'iiii~~;;' , i·.i ~~jf~~ion ) ~ ,~ Inaex 216 r- ~ J" ~>:(: economy (cont.) industrialization, 66 long-term growth rate of: 10, 180,191 manufacturing in, 126 19th century growth in, 35-37 of 1920s, 3-5 of 1970s, 18,44-45,99, 101, 117-33 1990s expansion in, 139-40 outsourcing in, 24 parallels to 19th century deflationary economy of: 74 post-Civil War, 96 post World War 11,117-18,126 pressure cooker of: 149-51 prognosis for, 53-54 recessions in, 19,41-42,72-73 2001 recession in, 6-7,15,42 2003 parallels to 1920s expansion in, 3-6 2003 rebound in, 27 Edmunds.com, 140 education, 4, 5, 52, 55,70,90-91, 118,137,141,171 early childhood, 185-87 gender distinctions in, 185 income gap and, 186, 189 of labor force, 29,148,184, 188-89 mass vs elite, 184-85 public, 185 reform of: 185-90 secondary, 184-85 efficiency, 139, 143-44, 148 Eichengreen, Barry, 107, 111 eight-hour work day, 70 Eisner, Robert, 61 electricity, 47 Electronic Data Systems, 140 ;: { ;.'}:: ~ ~ } : :- :- ( ,~, ~-> 'Y"~ : ~" Employee Benefits Research InstitutelInvestment Company Institute, 155 Employment Act of 1946, 123 employment growth, 53 employment theory, 60-61 End ofA.fJluence: The Causes and Consequences ofAmerica's Economic Decline, The (Madrick),50 energy industry, deregulation of: 45 Engels, Friedrich, 31 Enron,ll entrepreneurship, 29,35,45,46,53, 55,66,112,149,164 environment, 137 equity investors, 128 E-trade, 140 Europe, 34, 179 balance of power system in, 30 education in, 184 European Central Bank, 13 excess capacity, 42, 46 exchange-traded funds, 167 Execution (Bossidy), 142 Extraordinary Popular Delusions and the Madness of Crowds (Mackay), 57 factory system, 64 Fallows, James, Famous First Bubbles (Garber), 58 farming, 35, 67-68, 69, 104, 125, 176-77 increased mechanization of: 68, 118 subsidies for, 176-77 tenant, 104 Farrell, Chris, 74-76 Farrell, Diana, 76 ' ~ Index fascism, 109 federal deposit insurance, 73 federal funds rate, 80 Federal Open Market Committee (FOMC), 2003 meeting of: 1-2,23 Federal Reserve, 1,7,18-19,48, 73,79,80-81,89,95-99, 101-2,106,115,122,127-28, 129-30,131,132,135,174, 192 as cause of Great Depression, 109-11 establishment of inflation targets by,132 interest rate cuts by, 1-2, 13,42 interest rate raised by, 42 as responsible for Great Inflation, 120 Federal Reserve Bank of New York, 110 Federal Reserve Board, 110 Feldstein, Martin, 191 fiat system, 48, 127 file sharing, 46 financial markets, and knowledge, 55-56 financial panics: historical, 97 see also market bubbles financial services industry, deregulation of: 45 Financial Times, 11 financiers, 44 First Bank of the United States, 96 fiscal policy, 190-93 Fisher, Irving, 98, 157 Fitzgerald, F Scott, 86 flXed-income securities, 168-69 Fogel, Robert, 70, 72 Forbes, Steve, 28 Ford, Gerald, 18 foreign direct investments, 30-31, 55 in China, 39-40 foreign exchange: markets, 85 risk in, 32 foreign markets, investing in, 166-67 Forrester Research, 24 401(k)s, 155, 156, 164, 169, 181-82 403(b)s, 181 457s, 181 France, 10,25,32,58, 113 foreign assets of: 31 industrial output of, 35 Franzia, Fred, 90 free silver movement, 69-70 free trade, 175-78 British policies on, 30 Frick, Henry, 67 Friedman, Milton, 48, 73, 92, 101-2,106,109-11,127,129, 130,174,193 "Friedman rule," 174 Fry's Electronics, 91-92 