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Jim Griffin is economic consultant and portfolio adviser to ING Investment Management. He also is editor of ING Investment Weekly, the company's newsletter and is frequently quoted in The Wall Street Journal, Business Week, Bloomberg, Fortune, and other financial media. ING Investment Management is the global investment arm of the ING Group.It is politically tempting to do something to try to soften the twin blows of high energy prices and the economic slowdown. In the 1970s, the Fed did do something -- and after some immediate palliative effect, the eventual result was an even sharper jump in oil prices and punishing inflation that took years to get under control.
Jim Griffin, an economic analyst with ING Investment Management, says the country seems to have learned and remembered the lesson of three decades ago -- although that will do nothing to ease the economic pain, which he likens to a slash in pay. And, he points out, the weak dollar, large national debt and other restraints give the Fed very little running room. "Having seen the original, we have a clue about how the sequel will proceed," he writes. "But being powerless feels even worse than being clueless. There appears to be very little of a positive nature that can be done in the short run to cushion our pay cut."
But there is some good news buried in his glum outlook. Accepting the pain now rather than look for short-term fixes that are bound to fail will eventually leave the country stronger. "Real, if painful, adjustments are now under way. Those adjustments on our part will serve to lower costs and increase competitiveness," Griffin says. "We've seen this movie before and it turned out quite well eventually, in a two decade long bull market following a fumbled response that made things worse than they needed to be."
POSTED BY: pete (July 23, 2008 12:30 PM)
Our collective "pay cut" is a direct result of Washington's weak dollar policy. I lived through the 70's and I see little difference -- print money then/ print money now. Where's the Fed's lesson learned?
POSTED BY: Brian Eichorn (July 23, 2008 09:14 PM)
This article reminds me a lot of the presidential debates...lots of sounds bites and absolutely no content.
POSTED BY: Anonymous (July 23, 2008 10:17 PM)
Poorly written-- should have stated UP FRONT what the Fed allegedly did wrong in the 70s, and I gave up reading this obtuse piece to figure out if you ever got around to even spelling out the Fed's 70s action(s).
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