A Possible Explanation

Just as many others living in the real world, I have often wondered how Ben Bernanke and his colleagues can fail to detect price inflation in the present economy. Then this story came along as a possible explanation. I can’t speak to the veracity of the tale, but it would explain a lot. It probably makes as much sense as most of the other hypotheses. Anyway here it is:

This guy wanted to know why Ben sees no threat of inflation in this country. So one Saturday morning he hung out outside of Ben’s house and followed him around on his day off, hoping to be able to ask him about inflation. Ben’s first stop was at the local full service station where they filled his car with ten gallons of 28.9 cent regular followed by a stop at the drugstore next door for a refreshing 25 cent chocolate malt. After that Ben was off to the grocery store with his wife’s shopping list. He couldn’t make out one of the items, and he didn’t have his cell phone. Luckily the store had a pay phone. So he fished a nickel out of his pocket and called his wife and found out that the illegible item was a loaf of bread. He grabbed a cart and started down the aisles filling his cart and whistling a happy tune. Being a trained economist and remembering that he had only a little under seven bucks left from the ten spot he had left home with, he kept track of the prices as he went along.

“Let’s see,” he muttered to himself. “Loaf of bread 15 cents. A dozen eggs 35 cents. Two T-bone steaks a buck twenty. A pound of hamburger 25 cents. Five pound of potatoes 15 cents. A Hershey bar for me 5 cents. A six pack of beer 59 cents. A can of Campbell’s soup 10 cents. A pound of saltine crackers also 10 cents. A cut up chicken 45 cents. A gallon of whole milk 55 cents. A three liter diet Coke 29 cents. Two cans of pork and beans 15 cents. A box of Velveeta 65 cents.

“That does it,” he said smiling. “And I’ll have just enough left to pick up the dry cleaning next door.”

And that is just what he did. The guy following old Ben never got a chance to speak to him, but he was happy anyway. Not only had the question been answered, but the guy had found the right neighborhood to do his shopping.

Perspective on the Present Mess

1st Man: Poor old Lyndon can’t go deer hunting this year.
2nd Man: Oh, why’s that?
1st Man: Because Oswald’s still got his rifle.
-joke circulating in Texas early 1964

As we struggle through the administration of the truly execrable Barack Obama after enduring the administration of the pretty execrable George W. Bush, it can help to look back at history and remember that this nation has survived some awfully bad characters in the White House. Consider Lyndon Johnson. His administration gave America the war in Vietnam, greatly increased government power and spending at home, serious domestic non-tranquility, and the assorted failures of the Great Society programs. This week it was reported that his predecessor’s widow was on record as having believed at least at one time that he had her husband bumped off. As the joke above indicates, that was not exactly a unique notion whether she really expressed it or not. The consensus among many was that if Johnson didn’t kill John Kennedy, it was not because of any ethical compunction on his part.

Johnson was followed in the next three elections by Richard Nixon and Jimmy Carter, two men belonging on any serious list of the half dozen or so worst presidents. Their administrations saw the inflationary depression of the 1970’s, the continuation and failure of the war in Vietnam, the creation of numerous new bureaucracies and regulatory monstrosities, a forced presidential resignation, the fiasco in Iran, astoundingly high interest rates, declining military power, and, at least under Carter, a losing position in the Cold War.

For all that, the nation recovered. The next decade saw a restored economy with inflation tamed, complete victory in the Cold War, simultaneous secular bull markets in stocks and bonds, and the start of a quarter century of unparalleled prosperity. That is something to consider as we look at the grim present. There is clear evidence that this nation can recover from really bad presidents. I think some of the present pessimism overrates Obama’s ability to do truly lasting harm between now and the next election, and I hope we won’t have to worry about him after that.