Despite the three years on negative real growth in the seventies real growth ran well over 5% for most of the decade. Point being the economy had a lot more steam then than it does now, when real growth is hasn't gone over 4% since 2000. So I am not sure the wage pressures will be the same as they were then. In fairness, however, the unemployment/participation rates were also less favorable then.

What caused this economic downturn? Mainly the freezing of credit and the destruction of wealth based in the housing sector. Because of this the rate cuts the Fed pursued had limited effect. No matter how much cash they through around the markets had/have no stomach for risk. In this light they may as well raise rates since they aren't having the desired effect anyway. Not only are they limited in what they can do help the weak dollar because of the state of the economy, (in my opinion), they are also limited in what they can do to help push the economy along because of the state of credit markets.