Fuchs, Victor R., 180 Furst, Timothy S., 106 Galambos, Nick, 150 Galbraith, John Kenneth, 57, 72, 106, 122-23 Garber, Peter, 58 General Accounting Office, 141 General Electric, 17, 22 General Theory ofInterest, Money and Employment, The (Keynes),106 Gentex, 147 217 218 Index Georgia, University o£ 28 Germany, 9,10,13,25,32,34,93, 98, 184 economic rise o£ 34 foreign assets o£ 31 hyperinflation in, 89 industrial output of, 35 Germany, Nazi, 107 Gerstner, Louis V., Jr., 142 Giants ofEnterprise: Seven Business Innovators and the Empires They Built (Tedlow), 132 Gibbon, Edward, 137 G.I Bill, 118 Gilder, George, 130 Glass-Steagall Act, 86-87 global capital markets, 49, 131, 135, 174,192 Global Electronic Finance, 53 globalization, 44, 176, 189 gold, global production o£ 33 Goldfinger, Charles G., 52-53 Goldin, Claudia, 184 Goldman Sachs, 55, 163 gold standard, 31-32, 69, 96,121 as cause of Great Depression, 107,111,113 deflationary contribution o£ 33, 34,36 discontinuation o£ 108 mentality o£ 18 Goodman, George, 117 Gordon, John Steele, 96 government: bonds, 105 relationship with business of, 122 Grapes of Wrath, The (Steinbeck), 177 Great Britain, 8,25,30-31,32,53, 55,58,64,89,98,108,120, 168,184 foreign assets o£ 31 industrial output of, 35 living standards in, 34, 35 19th century deflation in, 33-35 steel production in, 36 wages in, 34, 35 working class in, 35 Great Deflation of the 1930s, 101 Great Depression, 2,5,7,27-28, 44,72-73,79,99,103-6,170, 177 bond performance during, 157-58 causes o£ 106-13 consumer debt during, 105 interest rates during, 104-5n, 111 markets during, 157-58 recurrence of, 113-15 Great Depressions ofthe Twentieth Century (Prescott and Kehoe), 10 Great Inflation of the 1970s, 99, 101,117-33 causes o£ 125-26 and end of managed capitalism, 126-28 managed competition and, 121-23 Great Mutual Fund Scandal, 153 greenbacks, 96 Greenspan, Alan, 2,8,16,19,23, 42,48,129,131-32,183, 190 deflationary fears ot: 12-13 Greider, William, Griffin, James, 46 Grossman, Gene, 64 Grove, Andrew, 139, 142 Index growth, economic, 60, 61, 120 deflation and, 61 innovations' impact on, 47 Grubman, Jack, 185-86 Hale, David, 178 happiness, 137-38 Hayek, Friedrich, 56,111,130 health care industry, 52, 76, 141 employment in, 181 reform of, 178-79 health insurance, employer based, 76,178-79,180 heart attacks, 181 Heinze, F Augustus, 98 Heraclitus, Heritage Foundation, 179 "high school movement," 184 high-tech sector, 46, 47,139 Hildebrandt International, 140 Hill, David, 138 Hillis, Danny, 47 History ofthe Federal Reserve, A (Meltzer), 102 Hitler, Adol~ 88-89 Hitt, Lorin, 144 HMOs, 179 Hobsbawn, Eric, 34-35 home ownership, 5,118,153, 169-70,192 Homer, Sidney, 128 Homestead Works, 67 Hong Kong, 9,21 Hoover, Herbert, 112 Hoovervilles, 103 hotel industry, 20 House ofMorgan, The (Chernow), 99 housing market, 80, 169-70 How the Other HalfLives (Riis), 65 human capital, 171-72, 182, 183-90 Hume, David, 33 hyperdeflation, 28, 80 hyperinflation, 69, 88 IBM, 46 I-bonds, 168-69 immigration, 29, 31, 36, 45 and economic growth, 188 education and, 188-89 income: inequality, 66, 137 insecurity, 70 income tax, 70 1920s reduction of: index funds, 167-68 India, 21, 24-25, 53, 55, 59, 175, 189 as high-tech base, 24 Indonesia, 21, 31 Industrializing America (Licht), 36 Industrial