If We Did It Before …
Thank you for Roger Lowenstein’s well-timed article drawing broad attention to the seismic change at the end of the Bretton Woods system in August 1971 (“The Nixon Shock,” Features, Aug. 8-Aug. 14). At the time I was an economist at the Atlanta Fed, and as an economics professor ever since, I have built my business cycle course around the remarkable events of the ensuing decade. The 1970s inflation, which your meticulously researched article identifies as [Arthur] Burns’s inflation, undermined Nixon’s stimulus package and led to the totally unexpected recession of 1974-75. This is the one I still refer to as the “great recession,” because it was such a mystery until Milton Friedman explained it and Federal Reserve Chairman Paul Volcker acted in concert to stop it. President Reagan was a real statesman to stick by Volcker even with 10 percent unemployment. The ensuing recovery was robust.
Bloomberg Businessweek readers need to be reminded of such tough times in the past that the U.S. has dealt with successfully.
Professor of Economics
Georgia Highlands College
“The Nixon Shock” seems to say that Volcker replaced Arthur Burns. G. William Miller replaced Burns, served as Fed Chairman from March 1978 to August 1979, and was replaced by Volcker. It was Miller’s easy money that drove inflation to the stratosphere and led to the Volcker appointment.
School of Public Policy
George Mason University
Surf, Turf—Try Scorpions
Apparently, Traci McMillan has no concept of military life in Afghanistan or Iraq (“Bullets, Bombs, Surf, Turf,” Politics & Policy, Aug. 15-Aug. 28).
Surf and turf or steak au guerre are not the normal bill of fare for our troops. They also rely on “appetizing” meals ready-to-eat (MREs), including entrees, side dishes, sandwiches, bread, tortillas, snacks, desserts, crackers, spreads, beverage bases, calorie bars, and water. All these tasty delicacies, including “tough” chops as a reward for avoiding IEDs, poisonous snakes, and scorpions; carrying 9- to 31-pound weapons in oppressive heat clothed in heavy boots, khakis, body armor, and a metal helmet; fighting an enemy that likes to torture and behead captives; and struggling through desert sandstorms. Oh, did I forget to mention that many do this at the risk of life and limb during several redeployments that take them away from their friends and family for months to defend Ms. McMillan’s right to criticize the cost of their meals?
Perhaps Ms. McMillan’s next assignment should be in Afghanistan or Iraq so she can gain more respect for what military sacrifice really means. Then, I suspect, she’ll agree that our troops deserve their occasional surf and turf, water, and snacks regardless of the cost while the rest of us remain stateside in the safety and comfort of our air-conditioned homes. P.S.: Send a few bucks to a charitable group that provides our troops with a few necessities we take for granted.
Hank Greenberg’s Untold Story
I was pleased to read Hank Greenberg’s insights as told to Diane Brady (Hard Choices, Aug. 8-Aug. 14). The man was a genuine war hero and built a company that was, over a long period, very effective. Yet between 1999 and 2007, AIG was negligent in maintaining adequate reserves to support the policies it wrote, and I believe Mr. Greenberg knew it. This may have been the reason behind his forced departure in 2005, and that may be the real courageous story behind his story.
With Standard & Poor’s, Moody’s, etc., rating subprime mortgages as prime, how could any entity like AIG prudently gauge risk and reserve for potential defaults? Yet in 2007 the company had $100 billion in sales, with an $11 billion paper profit, as Mr. Greenberg referenced. Just a year later, AIG had only $11 billion in sales and a $90 billion loss, with no attempt to reduce costs or commitments. Where was Hank when AIG and America really needed him?
Mr. Greenberg told a good story, but the real story should be: How could such a company be allowed to force its chairman out only to continue with very questionable business conduct?
Paul A. Alegria
Gilbert Alexander & Associates
Level the Health-Care Field
“Vanishing Health Benefits” (Enterprise, Aug. 8-Aug. 15) is an eloquent endorsement of a national health insurance program.
Small employers cite health insurance as one of their greatest unknowables. Wouldn’t it make sense to have a level playing field in which all Americans are paying the same thing for the their insurance and erase this worry from municipalities and states, as well as companies? The day will come when other countries will eat our lunch because they provide universal coverage, while we make the engines of growth in our country work their way through a maze of possible coverages and try to plan without knowing what next year’s premium increases will bring.
Karen M. Dumont, CFP
Broadview Heights, Ohio
Keep Your Hands Off Seniors
Peter Coy’s comment that Medicare and Social Security “cuts in benefit formulas … should apply at least in part to current beneficiaries” (“It Gets Worse,” Opening Remarks, Aug. 1-Aug. 7) is quite unfair to senior citizens who depend on these social health and retirement plans. We seniors paid into the system during our working years to have the protection and income when we stopped work. Younger workers also have this help in their futures as well as saving opportunities in 401(k) and other accounts. The recession wrecked many of their tax-deferred retirement savings, but that’s due to the way our business system operates in a recession. To the extent that tax-deferred retirement savings was a faulty plan, society, through our government, might adjust “catch-up” contributions or otherwise help younger workers. With the problems of health costs, inflation, and personal care staring today’s seniors in the face, we are hardly “completely insulating today’s elderly” from financial problems.
I have heard no one in government, even the most demanding budget cutters, propose any cuts to current retirees. I hope you will use your magazine’s influence to look forward by helping solve problems rather than promoting punitive proposals.
Benefits, Demotivating? Ha!
In “The Deceptive Liability of 99-Week Jobless Benefits” (Bloomberg View, Aug. 8-Aug. 14), the suggestion, “Help the unemployed: Shorten their benefits” is wrong, like making somebody learn to swim by taking away their life preserver. It goes against what was demonstrated by Massachusetts Institute of Technology economist Peter Diamond, who won his Nobel Prize for showing how unemployment benefits help both employers and workers by providing search time to find the best fit and improving market efficiencies.
It is a dim view of humanity that says that benefits are demotivating, and particularly heartless in this job market, with nearly 10 percent unemployment. Even if it were true, the most motivated workers would be hired first, making the markets more efficient again. (Can I get a Nobel Prize for that thought?)
David J. Melvin