Financial Times/John Plender/9-27-2022
“Yet while the current threat of stagflation rhymes with the 1970s, the wider economic and financial context when Federal Reserve chair Paul Volcker started tightening policy in 1979 differed notably from today. Inflation was much higher and the advanced economies looked very different. It is important, then, to ponder the likely new mistakes of the 2020s.”
USAGOLD note: Plender offers important insights on the differences between the economy Paul Volcker confronted in the early 1980s and the economy now. In the pile of reference material now available on that era, the one compelling difference is that the world was coming off a decade of runaway inflation. The current inflation is a little more than a year old and the level of debt, by any measure, is substantially larger. In short, the Fed must consider an incredibly shaky and volatile credit market in its deliberations along with the possibility of runaway inflation. As the British government has discovered over the past several days, no matter which way policymakers turn, there will be consequences.