Does anyone here know enough economic history to inform me as to what most economists think caused the inflationary period of the '70s? I'm trying to find some correlation to today's situation. I would guess, but don't know, that it was mostly the result of spending on Viet Nam war, LBJ's Great Society programs, and printing of money to fund them.
Check out unit labor costs in the 70s. Low productivity growth and/or high labor costs - simultaneously: One of the first things to look for should a positive inflation feedback loop (second round effects) materialize should be an uptick in unit labor costs.
The chart reminds me that they used the terms "cost push inflation" and "stagflation" in describing this period. I'm interested if economists today have any consensus as to what might have been root causes of this. I don't know but I would guess it was the spending of the '60s????? Other opinions?? Stosh
What caused the inflation of the 70s was the defecits we built up from the great society programs and the Vietnam war, we also flooded the world with dollars The world lost confidence in the dollar and decided to exchange for gold, It forced Nixon of the gold standard and a dollar devaluation because the world was exchanging dollars for gold The other insight is that the government fought the free market tooth and nail We got price controls, wage control and that resulted in high unemployment and rationing of goods It was a missrable time so my father tells me we are right on track for reliving the 70's x 10
Thanks lrm21.......I lived through that period but was too young and stupid to know what was going on, but it was a rough time. Your analysis makes sense to me and would seem to have some similarities to today. Hope we get some other comments?
Oil Shocks were primary. Deficit spending to fund the military and the wind down of the war were significant. All so this was pre personal computer days. Our productivity was very low back then and with out the computers to help them improve it was slow going in some industries. Also unions had big companies by the ball and were always coming out with new contracts. It drove the airlines, car companies, steel companies in the ground. John
Thanks, I had forgotten about the oil embargos and oil price spikes......another similarity to today. And true, unions were much more powerful in those days.
I read, back then, that it was Carter's policies. He influenced interest rates so poor countries could pay back their debt.
President Nixon completely eradicated the Gold Standard, preventing other countries from being able to claim gold in exchange for their dollar reserves, but also weakening the exchange rate of the dollar against other currencies and Increasing Inflation by driving Up the cost of imports.
It's beginning to sound like it was a "perfect storm": 1. Viet Nam war 2. Great Society programs 3. Oil shortages 4. Decoupling the dollar from gold 5. Union contracts I presume the Fed was accomodative in those days, too.