T. Rowe Price

Chapter ThirteenTHE UNITED STATES ENTERS A NEW ERA, 1965–1971

Given the unpopular, increasingly expensive, out‐of‐control war in Vietnam, the huge costs of the Great Society program, and the large ensuing budget deficits, Mr. Price's sensitive antennae were up. His concerns began to increase about the country's future and the outlook for the stock market. He believed that economic history continually repeated itself because it was driven by human nature. As he had written in the 1937 pamphlet “Change: The Investor's Only Certainty”: “The basic social, economic, and political currents flow as long as human beings remain in control.”

The huge postwar economic boom following the war was similar, Mr. Price believed, to what occurred in the 1920s, following World War I. This current boom also had to end. By 1966, the nation's huge pile of gold, which had reached record levels in 1947, had virtually disappeared. Mr. Price wrote in a memo, “Change – The Investor's Only Certainty in 1966” (June 10, 1966), that “gold reserves were at the lowest levels since prior to World War II.”

The 1929 stock market crash had turned into a depression, many believed, because of the leverage from the huge stock market‐related debt taken on by Wall Street, corporations, individuals, and the banks themselves. But, “in the mid‐1960s,” Mr. Price wrote privately, “it was the consumers, supported by the banks and other financial institutions, that had engorged, not on stocks, but on houses and automobiles, ...