What Caused the Great Inflation of the 1970s?
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- Опубліковано 16 жов 2024
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In this video, we'll explore what caused the Great Inflation of the 1970s and what policies were put in place to try and fix the situation.
If you're curious about the history of the 1970s, then this video is for you! We'll explore what caused the Great Inflation of the 1970s and how it was fixed. We'll also talk about Paul Volcker and his role in the inflation crisis. Finally, we'll look at stagflation, the economic condition that followed the inflation crisis.
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This happened because the FED do not wanted to revalue the value of gold, they want MODERN SLAVES IN ANY INDUSTRY- JUST SELL THEM A F....G DREAM and they will be happy 😂😂😂😂😂😂
💯 We are repeating history but on a different level on purpose.
Indeed. I'm highly intrigued to see the outcome of our nation's existing multi-trillion dollar debt in the years to come, especially within the next five to ten.
@@RothToRiches debt now 35 trillion in USA, closer to hyperinflation with every billion
I'm really glad to see this time period covered on UA-cam or anywhere. This stuff happened during Generation X's childhood. No one was getting ahead. Some were falling behind faster than others. Plus, we keenly felt the loss of the Vietnam war.
I can recall the gas lines and consequences of the Vietnam War from my time as an older Gen X'er, a period that was difficult for many. The generations after me have not had to experience similar tumultuous times like we did back then, so I wonder how younger generations will handle it if another chaotic economic crisis (excluding the brief Great Recession) were to arise. Who's to say we aren't entering another era altogether, one distinct from the past?
I agree. One thing unique to them is school shootings and the drills preparing for them. I've heard that the young staffers at the Capitol on Jan 6th knew how to handle the situation.
@@RothToRiches when you consider climate change...I think the economy is going to be the least of the worries of anyone under the age of 25, heading into the future :/
@@cg9612 That didn't stop capital police from shooting an unarmed person.
In the fall of 1979, I started College in Boston. Completely paid for via a BEOG and a SEOG from the government. Tuition was $1,150 a semester. Pretty good and affordable times compared to now.
Yes, it's true that Baby Boomers had it pretty well compared to the generations that followed. The government offered great programs for college tuition back then, and living expenses were far more affordable as well. In the past, college students could work during their summers and make enough money to pay for tuition and books throughout the entire school year. Unfortunately, this is no longer a feasible option for most. It definitely was one of the best times for a lot of people.
Unconditional war on poverty. Looks like we lost that one too.
Notice, everything that got officially declared will end up fooling people around
Keep fighting my brothers and sisters. Keep effing fighting.
It was caused by incompetence at the Fed, incompetent politicians and a lack of understanding of what was going on by economists. Not sure anything much has changed to be honest.
They got rich by *printing money.*
That's not incompetence they knew exactly what they were doing.
it hasnt because capitalism by ts inherent nature is unstable and cirses and cant be fixed. its like giving medicine often- when you fix on thing you fu*k something else
It wasn't until half way through the video when it was finally mentioned that energy costs went up 4X's. in the early 70's and even more later in the decade. Could it be that this massive supply shock played a much bigger role than monetary policy?
Absolutely, you can't ignore the huge spike in energy costs in the 70s when you're looking at the economy back then. It's pretty fascinating to see how a shock to something as basic as energy can shake up the whole economy. It doesn't just bump up the prices of things; it also messes with decisions about monetary policies.
It really shows how everything in the economy is connected, like dominoes - you knock one over, and a whole bunch can follow. Understanding this complex web is key to understanding why policymakers have such a tough time during these crises.
Thanks for pointing that out; it really shows why we need to look at historical economic events from a wide angle to fully understand what they mean.
Australia is seeing or has had a huge increase in electricity and gas prices, expecting higher diesel prices to follow. Manufacturing closed and closing it all on purpose we are almost crippled
How does this gem of a video not have more views
Great job bro ❤️🙌🔥
Thanks! I'm glad you liked it. :) UA-cam's algorithm is a fickled beast, you never know when or if your video will get views ;) I appreciate your positive feedback though.
The 1970s was the decade that the big surge of baby boomers were entering the workforce. Every month, more people became work eligible, and work seeking and high unemployment was the result of the lag of the economy to absorb them into jobs. But these people WERE getting jobs, eventually, and so there was a steady growth of grocery buyers, car buyers, gas buyers, home buyers - more money chasing a (temporarily) fixed amount of goods, hence inflation.
This is literally Philips Curve theory which was disproven lol. Yes new workers demand more goods but they also produce goods to compensate.
