Stagflation Volcker and Friedman Essay

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-What factors contributed to the stagflation of the 1970s?

Stagflation is the combination of high inflation plus high unemployment plus slow economic growth, all of which occurred in the 1970s. Monetary policy was loose, the dollar supply was going up faster than the economy was, and inflation was the result (Philadelphia Fed, 2015).

-How did Volker deal with the high inflation?

He raised the federal funds rate.

-Did high oil prices cause the stagflation or was it something else?

No, what caused stagflation was a combination of factors, as already stated: when the central bank’s printing presses start rolling, the value of the dollar goes down, and the price of everything goes up. However, loose monetary policy simply blows asset bubbles—it doesn’t actually fix the economy or reduce unemployment. High oil prices were more a combination of geopolitics and Nixon’s abandonment of the gold standard.

-Is the Fed independent? If so, how do our leaders ensure they maintain the best interests of the public?

The Fed is independent but does report to the Congress, which is how our leaders supposedly ensure that the Fed maintains the best interest of the public—but these reports are really a lark: the Fed serves the interests of the banking cartel.

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Its record of blowing asset bubbles speaks for itself.

-How does Milton Friedman establish his view that inflation is a monetary issue?

He notes that there has never in history been an episode of inflation that has not been accompanied by an extremely rapid increase in the quantity of money: the more money that is made available, the less value it has and less purchasing power it maintains (and thus the price of everything goes up—as the CPI and money quantity chart shows) (StatelessLiberty, 2013).

-According to Friedman, do trade unions cause inflation by pushing up wages and the cost of production?

No, the quantity of money is what causes inflation. Trade unions are simply trying to compensate for the rise in CPI (StatelessLiberty, 2013).
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