Macro Musings with David Beckworth Robert Samuelson on the Great Inflation, Its History and Its Legacy
May 27, 2019
Economics columnist Robert Samuelson discusses the Great Inflation era, its historical significance, and the actions taken by Reagan and Volcker to combat inflation. They explore the clash of Keynesianism and monetarism, wage price controls, and the enduring impact on American attitudes and policies.
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Timeline And Turning Point
- The Great Inflation ran roughly from the mid-1960s to the early 1980s, peaking near double digits.
- Paul Volcker's tight money and the 1982 recession decisively broke entrenched inflation expectations.
Prefer A Target Range Over Fixed Point
- Avoid rigid numeric inflation targets and prefer a modest range with bias against deflation.
- Act decisively to stop deflation or inflation once it becomes noticeable rather than rely on precise targets.
Inflation As Social Crisis
- Inflation in the 1970s was as much a social and political crisis as an economic one.
- It eroded public confidence and symbolized perceived governmental incompetence.