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I've always found it baffling that 70s inflation was somehow magically blamed on progressive policy and pay rises and not on a far more obvious cause - oil pric
by TheOtherHobbes 5y ago
I've always found it baffling that 70s inflation was somehow magically blamed on progressive policy and pay rises and not on a far more obvious cause - oil price shocks.
In the 1973/4 crisis the price of crude quadrupled.
In the 1979 crisis it more than doubled.
On both occasions the price hikes were combined with physical shortages which did huge damage to economies which were - and largely still are - dependent on oil for everything from transport to energy to plastics to food production.
And yet... these economic cataclysms have been almost sidelined from the official economic narrative in both the UK and the US.
Ask a typical British voter about the history of the 70s and they'll tell you the UK was bankrupt because of excessive government spending, and not because the price of crude went through the roof.
It's one of the reasons I consider economics a branch of propaganda and not a real science. Clearly the oil shocks were an economic catastrophe and were directly responsible for very severe inflation. But somehow the effects are still blamed on wage growth and (in the UK) unionisation - both of which were far more credibly an effect than a primary cause.
- bambataa 5y agoRather than economics itself being a tool of propaganda (which might be true but I think most economists would say they strive to be evidence-based), I think it demonstrates that the average voter’s views on economics are more or less worthless.
- cogman10 5y agoEconomics is so closely tied to politics that I don't really blame the public for seeing it as worthless. I couldn't tell you what modern economic theories look like, but I could certainly talk about Reagan's trickle-down economics.
- handrous 5y ago> I think it demonstrates that the average voter’s views on economics are more or less worthless. Poli-sci research is depressingly consistent in demonstrating that the average voters' views on everything are worthless. It's amazing the system works at all, even for very generous values of "works". Research on voters' understanding of issues, and of the world, largely amounts to a less-funny version of that thing where a late night show has someone go out and get people to give incredibly stupid answers to easy questions.
- joe_the_user 5y agoRather than economics itself being a tool of propaganda (which might be true but I think most economists would say they strive to be evidence-based), I think it demonstrates that the average voter’s views on economics are more or less worthless. Your second point is not an alternative to the first, rather it is implied by the first.
- snomad 5y agoThat completely ignores leaving the gold standard... which was necessitated by... runaway govt spending
- gumby 5y agoActually it wasn’t. The national debt had been falling for a few years when Nixon took the US off the gold standard. This was even discussed on HN in the past few days.
- User23 5y agoBy that time, gold redemptions were mainly available only to foreign entities. Unlike all other forms of money[1], only US federal government spending, in cooperation with the Fed, could create new reserves[2]. That there were too many reserves in foreign hands chasing $35 an ounce gold could only be the result of US federal spending. Therefore while foreign demand was the proximate cause, it was definitely a downstream consequence. The size of the US government's outstanding liabilities at the time isn't relevant, what affects prices is money flows, not stocks. [1] https://en.wikipedia.org/wiki/Money_supply#United_States https://en.wikipedia.org/wiki/Money_supply#United_States [2] Back then the Fed wasn't willing to just expand its own balance sheet significantly on its own initiative as it is now.
- Natsu 5y ago> a far more obvious cause - oil price shocks The way you put it sounds rather backwards and gives me "wet streets are causing rain" vibes, as if lots of government increase of the money supply won't cause demand for scarce resources and drive up their prices via sudden increases in demand with the newly available cash that can't be met by similar increases in supply.
- breakyerself 5y agoConservatives are masterful at messaging.
- hindsightbias 5y agoOil goes both ways. Ask Texans why the oil bust in the 80’s happened. Not a clue then or now. Not that Reagan supported a war between Iraq and Iran, played both sides, caused OPEC to fall apart and flood the market dropping the price to $15 barrel.
- badpun 5y agoThen why was (for example) Germany largely unaffected by the crude oil price spikes? Their average inflation through 1970s was around 5%.