@@andreworam2844 The issue was that young baby boomers did NOT want to work in blue collar industry, many took drugs, many moved to California so they were not increasing production
@@drscopeify As long as they're working they're increasing production.
the problem was also an increasing stagflation that eventually (amongst other things) got reagan into office
Thanks for this video. I recently became curious about this when I saw some stats about how high the inflation was during that period. I did a related search on UA-cam a couple of weeks ago, and I guess the algorithm picked that up, so, luckily, UA-cam recommended me your video this week. Thanks for explaining it so well.
You're welcome! Thanks for checking it out. I'm glad you found it useful and shared your feedback with me.
I'm continually amazed how few people know of the collapse of the 'Bretton Woods' agreement.
It's fascinating how significant historical events can sometimes fade from public consciousness! The collapse of the Bretton Woods agreement in the early 1970s changed the global economic landscape dramatically, transitioning us from fixed to floating exchange rates.
15:58 "in October 1979, the Federal Open Market Committee announced that it would target reserve growth instead of the Fed fund's rate as its policy instrument"
How did it achieve this? Quantitative tightening?
Essentially yes. This meant the Fed would focus on controlling the amount of reserves provided to the banking system, which would ultimately limit the supply of money.
Economic investigator of money and politics YOUR content is Spot on Great to see so i Started watching your very informative content
cheers Frank Melbourne Australia 🇦🇺
Thank you so much for your kind words Frank and for watching! It's always great to hear that people find it informative. I'm glad you're enjoying it! All the best. Cheers!
I wish the world got back to basing currency on precious metals, which worked great for centuries instead of faith in the American economy which created the greatest wealth gap in history between people and also between nations in just a few decades.
Indeed. Relying on fiat currency has led to a lot of problems, like inflation and economic inequality. Precious metals have historically been more reliable as a medium of exchange because their value is based on scarcity. A return to precious metal-backed currencies would be a move in the right direction.
All fiat currencies have eventually failed. Unfortunately, the current United States dollar has the characteristics of all previously failed fiat currencies.
Deserves more views! Thanks for the nice info, man!
I appreciate that! Thanks for giving it a watch.
Sounds just like what we have had since 2019, and more so since 2021, with the wrong people in charge.
It may also be worse than 1970 to 1984 due to our 31 trillion dollar debt.
More big government control always results in bad unintended consequences.
When will the voters ever lean and stop electing incompetent politicians?
Good question. I'm wondering that myself.
What makes you think the voters have a choice mike? Has anyone ever asked you who you think should run for office? Blame the people running the system not the fools who spend good time and fuel casting votes that don't count.
Our disordered voting system in this country has virtually eliminated any chance of having a public vote that is actually meaningful.
Answer: detachment of the dollar from the gold standard
On point. Since its introduction by the Tang dynasty of China in the 7th century, each and every fiat currency has met a similar fate - failure. The value of these currencies is only as strong as their issuing government's relevance; Nixon's era marked the US dollar's gradual descent into extinction, like so many others before it.
Excellent. True economic news. This is economic theory and practice. Thank you.
You are welcome!
Three things ruined America: 1) Getting off the gold standard in the 1970s. 2) Deficit spending based National Debt expansion in the 1980s and 3) The dismantling of America's industrial base in the 1990s. There ain't no quick & painless rebound from *THAT TRIPPLE WHAMMY!!*
Indeed. Withdrawing the US from the gold standard essentially opened up a world of opportunities for creating economic bubbles and controlling the money supply. By controlling the currency, developing countries gain the advantage of financial freedom and have seen a huge spike in wealth creation. Unfortunately, this has come with an unfortunate side effect: growing economic stratification that deepens gaps between classes.
@@RothToRiches The average American is still living with this mess of stagflation, but with so much more. The great postwar economy where people (on a mass scale) could get ahead was that quarter century from 1946-1972. '73 was really the end of a too-good-to-last economy for typical Americans, gone permanently. This also coincided with the endings of Look magazine in late 1971, and LIFE just a year later. These were extremely significant publications that (not officially) aimed at average Americans, but really were for all intents and purposes. The reasons were economic unsustainability, but the timing of these losses unspokenly said "it's over". They were also a force of unity in America. As divided as things got in the late '60s, it wasn't across the board on everything like today, at all, where there's no hope. America itself is now unsustainable, and is far into the disintegration process.
@@RothToRiches And generations.
If America ceases to be the world's reserve currency, we may face serious repercussions in the future.
I agree j s b , the biggest one the bumbling idiot Nixon ,for taking us off gold.
