We saw the same economic mess in the late 1970s. Carter’s economic malaise gave birth to stagflation and an interest rate spiral that pushed lending costs to double digits. My wife and I purchased our first home in 1979 at a whopping 11.25% interest on a 30 year fixed loan. Within months interest rates on home loans were topping 15%. I remember gas prices topping $2.00 per gallon well over $4.00 in today’s dollars. Fortunately Ronald Reagan put the country back on the right economic path in the 1980s.
OPEC slowed the oil flow due to our support of Israel in the 73 war and then the Iranian Revolution.
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On October 19, 1973, immediately following President Nixon’s request for Congress to make available $2.2 billion in emergency aid to Israel for the conflict known as the Yom Kippur War, the Organization of Arab Petroleum Exporting Countries (OAPEC) instituted an oil embargo on the United States (Reich 1995). The embargo ceased U.S. oil imports from participating OAPEC nations, and began a series of production cuts that altered the world price of oil. These cuts nearly quadrupled the price of oil from $2.90 a barrel before the embargo to $11.65 a barrel in January 1974. In March 1974, amid disagreements within OAPEC on how long to continue the punishment, the embargo was officially lifted. The higher oil prices, on the other hand, remained (Merrill 2007).