The Marginal Revolution Podcast 1970s Inflation: The Economic Fever That Changed America
Sep 20, 2024
Explore the ins and outs of 1970s inflation, a period marked by economic chaos and political shifts. Delve into the debates around Keynesian policies and the collapse of the gold standard. Discover how the Federal Reserve's independence shaped inflation control while facing energy shocks and global competition. Examining the cultural backdrop adds depth to the economic discussion, drawing intriguing parallels to today's inflationary landscape. Expect lively critiques and thought-provoking insights into how past policies inform current financial challenges.
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Keynesian Influence on Fiscal Policy
- The Keynesian idea of deficit spending to combat recessions influenced the Kennedy-Johnson tax cuts.
- These tax cuts marked a shift from the traditional balanced budget approach in U.S. fiscal policy.
Political Manipulation of Keynesian Economics
- Politicians embraced Keynesian economics to justify spending increases and tax cuts for economic stimulus.
- However, they often neglected the Keynesian principle of raising taxes and cutting spending during economic booms.
Bretton Woods and Inflation
- The collapse of Bretton Woods contributed to inflation by transitioning from a gold-backed dollar to a fiat currency.
- This shift was necessary to supply more liquidity to the global economy, with T-bills serving as a form of dollars.