Anybody with a passing familiarity with U.S. political history is aware of the one brief moment monetary policy became a huge national preoccupation: the presidential election of 1896, when Democrats under William Jennings Bryan broke from the bipartisan “hard money” policies insisted on by Grover Cleveland and stood frankly for a mild inflation of a deflated currency via “free coinage of silver,” a quasi-religious cause for debt-strapped farmers and the urban unemployed alike. Bryan lost, and “bimetallism” soon lost its political salience thanks in no small part to new gold discoveries that boosted money supplies even under a gold standard.
But as Paul Krugman points out today, we’ve had more recent experience with the debate over inflation and deflation, and learned anew that there are distinctive class biases at work in allegedly technocratic monetary policy positions:
Throughout the recent debate over monetary policy there have been apocalyptic warnings about Zimbabwe/Weimar and all that, but also constant invocations of the 1970s. My side of the debate has made a point of explaining why this situation is nothing like the 70s. But ask a different question: how did the 70s get framed as the ultimate bad time? For sure they weren’t good — but the really bad times for ordinary working families were the big recessions, which took place under Reagan, to some extent under Bush I, and above all after the financial crisis….
Think about how weird it is…for people in 2010 or 2011, amid the wreckage, to be saying “Watch out — if we’re not careful this could turn into the seventies!” (cue ominous soundtrack).
But there were some people for whom the 70s really were the worst of times — namely, owners of financial assets.
In other words, how much inflation is considered intolerable remains a question of whose ox gets gored.
The irony, of course, is that to the extent the inflation of the 1970s was the product of deliberate government policy (as opposed to the global spiking of oil prices at a time our economy was much more sensitive to energy costs), it was largely the work of Richard M. Nixon, who ordered fiscal stimulus on the heels of wage and price controls to boost his prospects for re-election in 1972. But Krugman’s right: even taking into account the recession that began during Nixon’s second term, the 70s were pretty good times for most Americans as opposed to the latter stages of the Great Recession in which unemployment remained high and wages stagnated even though profits were skyrocketing and happy days returned for the 1%.