The new populism isn't necessarily a creature of left-wing petrocrats like Hugo Chavez. It may not be what folks like Lou Dobbs and Mike Huckabee are selling. In fact, it may be just the opposite. It may be that the new populism is the populism of ... the investor class. Robert Samuelson was the first to suggest this intriguing historical parallel: "Just as the late-19th-century populists, mostly farmers, wanted the government to provide cheap money and curb the railroads' power, today's financial populists think government should somehow guarantee that the economy always expands and stock prices always rise." The populists wanted easy money. The investor class wants ... easy money. But both groups are playing a dangerous game. Here's Samuelson:
The Fed's first responsibility is to maintain a basic price stability - to keep inflation at low levels - because, without that, its other goals of maximum economic growth and low unemployment become impossible. We learned this lesson painfully in the 1960s and the 1970s. Political pressures then to avoid all recessions led the Fed to relax money and credit too much and too often. As inflation rose, the economy grew increasingly unstable. The perverse results were higher inflation, ultimately reaching double digits, and more frequent and harsher recessions. Annual inflation peaked at 13.3 percent in 1979 and annual unemployment at 9.7 percent in 1982. Unlike financial populists, the Fed should focus on the economy's performance in the next six years, not the next six months. Some economists think that the Fed is already repeating its previous error, now prodded by 'market pressures' and the specter of financial panic. If the market constantly demands to be stimulated by lower interest rates and easier credit, and threatens to go into an uncontrolled tailspin if it isn't, then the Fed is in a treacherous position. What the Fed now does to make matters better may make them worse - possibly much worse - in a few years if it leads to higher inflation. This is a real, if easily overlooked, danger.
There are hundreds of millions of people around the globe who were either not yet born or too young to remember the economic crises of the late 1970s and early 1980s. I'm one of them. But the lessons are there in the history books for all of us to see.