The Trillion Dollar Meltdown

Author Charles R. Morris is the first writer out of the starting gate to tackle the issue of the "debt meltdown" in a head-on manner in his new book The Trillion Dollar Meltdown.

I have now finished reading this book and I can tell you that I was so engrossed in what Mr. Morris had to say I read the entire 169 pages in one afternoon, stopping only periodically to refresh my Gin & Tonic so I could continue facing the harsh reality of what Mr. Morris had to say.

In this blog (and the next few to come) I will try to give you taste of what Mr. Morris has to say by quoting excerpts from his book. Bottom line – this book is a must read. Go to your local bookseller in Canada or the USA and get it…today !!

In the opening part of the book, Charles Morris begins with a look back at the first several decades that followed WW 2 with a particular focus on liberalism. It was the shortcomings of liberalism that led to the high flying free market attitudes of the 1990's....

In a modern sense, liberalism is a theory of government posing as a branch of economics where government essentially drives the bus...

...during the five years of the Johnson Presidency, despite an uptick in inflation, the real annual rate of growth exceeded 5%. But by 1970, Nixon's second year in office, growth plunged to near zero….

...the American commitment to redeem dollars at the rate of $35 per ounce of gold underpinned world monetary stability. But American gold reserves were dropping so currency traders mounted dollar raids to test the Treasury's resolve. The textbook solution was to raise interest rates to foreigners would choose to hold their dollars...

...Nixon announced he would ...impose wage and price controls…and rescind the commitment to redeem dollars in gold.

...the OPEC oil price hikes which helped trigger the Great Inflation of the 1970's was a direct consequence of floating the dollar. By 1973 when the OPEC nations tripled the price of oil, the dollar had fallen to about $100 per ounce of gold. In 1979 when OPEC tripled prices yet again the dollar varied between $233 and $578 per ounce.

...Rarely had American prestige and pride sunk so low. Foreign policy was in shambles, and the economy was a mess. Inflation hit 13.5% in 1980, and output was dropping while the dollar spiraled into the abyss.

...and he [Carter] appointed Paul Volcker head of the Federal Reserve and gave him a free hand in fighting inflation. It was the most important policy appointment of the era.

...With the eclipse of Keynesian liberalism, the day had finally dawned for an alternative paradigm... – Milton Friedman's "monetarism".

...Ronald Reagan's election in 1980 signaled that Keynesian liberalism was dead.

...voters had signaled their readiness for a change of ideological horses. The theorists of the free market would get to run their race.

In my next blog, I will give you a taste of what Mr. Morris has to say about the 1980's and 1990's and how this sewed the seeds for the mess we are in today…..