TY  - JOUR
AU  - De Long, J. Bradford
TI  - America's Only Peacetime Inflation: The 1970s
JF  - National Bureau of Economic Research Historical Working Paper Series
VL  - No. 84
PY  - 1996
Y2  - May 1996
DO  - 10.3386/h0084
UR  - http://www.nber.org/papers/h0084
L1  - http://www.nber.org/papers/h0084.pdf
N1  - Author contact info:
J. Bradford DeLong
Department of Economics
601 Evans Hall
University of California, Berkeley
Berkeley, CA 94720-3880
Tel: 510/643-4027
Fax: 510/642-6615
E-Mail: delong@econ.berkeley.edu
M1  - published as J. Bradford DeLong. "America's Peacetime Inflation: The 1970s," in Christina D. Romer and David H. Romer, Editors, "Reducing Inflation: Motivation and Strategy" University of Chicago Press (1997)

AB  - The 1970s were America's only peacetime inflation, as uncertainty about prices made every business decision a speculation on monetary policy.  In magnitude, the total rise in the price level from the spurt in inflation to the five-to-ten percent per year range in the 1970s was as large as the jumps in prices from the major wars of this century. The truest cause of the 1970s inflation was the shadow of the Great Depression.  The memory left by the Depression predisposed the left and center to think that any unemployment was too much, and eliminated any mandate the Federal Reserve might have had for controlling inflation by risking unemployment. The Federal Reserve gained, or regained, its mandate to control inflation at the risk of unemployment during the 1970s as discontent built over that decade's inflation.  It is hard to see how the Federal Reserve could have acquired such a mandate without an unpleasant lesson like the inflation of the 1970s. Thus the memory of the Great Depression meant that the U.S. was highly likely to suffer an inflation like the 1970s in the post-World War II period þ maybe not as long, and maybe not in that particular decade, but nevertheless an inflation of recognizably the same genus.
ER  -