An interesting video, not sure if you agree with the view mentioned at the beginning of the video, that the crisis was due to borrowing by the US government. It seems to me it was more to do with the gold peg that made realisation of productive economic output impossible.
Great video!
Thanks!
1962 crash was similar in the S&P as the covid crash on a 3 month chart
You almost lost me at 3:35. Ken-eeshian? I suspect you are talking about the policies presented by John Maynard Keynes, which is actually pronounced "Kanes" hence "Kanesian" economics. But please, continue.....
Having lived through the 1970's and the Nixon resignation, I can tell you that part of the reason interest rates rose so high back then is because the world's investors also lost faith in the USA as a place of law and order. Nixon was allowed to walk away, get pardoned by Ford and Republicans thought everything should return back to normal but they never even consider that foreign nations would no longer buy USA debt, forcing the US Treasury to beg the Federal Reserve to raise rate, which they refused. The result was 18% mortgage rates once Volcker came aboard.
The USA is in the same exact situation right now. The world just witnessed an attempted coup in the world's largest economy and everyone involved at the highest levels has been allowed to walk away with any repercussions. The world's investors havent forgotten the 1970's like today's RepubliQans have done.
Absolutely! The 1970s was an incredibly tumultuous time for the US economy and, indeed, the world as a whole. It's shocking to see that some of the same issues are still present today. Unfortunately, it appears that unless there is real accountability and justice served, these problems will continue to exist and we may be in for another decade of instability. Here's hoping that Wall Street, Washington, and the world as a whole can come together to create lasting change this time around!
The "Unemployment rate" is not a good measure of US productivity.
We are much better off starting to measure and disclose the "work participation rate."
That rate has been going down since the lockdown lunacy of 2020 and will continue to go down until we replace the current wrong people in charge.
We sure could use another Paul Volker today.
A modern day Volker would be a nice surprise.
Wages for workers have been going down since 1980. That is corporate America and Republicans refusing to raise wages and the minimum wage at state and Federal levels. It's literally documented over the decades in Congressional votes at the state and federal levels.
The FFR should never again be lower than 3%.
The lower the rate, the bigger the economic bubble that is created.
What Volker did in 70s pre global economy IS NOW CAUSING FOOD AND ENERGY FAMINE in mush of world . Dollar rising value directly causes higher inflation globally . Srilanka, philippines, Pakistan and many others
Lots of things caused it. Runaway government spending, devaluation of the dollar. the final nail was the oil embargo, when we couldn't pay for oil imports.The only answer(at the time) was to print more money.
Indeed.
I take back my comment. I see you cited the website 😅
And everyone seems to think that all of this was coincidence.
Sounds like our governments today make this same mistake at an exponential level.. less than 1% interest rates to compensate for post 2008 economics. And nobody sees this will be a very bad inflationary problem when it comes to housing and economic stability.
Yes, it does seem like many governments chose to take the low-interest rate approach in response to the 2008 crisis. While this may be a short-term solution for some of our economic problems, we need to make sure that inflationary pressures are monitored and controlled so we don't repeat the same mistakes again in the future. Thanks for bringing up this important issue!
JPow aint no Volcker! Inflation is back baby!
Indeed!
Why did you stop posting ? :(
I know it’s been a while since I last posted, and I appreciate you asking about it. I’ve been meaning to create more videos for a while now, but as you might know, producing good-quality content takes time-way more than I’d like! Between managing a community of investors and traders on Patreon, keeping up with my own trading, and everything in between, finding that extra time for videos has been a bit of a challenge.
That being said, I do have plans to post more consistently soon. I may have to go with a bit more raw content without all the fancy edits but rest assured, the info will still be just as solid! Thanks again for your patience, and I look forward to posting more content soon!
While I have no problems in composing complex music, I'm danged if I can understand economics. The stuff in this video goes right over my head. I still cannot understand why we have inflation. The government decides what money is worth. If the government decides that an electrician's wages should be $5 an hour and that $5 buys a steak dinner or one tank of gas or 3 bags of groceries or two movie tickets and so on, if this is what $5 is worth, then I cannot see how or why these values should change. The thing that puzzles me, is where do these decisions come from? How was it ever established that one hour of electrician's work equated to one steak dinner? Why not one hour of work for 3 steak dinners, or 3 tanks of gas, and so on. Who decides the value of work versus compensation?
Inflation and how monetary policy works are complex issues. To put it succinctly, the economy is based on a combination of supply and demand with input from our government, particularly through changes administered by the Federal Reserve.
