochrane wrote, published in the Fall 2011 National Affairs.  The article is important quite apart from the Phillips Curve charts.  Although the prevailing view seems to be that high inflation is most likely to occur if and when the Fed increases the money supply, Cochrane warns high inflation could occur as a consequence of soaring government debt.  Such inflation would amount to a default.  It would be triggered by a run on dollar-denominated assets, if and when investors conclude that the government cannot pay its debts.  Runs occur without warning, often after a succession of events have undermined investor confidence.