Back to the Future; History Repeats Itself
Yes, History Has Repeated Itself Once Again.
I was having a conversation with a friend the other day about the high price of gas. I reminisced how I used to make money waiting in the gas lines for people. The year was 1973. The price of gas roughly doubled going from about 30 cents a gallon to about 60 cents. As the conversation progressed, I remembered how inflation had skyrocketed as well. We were at the tail end of an unpopular war which ended in April of 1975. We woke up to the fact that our American made Cars were not as good as the Japanese imports. Stagflation was the evil word of the day. Inflation had taken hold big time pushing prices higher stifling economic growth. This was primarily due to the Fed turning on the printing press making money to pay for the war. Paul Volcker, the Federal Reserve Chairman at the time raised interest rates to 17 percent because of the inflation. The economy choked, coming to an abrupt stop. Prices began deflating including housing because no one could afford the payments at the super-high interest rates.
It suddenly occurred to me, history has repeated itself once again. Who was it that said those who ignore history are doomed to repeat it?
Today, we are right back in 1973. We are toward the latter stages of an unpopular and costly war. Gas prices are at record levels. The cost of everything, especially food is skyrocketing. Heck a loaf of bread here in California is over $4! It seems like everything is now made in China. America now makes nothing. Housing prices are falling at the same unbelievable pace they went up. The Dollar is dropping like a rock against world currencies. And you can bet that soon the Fed will be forced to increase interest rates to record levels to combat inflation. I sure as heck wouldn’t sign up for an adjustable rate mortgage right now!
Yet, you just wonder how stupid the politicians think we are. They beat around the bush with their assessments. They use descriptions like "cost-push inflation" instead of the much more accurate term Stagflation. They say "the R word" in place of the politically un-correct term Recession. They want to give us $600 or so to get us back on track. Why? All we’re going to do is give the money to China to buy all their cheap-ass "just-good-enough" import goods. Sad but true. But the 80’s turned out ok. And the 90’s were even better. So maybe it will all be worth it.
Indeed, we are back to the future. History has repeated itself.
My Two Cents,
George
