We wrote in today’s Capital Letter that, half a century ago, the US was subjected to the combination of an unbacked tax cut sponsored by the Republicans, the largest export subsidy in history – in the shape of that not-entirely altruistic exercise known as the Marshall Plan – and the explosion of an avowed policy of counter-insurgency and pre-emption against a global ideological foe, known as the Truman Doctrine, into a debt-financed hot war in Korea.
Does any of this seem to have a certain ring to it?
Naturally, all this worked with the Fed’s enforced monetization of the giovernment’s debt to drive the YOY change in consumer prices smartly from 1949’s recessionary minus 2.9% to 1951’s +9.4%, the tallest peak in a surrounding 26-year period - prompting the grand old man of the New Deal Fed, Marriner S Eccles (he, of the Fed building fame) to lead a successful fight to be free of this obligation, calling it an ‘engine of inflation’.
Today’s Fed, of course, has promised us that, if necessary, it will willingly fire up that exact same engine!
