[quote=EconProf]It all boils down to inflationary expectations. Back then we were looking at a hyperbolic graph of inflation that showed every sign of turning into hyperinflation. Inflation in the 1950’s probably averaged 2%. In the 60’s it steadily rose from 1-2% in the early years to about 5% by the end of the decade. The 70’s saw a steady rise to 13.5% in 1980.
By all appearances the wheels were coming off the economy. Lenders had been burned so badly they adjusted their interest rates upward, assuming the climb in inflation would continue. Homeowners with fixed rate mortgages benefited throughout the 1970s, especially toward the end of the decade, as their values rose and monthly payments stayed constant. Gold hit $800.
It took newly appointed Fed Chairman Paul Volcker to end it all. He took the punch bowl away with a tight monetary policy that threw the economy into a deep recession that tamed inflation and lowered inflationary expectations of all parties.[/quote]
…None of which anyone is willing to do these days….Things are gonna end badly for this country, ain’t it?
