Biden's rerun of the Carter era

 Washington Examiner:

The last time prices were increasing this quickly was in 1981 when Ronald Reagan was president, interest rates were near record highs, and the United States was embroiled in the Cold War.

The country has changed significantly since the Great Inflation of the 1970s and 1980s, and today's inflationary bout is much different — but there are some similarities between now and 1981, the last time inflation hit 8.5%.

The inflation more than four decades ago was much more severe than it is now. Inflation peaked in the spring of 1980 at a jaw-dropping 14.8% and subsequently began declining.

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“This thing is similar in the sense that they have let inflation get out of control, but they [are] dealing with it at a much earlier stage than they dealt with it in 1979,” Lachman told the Washington Examiner about the U.S. response to current inflationary pressures.

In 1979, President Jimmy Carter appointed Paul Volcker to lead the Fed. In order to tame the excruciatingly high inflation, Volcker acted decisively and with a heavy hand, aggressively jacking interest rates up until they crested at more than 19% in 1981.

The economy had a hard landing as a result of the sky-high interest rates.

Now, Fed officials say they are working to raise interest rates and shrink the central bank's balance sheet to slow spending and limit inflation.

Lachman, though, said the Fed should have learned the lessons of the Great Inflation better and moved more quickly to tighten monetary policy.

Indeed, throughout most of 2021, while inflation was inching up, Fed Chairman Jerome Powell consistently messaged that the growing prices were merely “transitory” and that inflation would naturally tamp back down as the economy improved. That did not occur, and by the end of last year, Powell and other Fed officials acknowledged they were dropping the label from their assessments of the situation.

The causes of the Great Inflation are varied, but one was the Iranian hostage crisis and subsequent oil shock.

After the Iranian Revolution in 1979, Carter announced that the U.S. was halting all incoming shipments of Iranian oil, nearly 10% of U.S. imports, to drive home the point that Iran’s oil would not be a consideration in freeing the hostages. In a parallel move, Iran also announced an oil boycott for shipments to the U.S.

Further fueling the energy crisis was the war between Iran and Iraq that ignited in 1980. Oil production from both major exporters dropped precipitously and further contributed to the global supply shock.

Similarly, today, supply chain snarls created by the pandemic have combined with the war in Ukraine to raise energy prices, which have soared about a third over the past year.

Ultimately, the Great Inflation and today's inflation are attributable to excess demand created by excess government spending and too-loose monetary policy. But supply-side disruptions are more of a factor in rising prices today, said Brian Marks, executive director of the University of New Haven's Entrepreneurship and Innovation Program.

“The prevalence of the supply-side component is more dramatic today than it was back then,” he told the Washington Examiner.

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The biggest difference in my view is that Biden is responsible for the increase in the price of gas.  He did it on purpose to push the Green New Deal and many in his administration laughed at the pain at the pump they created.  While carter had to deal with the cut off of Iranian oil and other Middle East trauma, Biden's cut off of Russian fuel would never have been necessary had it not limited US production.  Biden was also responsible for the big spending programs that drove up inflation.