At 4:26 PM 1/27/95, Eugene Coyle wrote: > One last remark. We keep reading about the high level of >capacity utilization, how 85% is histyorically high, and cannot be >sustained. But if you look back at the end of the '60s, you'll see that >capacity utilization rates were above 90% for three consecutive years. > Ok, I'm not going to answer people who take that last thought >and rebut it with the assertion that that high utilization caused the >inflation that ensued. Life is too short for that one. > But I do think that a high pressure economy --like the end of the '60s >-- is clearly better for working people[...] ...and worse for bondholders. How can you say that high CU is good for workers and then not entertain that high CU rates in the late 1960s helped lay the groundwork for the 70s inflations? It's a clear class struggle. When markets are strong, workers are in a stronger bargaining position. Actually, CU in manufacturing was above 90% for only one year, 91.1% in 1966. For 1965-69, CU averaged 88.4%, a level it ever again approched only in 1973 (88.1%). It was a hair above 85% for 1978 and 1979. 1974 and 1979 were the twin peaks of the 70s inflations; profits also fell *in nominal terms*, despite the inflation, between 1973-74 and 1979-80. It is an empirical fact that inflation tends to rise when the CU rate is above 82-83%. Business often views late cycle cost pressures as coming out of profits - costs they're not fully able to pass along. Bondholders and the Fed are doing their class duty. Doug -- Doug Henwood [[EMAIL PROTECTED]] Left Business Observer 250 W 85 St New York NY 10024-3217 USA 212-874-4020 voice 212-874-3137 fax
