question for US posters adults in the 1970s

[BH]

Hi everyone

i have a question. i was a small child when Ford and Carter were president back in the 70s. i know inflation was bad then. my question is this. Did prices eventually go down again or did people have to wait till their wages increased somewhat to not feel a pinch from prices. thanks.

 

[laughing dog]

Hi everyone

i have a question. i was a small child when Ford and Carter were president back in the 70s. i know inflation was bad then. my question is this. Did prices eventually go down again or did people have to wait till their wages increased somewhat to not feel a pinch from prices. thanks.

As a whole, prices did not fall - there was no deflation. Of course, prices of some items fell and some rose.

Just a reminder that inflation is the positive rate of change in the price level, while deflation is the negative rate of change in the price level. When a period of inflation ends, the price level is higher than when it began. For example, suppose the CPI = 100 and there is 20% inflation for a year, followed by 0 zero inflation. After inflation ends, the price level is 120 and stays there.

 

[pood]

The inflation of the 70s was caused by a number of factors, starting when LBJ decided to fight the Vietnam War while also implementing the Great Society without raising taxes to pay for them. Nixon’s opportunistic solution to inflation was to impose wage/price controls in 1972, not because it was an economically valid solution to inflation, but because he wanted to freeze prices to insure his re-election. After removed the controls early in 1973, inflation immediately skyrocketed, as would be expected, and in addition to that the OPEC oil embargo caused yet more inflation and an energy crisis and long car lines at gas stations. We entered a period called stagflation, unprecedented, in that there was high inflation and low growth. Low growth is usually associated with deflation, as during the Great Depression.

Ford decided to fight inflation by handing out WIN buttons, standing for “Whip Inflation Now.” But then, as LBJ once pointed out, Ford was so dumb he couldn’t fart and chew gum at the same time. Stagflation, along with the Nixon pardon, cost Ford his election in the race against Carter. Carter, too, couldn’t get inflation down, and I believe it was around 13 percent annually when he lost to Reagan in 1980. Of course, presidents have no control over the price of eggs or anything else, but our dumb electorate does not know that so they punished Harris this year for an inflation rate that was way below what it was in the 70s.

Regan adopted policies to end inflation by plunging the nation into a deep recession in the early 80s. At the time, throwing millions of people out of work by adopting these policies was deeply unpopular, and Reagan’s approval ratings through much of his first term were at low, Carter-like levels. But by that time the oil embargo had been lifted and in addition, the U.S. discovered vast new domestic oil reserves and by 1984 the economy was making a full recovery. Reagan got the credit for it, even though he had nothing to do with the recovery but everything to do with starting the recession. Since Americans can’t remember yesterday much less what happened a few years ago, they re-elected Reagan resoundingly, even though in addition to being an economic disaster he was already showing signs of senility as evidence by his first, disastrous debate with Mondale.

 

[TomC]

Hi everyone

i have a question. i was a small child when Ford and Carter were president back in the 70s. i know inflation was bad then. my question is this. Did prices eventually go down again or did people have to wait till their wages increased somewhat to not feel a pinch from prices. thanks.

It's more complicated than that.
I was in my teens during the 70s.

The big problem at the time was "stagflation". Consumer prices were skyrocketing, over 15%/year. But wages were not going up.

Stagflation was a combination of stagnant wages and consumer inflation. Ergo "stagflation".
There were multiple reasons for this. The two biggest, IMHO, were the influx of women into the workforce. That kept wages down. And the increase in energy costs. That caused price increases.
Those weren't the only ones, there were lots of others . But those were two biggies.
Tom

 

[pood]

The recent inflation, not nearly as bad as the 70s inflation, was caused by economic dislocations from the Covid pandemic, which was bungled by our once and future Orange Turd and led to the needless deaths of hundreds of thousands of people. Naturally, the Orange Turd has been rewarded by the electorate for all the terrible harms he caused.

 

[pood]

Keep in mind of course that there is always inflation, but in stable economies rising income roughly keeps pace with rising prices. And in fact studies have shown that groceries are now actually more affordable than they were in 2019, but most Americans can’t remember that far back. It’s ancient history to them, like when Lincoln presided over World War II, as one famous poll at one time found most students believed.

 

[pood]

Most Americans can’t even remember most of our presidents. For example, as of 2009, only 48% of college students knew who Nixon was. He had left office only 35 years earlier.

 

[bilby]

The recent inflation, not nearly as bad as the 70s inflation, was caused by economic dislocations from the Covid pandemic

...and by increasing energy costs, due to Russia's invasion of Ukraine, and to increasing instability in the Middle East.

Energy costs are a huge driver of retail price inflation. In the '70s it was mostly oil; Today it's both gas and oil.

The world needs to stop relying on fossil fuels from shithole countries, like Russia, Iran, and Texas.

 

[pood]

Yes the Russian invasion as well.

Nuclear power would solve energy-supply problems as well as greatly mitigate climate change. Therefore, we won’t do it.

 

[pood]

I wish I could be around 100 years from now to find out how historians of that era will explain us. Assuming there will be future historians.

 

[Elixir]

Hi everyone

i have a question. i was a small child when Ford and Carter were president back in the 70s. i know inflation was bad then. my question is this. Did prices eventually go down again or did people have to wait till their wages increased somewhat to not feel a pinch from prices. thanks.

Prices don’t go down over any significant period of time. If they did, you’d hear financial wizards recommending hoarding cash.
Wages increased at about 6% annually in the early 70s. I bought my first real estate in 1972, and paid 7% on the loan from the previous owner. That seemed cheap. Average inflation through the decade was 6.8%, but iirc it peaked at about 14% around 1980. Wages never kept pace, then or since. That’s why we don’t have a thriving middle class any more.

 

[Gospel]

I wish I could be around 100 years from now to find out how historians of that era will explain us. Assuming there will be future historians.

The exhaust fumes of the industrial age. A time when the consequences of decades of rapid industrialization, consumerism, and environmental disregard have come to a head, sprinkled with social tensions over abortion rights, gender identity, and lots of fucking guns.

 

[ZiprHead]

In before spendapalooza gets mentioned.

The real story of inflation - Pandemic-era stimulus isn’t the culprit.

Inflation turned out to be a defining issue of the 2024 election, but the common story about its cause — covid-era stimulus — is more wrong than right. We should not learn a mistaken lesson.

The culprit is often identified as the American Rescue Plan, a $2 trillion stimulus package enacted in March 2021, which followed other relief packages provided in 2020. According to this theory, the government may have meant well, but it put too much money into people’s pockets, drove up demand and unleashed inflation.

This story is intuitively appealing, and it is no surprise it became a popular narrative with the media. The weight of the evidence, however, suggests that the package had only a modest impact on the path of inflation.

The central cause was the pandemic itself — and the nearly unprecedented supply-side shock it caused, which extended beyond the crisis itself.

Along with Robin Brooks of Brookings and William Murdock of Lazard, I have parsed a variety of economic data through the arc of the pandemic, including a commonly used measure of demand, supply indicators such as delivery times, and a proxy for how firms manage their inventories.

The results show that supply-chain variables directly accounted for 79 percent of the rise in underlying inflation in 2021. These effects then continued into 2022, with ongoing supply issues directly explaining 60 percent of the rise in inflation that year. The rest was more than accounted for by spillovers from the 2021 supply-driven inflation. All of which leaves only a modest role for demand-driven effects like the covid relief package.