Wednesday, March 5, 2008

The Last War, or the One Before?

Re-fighting past battles isn't only for generals. Economists are finding different historical precedents for our current economic woes, which lead to very different policy implications.

Collapsing asset prices and credit market turmoil recall the depression (and its recent Japanese echo):
Record oil prices and simultaneous inflation and unemployment bring back memories of 1970's stagflation:
The Bernanke Fed's tune sounds more like "Happy Days Are Here Again" than "I Will Survive" - it has been willing to respond aggressively with rate cuts to stimulate the economy and aid the financial sector, even at the risk of inflation.

In the Things That Make You Go Hmmm... Dept.: The lyrics to "Happy Days Are Here Again" were written by J. Yellen, and the President of the San Francisco Fed is also J. Yellen.

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