Many of today’s market participants did not have to endure the inflation of the 1970s through early 1980s. Revisiting that era is useful, as for first time in many months, the Federal Reserve Open Market Committee (FOMC) gave an indication of when it might consider changing credit policy.
Much has been written about the 1970-1980 period and what caused the highest inflation rate in more than 100 years. Accounts of the period make it clear that a combination of factors, including government mistakes, led to debilitating price increases that eventually would require severe measures to reverse. The fact that governmental mistakes in the 1970s contributed to the runaway inflation of the period is what worries some investors now, as the Federal Reserve maintains an aggressively accommodative credit policy.