A Little Economics

Submitted by Lucas J. Meyer (United States), May 14, 2002 at 13:56

You are, in my view, one of today's great thinkers. Your articles are cogent, closely reasoned and tend to "tell it like it is."

There was, however, one error, in my view, in your last article. To Wit: That the Saudis helped cause the 1973-1975 American economic crisis.

That crisis was brought on by U.S. government-caused inflation. Beginning with Lyndon Johnson's flawed thesis that we could have both guns and butter (the Great Society and the Vietnam War) financed by deficit spending, and ending with Richard Nixon's bullying of then-Fed Chairman Arthur Burns, the United States unleashed a wave of inflation that resulted in both a de facto and a de jure devaluation of the U.S. dollar.

It was because of this devaluation (caused by a huge expansion of the money supply) that the Saudis, as well as other oil producers (remember, oil is priced in dollars) were able to demand higher prices for their oil. True, they exploited our weakness, but theywould have been unable to do so had we not followed a profligate and senseless fiscal and monetary policy.

Very truly yours,

Lucas J. Meyer

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