The Great Inflation

The Great Inflation, which lasted from 1965 to 1982, was a period of economic turmoil that led to major changes in macroeconomic theory and policies of central banks. While there is debate about the factors that caused inflation, it is widely agreed that the policies of the Federal Reserve, particularly the excessive growth of the money supply, were a major contributor. The collapse of the Bretton Woods system and the energy crises of the 1970s further exacerbated the inflation problem. Policymakers at the time underestimated the inflationary effects of their policies and were misguided by the belief in a stable trade-off between unemployment and inflation. The era of stagflation, with high inflation and high unemployment, ultimately led to a shift in policy towards controlling inflation. Paul Volcker, who became chairman of the Federal Reserve in 1979, implemented tighter control over the money supply and successfully brought down inflation. The lessons learned from the Great Inflation have since shaped modern macroeconomic theory and the policies of central banks.

https://www.federalreservehistory.org/essays/great-inflation

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