Revolution, 17, 194 inflarion,2,3,15,23,32,42, 48-49,55,60,69,88,111, 114,119, 135, 138, 159, 168, 174 as abhorred by investors, 49 bonds indexed to, 168-69 defined, 92 flare-ups in, 18 high-tech's influence on, 47 as historical precedent, 16-17 loathing of: 125 monetarist view of: 33 in 1920s, in 1970s, 18,44, 89; see also Great Inflation of the 1970s in 1990s, primary cause of: 92-93 219 220 Index inflation (cont.) tolerance of: 120 unemployment rates and, 60-61, 128,129 wartime, 120 information, 165, 193 see also knowledge information industry, 74, 150 information overload, 144 information technologies, 5, 20, 44, 46-47,53,132 and pricing, 142 and productivity growth, 144, 190 ING Investment Management, 46 innovations, 5, 28,29,33,34,46, 51,64,66,150,175,189 impact on growth of, 47, 97 Innovator's Dilemma, The (Christensen), 142 Institute for the Future, 24 insurance: buying of: 164 employer-based health, 76 unemployment, 73, 123 universal health, 178, 180 interest rates, 32, 53, 60, 79, 80-81, 157, 161-62 cuts in, 1-2, 13, 102 during Great Depression, 104-5, 111 historical, 84 nominal vs real, 78 short-term, 114 international division of labor, 178 International Food Policy Research Institute, 176 International Herald Tribune, International Monetary Fund, 9, 59, 73 establishment of: 121 international monetary system, 43, 48-49,108,126 international trade, 28, 30, 32, 45, 55,126 Internet, 5,24,29,74,148,175 commerce, 51, 139 deflation and, 20-21, 46-47 productivity and, 51 and services industry, 139-41 see also dot.com boom investing, 55, 66,153-72 asset allocation, 155, 166 diversification in, 154-55 in foreign markets, 166-67 high-risk, 53 for retirement, 171 risk as inherent in, 156, 159-60 investment banking, 86-87 investment capital, 131 investor enthusiasm, 162-63 investor irrationality, 57 IRA (Investment Retirement Account), 164, 169, 181 Iraq, 1,42, 137, 154 irrational exuberance, 57, 59 Irrational Exuberance (Shiller), 50 Ishizuka, Masahiko, Italy, 25, 113 Jack (Welch), 142 Jackson, Andrew, 70-71, 96 Japan, 25, 34, 55, 81, 126 central bank of: 114 deflation experience of: 7-9, 19-20,37-38,114-15 real estate prices in, , , ', A ~ w "- "";, ,., C(>- : A~ ,}, Japan EconomicJournal, Jargowsky, Paul, 54 JD Power and Associates, 143 Jepperson, Ronald, 109 JetBlue Airways, 140 job insecurity, 136-38, 150, 151, 178 Jobs, Steven, 139 Johnson, Lyndon B., 191 Johnson &Johnson, 144 Jones Commission of 1876, 98 J.~ Morgan, 10 junk bonds, 45 Kehoe, Timothy, 10, 28 Keller, Maryann, 147 Kellogg Graduate School of Management, 21 Kennedy, John F., 191 Kennedy, Paul, Keynes, John Maynard, 57, 73, 81, 102, 106, 121, 125, 133, 191 on stable money, 87-88 Keynesianism, 29,191 Kindleberger, Charles, 89, 106 kinetic corporation, 142-45 King, Edward, 99 King,Mervyn,94 Klein, Maury, Klug, Adam, 79-80 Knop£ Alfred A., 73 knowledge, 165, 193 application o£ 56 financial markets and, 55-56 Korea, 21 Kozlowski, Dennis, 11 Kravis, Henry, 45 Krugman, Paul, 3,114 Kuznets, Simon, 73 ~ s - -V E: :e / , Index J.