The History of Stagflation in the 1970s
Stagflation is stagnation plus inflation: normally you would expect the two to move in opposite directions.
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1.What is stagflation?
Stagflation is stagnation plus inflation: normally you would expect the two to move in opposite directions.
2.What did many economists believe in the 1960s about inflation and unemployment?
Phelps and Friedman doubted it would last; in the Fed's words, the stable trade-off proved unstable.
3.What happened in the summer of 1971?
The dollar's last link to gold was cut; the Fed history calls the dollar completely unanchored, and wage and price controls began.
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Sources (3)
- The Great Inflation (Federal Reserve History) (Federal Reserve Bank / Board of Governors, federalreservehistory.org)
- Oil Shock of 1973-74 (Federal Reserve History) (Federal Reserve Bank / Board of Governors, federalreservehistory.org)
- US Business Cycle Expansions and Contractions (National Bureau of Economic Research (NBER))
Education only. Not financial advice.