The government mandates are twofold: sustaining maximum employment and keeping prices stable, as well as long-term interest rates at a moderate rate. Stable prices and moderate long-term interest rates are deemed one mandate. The Federal Reserve set long-term interest rates with an eye to managing pricing pressure and inflation.
The value of work versus compensation is determined by the laws of supply and demand. When there is a high demand for something, like electricians, the wages increase because each hour of their work becomes more valuable. When there's a surplus in the labor market -- meaning it's easy to find electricians or any other type of worker -- then wages will drop because their service is not as sought-after. Inflation also plays a role since prices tend to rise when money has lost its purchasing power over time due to inflation. So what used to be $5 an hour may become worth less over time if inflation causes things like steak dinners, tanks of gas, and groceries to become more expensive than they were previously.
When the Federal Reserve produces more money, it leads to an increased supply of currency in circulation. As a result, this devalues each individual dollar because there is now a greater amount of cash circulating throughout society. Thus, inflationary pressures begin to rise since people can purchase fewer goods due to their reduced purchasing power. Unabated, it will quickly become a vicious cycle.
It's complicated, to say the least, but supply and demand for labor, goods and services and money help create inflation and it's the Fed's job to manage it through their interest rate policies while adhering to their dual mandates.
Hope this helps clear things up!
According to your reply, I believe you may have misread my response to the original viewer's comment. Nowhere in my response do I say the government decides wages or the price of goods. In fact, this is what I said exactly..."When the Federal Reserve produces more money, it leads to an increased supply of currency in circulation. As a result, this devalues each individual dollar because there is now a greater amount of cash circulating throughout society. Thus, inflationary pressures begin to rise since people can purchase fewer goods due to their reduced purchasing power. Unabated, it will quickly become a vicious cycle."
Is that not the same as FLOODING the economy with dollars and DILUTING its value?
In addition, wages are determined by the laws of supply and demand, amongst other factors. The pricing of goods and services is largely determined by the relationship between buyers and sellers, in addition to other influencing factors. I never suggested otherwise in my statements.
The gov't doesn't decide what a dollar is worth, you and I do, they also don't set wages or prices (for the most part) so I don't really get what you are saying. You decide what a dollar is worth every time you buy something. Prices and wages are based off supply and demand, which is why the Fed is so crap at fixing anything they can literally only increase or decrease the demand in an economy which is fickle and doesn't always react to interest rates like they think it will. If there is a surplus (too many) of something in the market the prices will fall, if there is shortages they rise which is why prices are rising across the board. Demand exceeds supply on virtually everything nowadays although I am starting to see it equalize but at a higher dollar amount.
Countries DO NOT NEED GOVERMENTS THE WAY ARE TODAY- ANY GOVERMENT SENATOR OR REPRESENTATIVE SHOULD HAVE A DIFERENT JOB AND GO TO THE CAPITOL HILL WHEN SOME LEGISLATIVE THING HAS TO BE DONE - SENATORIAL OR REPRESENTATIVES - ARE NOT A FULL PAID JOB - YOU BECOME A SENATOR OR A REPRESENTATIVE TO BRING GOOD FOR THE COUNTRY - YOUR SERVICE TO THE COUNTRY WILL BE REWARDED WITH SOME POINYS TO YOUR RETIREMENT.
Inflation is ALWAYS, ALWAYS a monetary phenomenon
Indeed, inflation is usually a monetary phenomenon that can take the form of demand-pull inflation or cost-push inflation. However, there is an exception: built-in inflation, which is the result of the increase in prices working through the production process inputs as higher prices due to increased costs of production (think commodity demand).
Invariably, when governments utilize fiat money, inflation and currency corruption rear their ugly heads.
12:00
We debased our money in 65 When we quit minting 90% silver coins. We finished the job when we quit minting the 40% Kennedy halves. FDR started it by restricting/essentially banning gold ownership in 33.
Abandoning the gold standard allowed for all kinds of financial alchemy. Had to pay for the Vietnam war also.
The shift away from the gold standard did indeed open Pandora's box in terms of financial manipulation and practices, often with complex outcomes. It's fascinating to consider how these historical decisions, such as funding the Vietnam War, have had long-lasting impacts on our economy. Thanks for sharing such an insightful observation!
2024 is the new 1907s
i migrate to Canada in 1974 but things were still affordable for the small pay regular folks were getting. but by 1987 I was selling Real estate and house prices went sky high causing market crashed. Hong Kong speculating buyers increased the problems while US manufacturing companies were moving to Mexico Brazil then soon after to China creating higher unemployment.
