Those Were the Days--of Runaway Inflation

In his column, “Why Fed Critics Are Demanding Big Rate Cuts” (Sept. 7), Tom Petruno discusses dropping interest rates to below the inflation rate in order to spur the economy.

Petruno cites the 1970 and 1975 interest rate cuts and he implies that they reignited the economy. Sure.

What they did was set the table for virtual runaway inflation in 1973-1974 and the horrendous stagflation of Carter era in the late 70s and very early 80s. Both periods were accompanied by staggeringly high interest rates and an eroding dollar.

Of course, some economists will tell us the inflation resulted from oil price shocks and other causes. This rationale either assumes we now live in a closed economy or that we are now in control of world events. This is more than presumptuous, it is foolish.

The scary part is the coupling of Petruno’s analysis with Time’s Board of Economists Irwin L. Kellner’s praise of the benefits of an inflationary economy the previous day, “Inflation: Sometimes You Don’t Know What You’ve Got Until It’s Gone” (Sept. 6).

Recent polls suggest Bill Clinton may have a lock on the presidency. So here come the liberal Democrat economists with their sorry, old concept of buying our way out of economic problems with devalued dollars.

In today’s global economy, their solution will put some people to work and make Clinton a hero for a couple of years. But at the end of his term we will have lost much ground in the global economy. And we will end up paying for it into the next century.

KIP DELLINGER

Los Angeles