“Regarding the past, there seems to be a lot of consensus that the deficits, fed actions, oil spike, excess money printing etc. all contributed to the double digit inflation.”
The dollar’s link to gold used to discipline Congressional spending. Fed and Treasury officials would traipse up to Capitol Hill and give Congressmen a short lesson what deficit spending would do to all that gold stored in Ft Knox. Our trade partners would start draining it as fast as they could. With Nixon killing that link there were no more lectures and Congress treated deficit spending like it was done on a stolen credit card.
Nixon’s Fed Chairman Arthur Burns was... a dope. IIRC he had the Fed directly purchasing all of the new debt that Congress was authorizing.
That’s a classic recipe for devaluing the dollar. All of those Saudis who had acquired impressive western educations weren’t about to be played for suckers, so via OPEC they pushed back, driving up oil prices. They were acting rationally in response to what we were doing.
“Excess money printing” is just another name for what the Arthur Burns Fed was doing. Or what they were helping Congress do. As Congress increased the debt limit, the Fed would monetize that additional debt by directly purchasing the new bonds (the effect would be different if the Fed only bought bonds on the secondary market).
What Congress and the Fed were doing made the quantity of money in the banking system grow. When it’s growing faster than demand you can get a general price inflation and we did. Bond buyers, “bond vigilantes”, began going on strike and demanding an ever increasing inflation premium. Interest rates soared. Hard goods prices soared. About the only thing that didn’t soar was my income.
About the only thing that didn’t soar was my income.
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I hear that. I actually changed jobs twice just to get a big enough bump to stay even.
The actual decoupling from the gold standard as I understand it happened before Nixon. He just closed the window on being able to choose Gold rather than dollars.
We have certainly had our share of Central Bank woes and incompetents. Could be why so many people hate the Fed. Ha.