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These, obviously, are not the kind of topics chosen by many recent Class Day speakers--Will Farrell, Ali G, or Seth Mac Farlane, to name a few.
As basic economics predicts, when a scarce resource cannot be allocated by market-determined prices, it will be allocated some other way--in this case, in what was to become an iconic symbol of the times, by long lines at gasoline stations. crude oil well below world prices, growth in domestic exploration slowed and production was curtailed--which, of course, only made things worse.
In 1974, in an attempt to overcome the unintended consequences of price controls, drivers in many places were permitted to buy gasoline only on odd or even days of the month, depending on the last digit of their license plate number. In addition to creating long lines at gasoline stations, the oil price shock exacerbated what was already an intensifying buildup of inflation and inflation expectations.
Because the members of today's graduating class--and some of your professors--were not yet born in 1975, let me begin by briefly surveying the economic landscape in the mid-1970s.
The economy had just gone through a severe recession, during which output, income, and employment fell sharply and the unemployment rate rose to 9 percent.
For a central banker, a particularly critical difference between then and now is what has happened to inflation and inflation expectations.
The overall inflation rate has averaged about 3-1/2 percent over the past four quarters, significantly higher than we would like but much less than the double-digit rates that inflation reached in the mid-1970s and then again in 1980.
Now, as in 1975, adjusting to such high prices for crude oil has been painful.
Gas prices around a gallon are a huge burden for many households, as well as for truckers, manufacturers, farmers, and others.
Our speaker in 1975 was Dick Gregory, the social critic and comedian, who was inclined toward the sharp-edged and satiric.
Central bankers don't do satire as a rule, so I am going to have to strive for "kind of interesting." When I attended Class Day as a graduating senior, Gerald Ford was President, and an up-and-coming fellow named Alan Greenspan was his chief economic adviser.