- Labor Department, U.S., 183 labor force, 53, 56, 67, 69, 88, 122, 124,193 education of, 29, 148, 184, 188-89 shortages in, 54 technology and, 47 Laffer, Arthur, 130 laissez-faire, 123 Langberg, Mike, 91-92 Langdon-Lane, John S., 79-80 Laudicina, Paul, 40 Law, John, 58-59 Lay, Kenneth, 11 Layard, Richard, 137 layoffs, 145 leather money, 84 Le Bon, Gustave, 57 lender of last resort, 97,110,130 Leuthold, Steven, 158 Leuthold Group, 159 leveraged finance, 45 Levin, Ross, 166 Levy, Leon, 18 Levy Institute, 179 Licht, Walter, 36, 67 Lichtenberg, Frank, 181 "liquidity trap," 81,114 Littlefield, Henry, 69 Littman, David, 148 living standards, 34, 35, 50,81,124, 136-37,180 central planning as factor in, 54 in 1920s, loans, 84 London Guarantee & Accident Co., 179 Loomis, Alfred Lee, 158 Los Angeles, 36 221 • • ~ ~ 222 Index Lucas, Robert, Jr., 114, 129 Lydian civilization, 84 McCain, John, 131 McCaw, Craig, 45 McClellan, Mark, 180-81 McClosky, Deidre N., 173 Mackay, Charles, 57 McKeown, Pat, 156 McKeown, Terri, 156 McKinley, William, 70 McKinsey & Co., 138 macroeconomics, 73, 113-14 Made in Germany, 34 Madrick, Jeffrey, 43, 50 Malaysia, 21, 31 Malkiel, Burton, 162, 167 Malthus, Robert, 193 managed capitalism, 118-19, 124 dismantling of: 130 management, 22,51,67,74,122, 138, 143, 145, 150, 182 hiring of professional, 36 technology and, 47 see also business; corporations Manganello, Timothy M., 147-48 manufacturing,143 in China, 23-24 technologies, 55 margin requirements, 122 market bubbles, 56-59 market capitalism, 44-45 markets, 54-56 bubbles, see market bubbles capital, 29, 97 during Great Depression, 157-58 knowledge and financial, 55-56 see also stock market, U S Marshall, Alfred, 34 Martinsburg, W Va, 67 Marx, Karl, 31, 61, 86 Marxism, 66 Maryann Keller and Associates, 147 mass production, 36 Means, Grady, 51 Medicaid, 123, 180, 188 Medicare, 123, 180 Mellon, Andrew, 111 Melton, William, 124 Meltzer, Alan, 102 mergers and acquisitions, 98, 131 merit pay, 150 Merrill Lynch, 3, 39, 140 Metternich, Prince Klemens von, 93 Mexico, 9,175 Michigan, University of, Center for Automotive Research of, 149 middle class, 118, 153-54 Milken, Michael, 45 Mill, James, 178 Miller, G William, 18-19, 120, 129 mineral industry, 125 Minnesota Public Radio, 136 Minnesota, University of: 28 Mississippi Bubble, 58 Mitchell, Charles, 10 Modern Capitalism: The Changing Balance ofPublic and Private Power (Shonfield), 118 Modigliani, Franco, 73 Mokyr, Joel, 65 monetarism, 33 Monetary History ofthe United States, 1867-1960, A Index (Friedman and Schwartz), 109-11 monetary policy, 42, 69, 129-30, 174 effectiveness o£ 80 in Japan, 114-15 monetary reform, 95, 98 money: history o£ 84, 87 leather, 84 other meanings o£ 85 paper, 32, 99,117 supply, 92-93,109-11 trust in, 88 Money, Prices, and Growth: The American Experience, 1869-1896 (Dickey), 37 "money illusion," 76-77 "money trust," 88, 122 Montgomery Ward, 179 Morgan,J ~,36, 98-99,122 Morgan Stanley, 3, 140 Morse, Charles W., 98 mortgage rates, 80 Muller, Jerry, 56 Murdoch, Rupert, 45 music industry, 20, 141 mutual funds, 29,153,167 NAIRU (nonaccelerating inflation rate of unemployment), 60-61 Naked Economist, The (Whelan), 93 NASDAQ, 57 National Bureau of Economic Research (NBER), 16, 106 National City Bank, 10 national currencies, 84-85 national debt, in 1920s, National Monetary Commission of 1912,97 Nelson, Daniel, 79-80 Nelson, Richard, 64 Netherlands, 53,113 Tulipmania in, 57-58 Netscape Communication Corporation, 20 networking, 171 New Deal, 72, 177 new economy, 50-51 New Industrial