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“Fifty years ago, the U.S. economy was plagued with stagflation—a stubborn combination of low growth, high unemployment, and elevated inflation. It was a true shock driven by oil embargoes in the Middle East: Gas prices tripled, inflation hit 14%, and unemployment soared toward 9%.”
“While the prospect of galloping, 1970s-style inflation remains low, today’s rising prices are troubling to the younger generations of Americans who were reared on the low inflation and interest rates of the ‘90s and 2000s. When combined with a predicted slowing of the economy and a softening labor market, today’s economy has the makings of what I call 'stagflation lite.'”
Yes. The term Stagflation gets tossed around indiscriminately today. While 3-6% inflation (depending who you listen to or believe) is nothing to sneeze at, it is nothing like the double-digit inflation of the late 70s. And there was slow growth in addition. In the 3 years from ‘78 thru ‘80 annual inflation was running between 9 and 13.3%. And in the 4th year (‘81) it was still elevated at 8.9%. Volker did a “job” and inflation was curbed at the expense of a severe recession.
I hope we never have to experience the Stagflation of the 70s again! Since I was a teenager then, I didn't pay too much attention to the economy. Although I didn't own a vehicle, I do recall the gas rationing of the early 70s.
Our economic situation appears to be much different than that of the 70s. Many people/institutions warning about future Stagflation¹ imply inflation may be 3%-5% with slow growth (but not no growth). Frankly, no one really knows exactly what will transpire. It may be prudent to keep expectations in check although recent market activity seems to contradict this thought!
¹ Perhaps someone could coin a better term for this prognosis?
At Observant and Hank. The discussion about the era of stagflation reminds me just how personal history and economics can be. During that time my wife and I had a couple rentals that were increasing in value and had positive cash flows. we had no kids, no stocks or bonds and no responsibilities. Given the high interest paid on cash we were able to live on our boat in the sea of Cortez on the cheap and our net worth was increasing. Our only worries were the weather and the mechanical state of our boat. No marinas, no hotels, no cars. In retrospect those were the best of times for us and Inflation and high interest rates made it possible that we returned in better shape than when we left. Life became much different for us when we returned to life and land.
I was just starting out in a career in secondary education. My second year into it (1970) I landed a great job in a rapidly growing Detroit suburban system. Being on the second salary tier (based on experience) I earned whopping $7,200 for a year’s work, which seemed like an enormous sum of money then. The most memorable aspect of inflation was walking into grocery stores on the way home from work during the 70s and seeing one or two workers in every aisle marking up the individual prices on products - from jars of pickles to bars or soap. Everything was jumping in price from week to week. It was a full-time job, and back before bar code scanners were in use. The checkout clerk needed to punch in the actual product price after looking at an item. How “lame” that seems today!
What many today overlook, I think, is the compounding effect of inflation. So after 5 years of 7.5% annual inflation things aren’t 7.5% higher. They’re closer to 40% higher than they were at the start of the period.
At Hank. In 1970 I was a substitute teacher in the (not) suburban Detroit schools. $ 37.50 per diem. Food seemed expensive but gas was cheap.
Yep. That’s about what I remember. Hardly worth the pain ISTM.
Don’t remember gas prices very well. But as a kid working at a filling station in the 60s for $1.50 per hour I recall prices in the 30-35 cent range - and that included whatever taxes were imposed.
Perhaps little known - - Regan / Volker are often given credit for slaying the inflation dragon. But it was actually Regan’s (defeated) predecessor Jimmy Carter who appointed Volker as Fed Chair.
hank: What many today overlook, I think, is the compounding effect of inflation. So after 5 years of 7.5% annual inflation things aren’t 7.5% higher. They’re closer to 40% higher than they were at the start of the period.
FD: I can't find 40% in the last 5 years, but I see 25-26%. From 01/2020 to 01/2024 = Biden 4 years. I see about a 23% CPI increase. The fastest 4 years since 1990.
Since 01/2025, we have seen hundreds of predictions, mainly by (dem) economists, about inflation, stagflation, recession, depression, and other horrific stuff within 6-12 months. This means 01/2026.
Can you take these seriously? I don't. Don't worry, I will be around in 01/2026 to report about it.
FD a Troll? Yes. in this instance he is. There was nothing political in my hypothetical 7.5% annual inflation example. I chose the number randomly to illustrate the math involved. I don’t think inflation is limited to any political party. To ascribe such is a gross misrepresentation.
Going from (1970s) memory … Inflation began ticking higher under Johnson (a Democrat), worsened significantly under Nixon (a Republican), worsened further under Ford (a Republican), peaked under Carter (a Democrat) and began subsiding under Regan (a Republican) - although it was Carter (a Democrat) who appointed Paul Volker to be Fed Chair. It had gotten so bad under Ford that he and wife Betty developed and actively promoted the slogan: WIN.
I’m not even opposed to inflation in moderation. A small amount may be beneficial to economies. When the assets I own through stocks, etfs, CEFs, OEFs, collectibles or real estate inflate in dollar value I am happy.
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Since I was a teenager then, I didn't pay too much attention to the economy.
Although I didn't own a vehicle, I do recall the gas rationing of the early 70s.
Our economic situation appears to be much different than that of the 70s.
Many people/institutions warning about future Stagflation¹ imply inflation
may be 3%-5% with slow growth (but not no growth).
Frankly, no one really knows exactly what will transpire.
It may be prudent to keep expectations in check although recent market activity
seems to contradict this thought!
¹ Perhaps someone could coin a better term for this prognosis?
What many today overlook, I think, is the compounding effect of inflation. So after 5 years of 7.5% annual inflation things aren’t 7.5% higher. They’re closer to 40% higher than they were at the start of the period.
Don’t remember gas prices very well. But as a kid working at a filling station in the 60s for $1.50 per hour I recall prices in the 30-35 cent range - and that included whatever taxes were imposed.
Perhaps little known - - Regan / Volker are often given credit for slaying the inflation dragon. But it was actually Regan’s (defeated) predecessor Jimmy Carter who appointed Volker as Fed Chair.
From 01/2020 to 01/2024 = Biden 4 years. I see about a 23% CPI increase. The fastest 4 years since 1990.
See the CPI at
https://tradingeconomics.com/united-states/consumer-price-index-cpi
=========================
Since 01/2025, we have seen hundreds of predictions, mainly by (dem) economists, about inflation, stagflation, recession, depression, and other horrific stuff within 6-12 months.
This means 01/2026.
Can you take these seriously? I don't.
Don't worry, I will be around in 01/2026 to report about it.
Going from (1970s) memory … Inflation began ticking higher under Johnson (a Democrat), worsened significantly under Nixon (a Republican), worsened further under Ford (a Republican), peaked under Carter (a Democrat) and began subsiding under Regan (a Republican) - although it was Carter (a Democrat) who appointed Paul Volker to be Fed Chair. It had gotten so bad under Ford that he and wife Betty developed and actively promoted the slogan: WIN.
I’m not even opposed to inflation in moderation. A small amount may be beneficial to economies. When the assets I own through stocks, etfs, CEFs, OEFs, collectibles or real estate inflate in dollar value I am happy.