On today’s show we’re taking a deep look at the 1970’s inflation narrative and seeing if there are any history lessons for us.
This past weekend, Treasury Secretary and former Federal Reserve Chair Janet Yellen was on PBS Face The Nation.
The discussion centered around inflation.
Back in the 1970’s the politicians blamed the consumer for inflation. Politicians blamed union leaders for demanding higher pay. The White House blamed the middle eastern nations for holding back oil. In fact, the OPEC nations didn’t want to be paid in Monopoly Money. They were used to being paid in a gold backed currency. They trusted the US dollar. But when Nixon took the dollar off the gold standard and started the slippery slope of printing more money than could be accounted for, the OPEC nations quite rightly concluded that they were being cheated by being paid in a devaluing currency. We now know that the inflation was not the fault of OPEC, or the unions, or greedy businesses. It was the result of grave mistakes that were made in central bank monetary policy. That was the cause then, and it’s exactly the same cause today.