Inflation now versus 1960s/1970s experience
US inflation today is the worst since that of the late-1960s and 1970s, but the current experience differs from that previous period in important respects. Unlike 55 years ago, the current inflation has emerged without any true boom in US growth. Similarly, real wages and real incomes are declining, something not seen in the 1960s when inflation took off then. Also, there appears to have been more disparity in price increases across goods and services sectors recently than was the case in the 1960s or 1970s, an indication of the monetary nature of 1960s’ inflation versus the supply-constraint-driven nature of the current experience.
- The present inflation experience differs from that of the late-1960s and 1970s in important respects.
- Then, inflation emerged after more than five years of fast growth and sharply lower unemployment than previously. Now, inflation has emerged after one year of economic growth that failed to offset declines inflicted by COVID-19 and despite an unemployment rate higher than previously.
- Current inflation gives workers and merchants cause for complaint in a way that its 1960s predecessor did not, inflicting declines in real incomes that were not seen in the late- 1960s or early-1970s.
- There has been more disparity recently between goods and services price increases than was the case in the 1960s and 1970s—an indication of the monetary nature of the 1960s inflation versus the supply-constraint-driven nature of the current experience.
- Presently, after a hugely less buoyant recovery than the 1960s and with higher prices inflicting pain, prices will be under intense, downward pressure. With monetary tightening piling on as well, those effects will be even more intense.
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