Can you address the recession of 1958?

0:00Excuse me, my favorite story. Anybody who's heard this, I apologize for repeating it. About, I think, in the recession in 1958, which was the first recession where the phenomenon of the inflationary recession first began to appear. This was the first time when the prices were still rising during the recession. And here we had an authentic, officially authenticated and certified recession. And yet prices, instead of falling, which is what prices are supposed to be doing in a recession, instead of falling, prices were still going up. They weren't going up very much, but they were going up. Arthur Burns, who at that time had just resigned as head of the Council of Economic Advisers in the Eisenhower administration, was giving a lecture up at Fordham, which I happened to attend, giving the usual Keynesian policies, what to do about recessions.

0:53Basically, when there's a recession, you pump spending into the system, you meaning the government. One, the government pumps spending into the system, thereby lifting the economy upward. And when there's an inflation, the government takes money out or takes spending out of the system. And you work several variants or changes on this theme, and that's essentially the changing or the establishment program. So Burns was going into explaining this policy and during the question period, I was a brash young fellow at that time. I said, well Professor Burns, what do you do if the government is supposed to be doing is pumping deficits during a recession and take out spending or have higher taxes or surplus during a boom?

1:41What do you do if the both are happening at the same time as it seems to be happening right now? The question was, what do you do if there's an inflation and a recession at the same time? Well, he said, his first reply was, well, there's no problem there because the recession will soon be over, and so forth. And I said, well, okay, and it was soon over in 1958. And I said, what happens if President Biden, if at some future date the same phenomena will recur and intensify, will have a severe recession, a lower and accelerating inflation? What then would you recommend? He stopped for a moment and he said, well, in that case, we all have to resign. Well, they haven't resigned. The rest, of course, is history. The phenomena has arrived and is with us right now and nobody's resigned. It's one of Rothbard's laws of political science that nobody ever resigns from government unless your hand is caught directly in the tail.