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Greenspan Paints the Walls Gray
Productivity Is Not Inflation
11/29/00

Essay Preparatory for Letter to the Los Angeles Times

     With regard to "Warning Signals Grow Louder for U.S. Economy" 11/29/00, once and for all, the nation and Mr. Greenspan must face two realities: 1) inflation is NOT caused by a tight market in one commodity (e.g. labor); and 2) we MUST keep government’s hands off the economy.

     The high employment rate of the last few years is the result of prosperity. There has been no expensive war, governmental social spending has been checked and businessmen have been left relatively alone to forge their dreams. As a result of entrepreneurs’ company-building and internal expansion of older corporations the requirement for more workers has mushroomed. While businesses have had to pay scarce workers more, they have not had to raise prices because the fabulous brains and ingenuity driving American business has sent productivity skyrocketing. Get it Mr. Greenspan, this is not the old zero-sum game, it is a new and spectacular eruption of raw prosperity driven by the multiplication of intelligence -- a glimmer of capitalism as it might and ought to be. We should celebrate and honor this phenomenon. Above all we should keep the government’s hands off!     

     Consider the absurdity of Greenspan shouting "inflation fear" on speculation that the price of a commodity (labor) "might" go up and then acting -- with governmental coercive force -- to artificially raise (inflate) the price of the most critical commodity -- money! That is a hideous and cynical contradiction on its face. On the contrary, inflation can only be created by government when it dilutes the currency through deficit spending and running the printing press because it is too craven to ask taxpayers to pay-as-we-go. Confine yourself, sir, to refraining from inflating the currency. Stand in the doorway and prevent others from doing so. Let irrationally exuberant dot-comers crash and burn if they must. But keep your hands off money.

     My point is supported by the fact that no inflation emerged when unemployment dropped to nothing. Greenspan, annoyed, stubbornly evaded reality, constructed the old paradigm in his mind and applied old, dead remedies. Now some are saying he just overreacted. What a tragic folly he ever acted at all.

     The hidden damage caused to industry by Greenspan’s six hammer-blows from May 1999 through June 2000 is now revealed. We are left with the dulling of optimism, the spreading realization we have shot the noisy Golden Goose because it was too happy and a feeling to the effect "well, we were free for a moment but it was too good to last, back to the grindstone."

     Goodbye bright high sky of free market capitalism, hello gray walls of the bureaucrat’s soul.

John Donohue
Pasadena, CA




As submitted, Letter To the Los Angeles Times

     With regard to "Warning Signals Grow Louder for U.S. Economy" 11/29/00, here is the straight dope for Mr. Alan Greenspan: During the surge of the 90’s, businesses had to pay scarce workers more but did not have to raise prices because the fabulous brains and ingenuity driving American enterprise sent productivity skyrocketing. This is not inflation, Mr. Greenspan, this is prosperity! Get it, sir, this is not the old zero-sum game but rather a new and spectacular eruption of raw value-creation driven by the multiplication of intelligence -- a glimmer of capitalism as it might and ought to be.

     Consider the absurdity of you shouting "inflation fear" on speculation that the price of a commodity (labor) "might" go up and then acting -- with governmental coercive force -- to artificially raise (inflate) the price of the most critical commodity of all -- capital. That is a sickening and cynical contradiction on its face. And you know better: inflation can only be created by government. It does so when it dilutes the currency through deficit spending and running the printing press, being too craven to ask taxpayers to pay-as-we-go.

     Confine yourself, sir, to refraining from inflating the currency. Stand in the doorway to prevent others from doing so. Let irrationally exuberant dot-comers crash and burn if they must. But keep your hands off the price of money.

John Donohue
Pasadena, CA






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