Indeed. Here's hoping that we don't experience a major economic reset. We never wish to be another Argentina or Zimbabwe, so I am constructively optimistic.
all 18k viewers are going to be the richest ever
Absolutely! We're not just heading to the moon, we're setting up a fancy lunar resort there. Brace yourselves for some serious inter-galactic opulence, folks! Make sure to pack your diamond-encrusted space suits and gold-plated telescopes. It's about to get ridiculously rich up in here! 🚀💎😄
Speaking seriously, investing in the US stock market for the long term typically yields favorable results.
They are all complicit, all guilty. Establishment politicians from both parties promised more to more people than could ever be delivered, whether business interests or welfare recipients. Both Republicans and Democrats are guilty. It all stunk, every bit of it.
I completely agree. Politicians of both parties have been complicit in making false promises and delivering empty results. The lack of accountability and transparency has only made matters worse, and it's up to us to change things for the better. We need real leadership that is willing to take responsibility for their actions, instead of relying on empty rhetoric or ignoring the consequences of their decisions. It's long overdue for a serious overhaul in our political process!
Don't see why Johnson is on there. He died in 72.
By the mid-1960s, it was increasingly apparent that the economy had begun overheating. Warning signs of inflation were all around due to stimulus from President Lyndon Johnson's Great Society programs, increased spending on the Vietnam War, and a tax cut in 1964; yet despite this, Johnson insisted that raising interest rates would be detrimental to his domestic agenda by slowing down economic growth.
In December 1965, the Federal Reserve increased interest rates in an effort to counteract America's rising expenditure on their involvement in the Vietnam War. Although President Johnson publicly declared a troop surge, he kept true budget calculations concealed from Congress and even the Fed. In fact, this figure was significantly higher than initially anticipated.
Johnson was the driving force behind what we now know as the Great Inflation of the 1970s, thanks to his mission of creating a 'Great Society' plan and expanding spending on the Vietnam War without alerting anyone to its true magnitude. His actions were paramount in leading to this historic inflationary period that shaped our economy today.
Therefore, he was included in this video.
@@RothToRiches I agree that paying for both "butter and guns" was a double-edged sword on and for the economy. On the upside, when Johnson left office in 1969, the country had one of the lowest unemployment rates in history and a balanced federal budget. There was even a healthy balance of trade and payments for the country in that year. Despite inflationary troubles, the 1960s had some of the strongest economic growth in American history.
I tend to lay most of the blame for "stagflation" on Federal Reserve chairman Arthur Burns and President Richard Nixon. Burns tampering with currency and interest rates combined with Nixonian price controls and "full employment budget" deficit spending turned a temporary and mild economic nuisance into a full-blown economic disaster.
@@willcardona7712Johnson’s economy started it. End of story. In fact Nixon inherited a recessions months after taking office. His balance budget was a facade and probably helped contribute as well
@@RetiredVet2020 The following is taken from the Economic Report of the President for 1970. "1969 was a year of progress in the fight against inflation. For the first time since the price spiral began, there was a sustained period of combined fiscal and monetary restraint. INSTEAD OF THE RISING DEFICITS OF EARLIER YEARS THERE WAS A SURPLUS IN 1969." The balanced budget of 1969 was very much real.
😱🇺🇲🇬🇧🇦🇺🇨🇦🇪🇺🥳🐷🤡🐒🍌🍌🍌🍌🍌🍌🍌🍌🍌🍌🍌🍌🍌🤞😒
Johnson was as stupid as he looked. Yet, he makes Biden look good. Sorta.
ISRAEL
It would seem as though the current administration has pulled off the impossible and has achieved the soft landing of lowering inflation without causing a spike in unemployment or kicking off a recession. All Americans should celebrate this because that’s the team we’re all on
Too early to make that claim.
@@edwardwelch7560 we’ll see. It’s early for sure. But all the ppl who have a stake in being right about this (investment banks and the like) in the last 6 months have gone from a recession is probable, to possible, to unlikely
How's your stance now based on recent Events? @@clayfoster8234
As the efforts to Colonize Vietnam failed, the US admitted the Treasury had little left to fight Poverty.
Once again as the US attempts to exploit Russian Resources, the expense of expanding NATO, seems to show how much that cost.
Here we are again.....
Yes, it appears that the US has a long history of attempting to expand its influence through military engagement. It is concerning to see how this strategy continues to be employed, and yet it seems the costs are always too high for both those involved in the conflict and those who bear the burden of poverty.
@@RothToRiches The US is not alone as a nation needing funds to pay the bills.
Nations all over the world report economic difficulty with Capital.