Inflation ‘Policy errors of the 1970s resonate in our time,’ warns Financial Times columnist

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The Financial Times on Tuesday published an op-ed warning that the world economy was in the grip of inflation, inflation and recession, with “hints of the 1970s.”

The article, titled “Policy Errors of the 1970s Resonate in Our Time,” compared America and today’s world to the economic ills that beset that disorderly decade, with the added caveat that “huge debts to the world economy” made the end trickier than 40 years ago.”

,unexpectedly high inflationWars in key commodity-producing sectors, falling real wages, slowing economic growth, fears of monetary tightening and turbulence in stock markets – these are all things we are seeing in today’s global economy,” wrote FT economic commentator Martin Wolf.

“These were also key features of the world economy in the 1970s,” he said.

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President Biden addresses inflation and supply chain issues at the Port of Los Angeles on Friday, June 10, 2022 in Los Angeles. ((AP Photo/Damien Dovergens))

“This period ended in the early 1980s with a brutal tightening of monetary policy in the US, a sharp fall in inflation and a wave of debt crises in developing countries, particularly in Latin America,” Wolf continued.

He said this period of crisis was followed by turbulence in the global economy. “Great changes in economic policy also followed: traditional Keynesian economics were buried, labor markets were liberalized, state-owned companies were privatized, and economies were opened up to business.”

Some have speculated that the economic woes of our time might similarly reshape the global economy. supply chain disruption And rising geopolitical tensions between the US and China could lead to more domestic production. Similarly, US and European dependence on foreign actors such as Russia for oil is being questioned given the national security risks involved.

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U.S. President Joe Biden (c) meets with Federal Reserve Chair Jerome Powell and Treasury Secretary Janet Yellen in the Oval Office of the White House on May 31, 2022 in Washington, DC. The trio met to discuss the Biden administration’s plan to combat record high inflation. (Photo by Kevin Diets/Getty Images)

Wolf wondered, “How big are the similarities, especially in the 1970s? What are the differences? And what can we learn from these mistakes?” he said Countries Risk “Inflation” If no appropriate policy measures are taken.

Wolf wrote: “Is what we are seeing already stagflation – defined as a long period of higher-than-expected inflation and lower-than-expected growth? The answer is “not yet”. But it is a risk.”

“Inflation is well above target almost everywhere,” he wrote.

“The echoes of the 1970s are then louder: higher-than-expected inflation, large shocks and weak growth.” Wolf also argued that even so, “the differences are also encouraging.”

In this September 30, 2021 file photo, Federal Reserve Chairman Jerome Powell testifies during a hearing of the House Financial Services Committee on Capitol Hill in Washington. Tangled supply chains and shortages have plagued the US economy since this summer, Powell says, and inflation is likely to rise well into next year. (Sarah Silbiger/Pool photo via AP, FILE)

Amidst these disparities, Wolf noted that oil prices have risen significantly in modern times, but the rise is less than in 1973 and 1981.

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However, there is a huge gap that will leave countries worse off in the coming years, he said, adding that “an obvious danger arises in a case where the global economy looks more fragile than it did 40 years ago: the size of debt, especially stocks denominated in foreign currencies.”

Wolf also pointed out that risks remain in the global economy, such as B. Russia cutting off oil for the United States and Europe. “Russia could also cut gas exports to Europe, which could lead to further unrest.”

Joe Silverstein is a production assistant at Fox News Digital.

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