State, The (Galbraith), 123 New York City, 65 New York Stock Exchange, 57 commissions deregulation by, 130 scandals in, 10, 153 see also stock market, U S New York Times, 141, 150 New Zealand, 48 92nd Street Y nursery school, 185 Nixon, Richard, 18, 127, 129, 191 Northwest Area Foundation, 177-78 Northwestern University, 21 Noyce, Robert, 132 Odean, Terrance, 165 Office of Management and Budget, 191 oil embargo shock, 50,118,126 oil industry, 125 online trading, 6, 130, 140 Only the Paranoid Survive (Grove), 142 OPEC (Organization of Petroleum Exporting Countries), 126 oil embargo by, 50,118,126 Organization Man, The (Whyte), 122 outlet bias, 94, 95 223 224 Index outsourcing, 21, 24, 59, 76, 140, 148,150,183 limits to, 148-49 "Ownership Society," 183 panics, see downturns paper money, 32, 99, 117 Parliamentary Gold and Silver Commission, 34 patent protection, 148 Paulson,]ames W., 159 peace, 30 pension funds, 178 pensions, private, 53 People ofPlenty: Economic Abundance and the American Character (Potter), 117 Perot, Ross, 140, 175 personal consumption deflator, personal finance, 85 pessimism, 7, 12, 136 Peterson, Alfred H., 149 pharmaceutical industry, 21, 141, 181 Phelps, Edmund, 129 Philippines, 24 Pickens, T Boone, 45 Pitney Bowes, 145 Poland, 113 populism, 66, 68-69, 70, 109 Potter, David, 117 poverty, 39, 54, 103 Power of Gold, The (Bernstein), 30 Prechter, Robert, Prescott, Edward, 10, 129 prescription drugs, 141 price competition, 135-51 price stability, 83-99, 120, 130, 132-33,174 measuring price trends in, 93-95 pricing: automobiles, 146 cost-driven, 142 power, 46 process determined by, 142 traditional approach to, 142 private pensions, 53 privatization, 86 "Problems of Price Measurement, The" (Greenspan), 23 Procter & Gamble, 39 producer price index, 42 product development, 143 production, 29, 88 mass, 36 productive capacity, 29 productivity, 28, 29,36,47,49-53, 115,118,132,150 of big business, 37 growth rate of, 50, 135-36, 144-45 in 1920s, in 1990s, 5, 59 service-sector, 51-52 productivity-driven deflation, 28, 37 professions, 86, 139 profit sharing, 150, 151 progressivism, 66, 68-69, 70 Progress Paradox, The (Easterbrook), 136 protectionism, 175-76, 178 public education, 185, 187 see also education public policy, 173-94 Pujo Committee of 1912, 98 quality, 94,143-44 quantity theory of money, see monetarism Radio Corporation of America, 103 radios, railroads, 30, 64, 66, 68, 71-72, 79-80,97,112 strike of 1887, 67 Rainbow's End (Klein), Rainwater, Richard, 45 Raju, Jagmohan, 143 ranching, 35 Reagan, Ronald, 119-20, 130, 190, 191, 193 real-estate, long-term return on, 170 recessions, 41-42 demand-side, 42 supply-side, 41-42 in U.S economy, 19,41-42, 72-73 Redish, Angela, 28 reengineering, 145, 150 Rees-Mogg, William, regulation, 141 restructuring, 150 retailers: chain, discount, 19, 95 retirement, 54, 155, 171 investing for, 171 savings plans, 76, 155, 164, 181-82 Return ofDepression Economics, The (Krugman), reverse engineering, 46 Ricardo, David, 32 Riis, Jacob, 65 Rise and Fall ofthe Great Powers, The (Kennedy), risk premium, 162 risk taking, 45, 64, 88, 112 in investing, 156, 159-60, 165 Ritter, Gretchen, 69 Rivlin, Alice, 23 Roach, Stephen, 3, 81 Robbins, Lionel, 111, 112 Rockefeller, John D., 36, 99 Rockoff: Hugh, 69 Rolnick, Arthur, 