flâneur

This Ain’t Your Daddy’s Inflation Part Three

profstevekeen.substack.com · 1,213 words · saved by 1 readers

The Volcker recession of 1981-82 crushed inflation out of the economy, and presented economists with a new challenge: rather than high and rising inflation, their new dilemma was low and falling inflation.Building a New Economics is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

The Volcker recession of 1981-82 crushed inflation out of the economy, and presented economists with a new challenge: rather than high and rising inflation, their new dilemma was low and falling inflation. This was a dilemma they were happy to have, and in fact, they took credit for it. They eventually labelled this period of not merely low inflation, but also (for a time) falling levels of unemployment—see the bottom chart in Figure 1—as the "Great Moderation". Volcker's successor from 2006 till 2014, Ben Bernanke, waxed lyrical in October 2004 that: The sources of the Great Moderation…

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