Gene Coyle wrote: > ... Greenspan in the late '80s and the '90s > decided to let the economy run, even when unemployment dipped to > levels like 6.5% below which horrible consequences would ensue. And > then below 6.0%, where even good liberals like Samuelson began to > shudder. And then, my God, below 5.6%, and so on. Of course > Greenspan was covered by the new supply coming from the blessed > sweatshops around the globe.
I think that it could be that AG decided to allow the economy to produce lower U rates (1) because the federal government was running surpluses -- which AG loves -- and (2) because of the "trauma" that workers were suffering (see Michael P's post below): all else constant, any given U rate had more "oomph" in preventing inflation during the 1990s than in the 1970s, because the cost of job loss had risen. It wasn't the sweatshops alone that kept a lid on US inflation in the 1990s. The high dollar exchange rate contributed a lot. (The nominal Major currencies index rose from about 88 in 1994 to 101 in 2000.) Even though rich-country workers get paid much more than sweatshop workers, the high dollar meant that the products of US major trading partners were relatively cheap in US dollar terms encouraging US imports and hurting US exports, discouraging inflation here. -- Jim Devine / "In the years since the phrase became a cliché, I have received any number of compliments for my supposed ability to 'think outside the box.' Actually, it has been a struggle for me to perceive just what these 'boxes' were — why they were there, why other people regarded them as important, where their borderlines might be, how to live safely within and without them." -- Tim Page (THE NEW YORKER, August 20, 2007).
