Diaries, especially when they are kept during historic times, are always fascinating.
Arthur Burns, former Fed Chair under Nixon, Ford and Carter, kept one that is now public. These were hectic times, characterized by Watergate, the resignation of a President, inflation and stagflation. The latter two events coincided, something that forced macroeconomists (at least the Keynesians) back to their drawing boards because such an outcome was thought not possible.
Another event also occurred during this period and that was the abandonment of the gold standard. From Mr. Burns’ diary:
The gold window may have to be closed tomorrow because we now have a government that seems incapable, not only of constructive leadership, but of any action at all. What a tragedy for mankind!
A rather prophetic statement that reflects the single most important underlying cause responsible for today’s problems. The absence of fiscal restraint imposed by a gold standard enabled politicians to engage in both economically and politically irresponsible behavior. We are beginning to see the product of what that behavior here and around the world.
The WSJ has an article on the Burns’ diary.
