Inflation history: How past price increases and monetary policy impacted the consumer
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- Опубліковано 28 тра 2024
- Inflation is not a new phenomenon for the U.S. economy. Although the Federal Reserve has sustained a higher-for-longer inflation environment, historical outcomes provide valuable insights. Brookings Institution Director of Economic Studies Ben Harris joins Wealth! to talk economic history.
Harris draws parallels to the 1970s and early 1980s, when "inflation lasted for roughly a decade." During that time, inflation reached a staggering 14%, he says, whereas inflation peaked at 9% most recently. While Harris acknowledges that though the current experience "wasn't as severe, some of the lessons were the same."
Harris emphasizes that monetary policy is the primary tool for combating inflation, stating that the Fed will "keep interest rates at what it deems to be an appropriate level until it has brought inflation down to around 2%." However, he notes a crucial difference: consumers today "believe in the Fed's credibility," which can influence behavior "in problematic ways."
As far as inflationary efforts go, Harris states, "We're now in sort of the last mile." He suggests that the big question now is, "How many additional high rates do we have to go through in order to get inflation down to 2%?"
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That was the period of cold war, and American wealth gap became the greatest it had ever been in the past and that inequality still continues.
if inflation was calculated today like it was in the 70s/80s it would actually be much higher now.
Currency is debt and sovereign bonds are currency.
When governments have exhausted their fiscal space, the crowding-out effect of the state on credit adds to the rising taxation levels to cripple the potential of the productive economy, the private sector, in favor of constantly rising government unfunded liabilities
Inflation is always and everywhere the result of government policies that increase the supply of money circulating in the economy faster than the productive sectors of the economy can expand their capacity to produce goods and services for purchase.
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