48, 186-87 Rome, 88 Romer, Paul, 56, 64,175,180, 188 Roos, Lawrence K., 119 Roosevelt, Franklin D., 72,113, 177 Roosevelt, Theodore, 98 Rosenberg, David, Roth lRAs, 181 "rule of thumb" perspective, 77 Russia, 24-25, 55 Sachs,Jeffrey,107 Saffo, Paul, 24 Sakakibara, Eisuke, 15-16 Salomon Brothers, 127 Salomon Smith Barney, 185 Samuelson, Paul, 73 S&P 500,167 Sanford, Charles S., Jr., 156 San Francisco, 84-85 Saturday Evening Post, 4-5 savings, 53, 55, 124, 155 savings and loan crisis, savings plans, retirement, 76, 155, 164,181-82 Sawhney, Mohan, 21, 47, 148 scandals, business, 10-11, 153 Schiff: Jacob, 122 Schnorbus, Robert, 143 Schumpeter, Joseph, 64, 101, 106, 111,112 Schwartz, Anna, 106, 109-11 Second Bank of the United States, 96 Securities and Exchange Commission, 130 Selgin, George, 28 SEP-IRAs, 181 September 11,2001, terrorist attacks, 1, 6, 42, 137, 154, 189 service industry, 74, 139-40, 149-50 service-sector productivity, 51-52 Sharpe, William, 73 Sherman Anti-Trust Act, 70 Shiller, Robert, 50, 89 Shilling, A Gary, Shonfield, Andrew, 118 Short History ofFinancial Euphoria, A (Galbraith), 57 short-term interest rates, 114 Siegel, Jeremy, 37 silver plan, 69 Silverstein, Michael, 11-12 Simmel, Georg, 85 SIMPLEs, 181 Singapore, 9,21 Slemrod, Joel B., 193 Sloan, Alfred ~,Jr., 135 Smith, Adam, 33, 178 socialism, 66, 109 social safety net, 73, 74,81, 178-83 Social Security, 73, 123, 180, 182 Soros, George, 167 Sound Money, 17 Southeast Asia, 31 South Korea, 55,175 South Sea Bubble, 58 Southwest Airlines, 140 Soviet Union, 45, 127, 130 Spanish-American War (1898), 30 speculation, 57, 97, 121 state government, 52 Stauber, Karl, 177-78 steel, 72 Steffens, Lincoln, 140 Steinbeck, John, 104, 177 Stigler, George, 73 Stiglitz, Joseph, 63-65 Stinson, Tom, 190 stock market, U.S., 43, 55,124, 154,158,160,161 averages, 160 1929 crash of, 5, 27,106, 157 1987 crash ot: deflation and performance ot: 159 forecast for, 159-63 inflation and, 12 mild deflation and, 158-59 19th century returns on, 37, 160 in 1920s, 4-5 in 1990s, 5-6, 59 as outperforming bonds, 162 postwar equity premium in, 162 2000 crash ot: 6-7, 42 stock options, 150, 151 for CEOs, 11 strikes, 67 Strong, Benjamin, 110 substitution bias, 94, 95 suffrage, 109 Sumerian civilization, 84 Summers, Lawrence, 175-76 supply and demand, 90 supply shock, 28 supply-side economics, 27-40, 43, 193-94 simplistic, 28-29 Sviokla, John Julius, 87 Swift, Jonathan, 15 ~:;' ~ -0, ~~.:7'" *~ ~:'>,~:'" & -;.;.,» " ' Switzerland, 48, 113 Sylla, FUchard, 97-98 Taiwan, 9,21,175 tax(es),60 Bradley-Gephardt plan to reform, 193 capital gains, 64 compliance costs and, 192 cuts in, 4,28-29, 190-91 income, 70 simplification o£ 192-93 technological piracy, 46 technology, 36, 47, 55, 95 innovations in, 53, 71 manufacturing, 55 Tedlow, FUchard S., 36-37,132 telecommunications, deregulation 0£45 Temin, Peter, 106, 107, 111 Templeton, John, 16 terrorism, 16-17, 137 textile mills, 64, 103 Thailand, 21 Thatcher, Margaret, 130 Thompson, Carol, 171-72 Thorne, Landon, 158 Thornton, Mark, 12 Time, 46 Tobin, James, 73 Toyota Supplier Support center, 149 trade, international, 36 barriers to, 182 protectionism in, 81, 182 training: voucher system for, 182-83 worker, 147, 171, 182-83, 184 transportation industry, deregulation of, 45 .- ~ I';"