“Let the Yankees Freeze in the Dark” read the bumper stickers in Texas in February 1982, the month I flew back from West Germany, mustered out of the U.S. Army at Fort Dix, New Jersey, and returned to my hometown of Wayne, Michigan. Oil had soared from $3.60 per barrel in 1972 to $37.42 in 1980. It dropped a little in 1982, to $31.83. All this occurred despite the federal imposition of price controls, which President Reagan lifted in 1981.
Unemployment in Michigan was 16 percent, which was technically at a depression level. I drove everywhere, pounding on doors to get a job. Nothing. Friends and relatives decamped for Texas. I flew to Washington, D.C., and again took up opinion journalism.
In 1987 it was the opposite. The Michigan bumper stickers read, “Let the Texans Drown in Oil.” The auto industry was humming. Great Lakes State unemployment had been halved, to 8.2 percent. But oil prices had dropped way down, to $14.44 per barrel—less than half of the 1982 figure. Texas unemployment more than doubled, from 4.2 percent in December 1980 to 8.8 percent in April 1987.
We are led to believe that the wild fluctuations in oil prices are always the fault of Persian Gulf sheiks. But the main problem in the 1970’s “oil crisis” was the shenanigans of our own Federal Reserve Board. This problem...