When Inflation Was the Fear

I recently had the pleasure of attending a book-signing event at Politics & Prose, a bookstore in Washington, where my friend Bob Samuelson was selling and signing his new work, “The Great Inflation and its Aftermath: The Past and Future of American Affluence.”All of us who read Bob’s columns in The Washington Post and Newsweek know him to be a prescient observer of the economic scene, and rarely if ever have his prescient observations been more needed than today. Bob took us on a journey back in time to the 60s and 70s when inflation ran riot, undermining everyone’s faith in the future. There really was something creepy about watching your money lose value year after year, but most of us have forgotten those times.

It was a deadly cycle fostered by big labor in concert with big business with their open-ended contracts that guaranteed steadily rising wages for labor and prices for products. The political class was committed to full employment and thus resisted efforts to squeeze inflation out of the system. Public opinion polls showed people were more concerned about inflation than the Vietnam War or the Iranian hostage crisis.

Along came Fed Chairman Paul Volcker determined to squeeze inflation out of the system and President Ronald Reagan who, Samuelson contends, was the only political leader of either party with the fortitude to support the Fed through that tough passage. Inflation, unemployment and interest rates were in double digits. The people were in distress and the politicians were beside themselves.

But we saw it through and got inflation under control, setting off a generation of steady economic growth interrupted by a few brief, shallow recessions. Until now, that is. Now we’re into truly unfamiliar territory.

Bob says he does not foresee another Great Depression, but he does see two similarities between the 1930s and today. One, no one knew what was going on back then and no one knows now. Two, there was no single nation willing and able to assume the leadership then or now to needed to wring order out of chaos.

It’s a good book. I recommend it.

(Editor’s note: Samuelson wrote a Washington Post column touching on the book’s themes in June, “Return of Inflation?“)

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