Business

It’s the ‘70s Again … or Worse

Inflation is rising. There is a heated political debate in Washington.

In some ways, it sounds like the ’70s.

Before Watergate, policymakers struggled with inflation. They tried to abandon the gold standard. they Tried Supervision of wages and prices. Nothing worked, and the families struggled throughout the decade.

Finally, sky-high interest rates have broken inflation.

Fifty years later, inflation and the political debate are once again dominating the news. Congress is equal considering Price control. A new bill in the exam will only limit energy price increases. But once a bad idea starts, he can have a life of his own.

There is one big difference between today and the 70s. In some ways, the economy was More Stable then.

The chart below shows the change in GDP from year to year. Gray stripes indicate a recession. From the 1960s to 2009, the economy Increased compared to the previous year during a recession.

A recession does not mean zero growth

There is still growth in recessions

While a recession is an economic contraction, until recently these contractions were more of a slowdown than a step backwards. Economic growth will slow to a few quarters and then resume growth. These periods were painful, but the recovery tended to be rapid.

In the last two recessions the economy has shrunk compared to a year ago. Before 2009, it only happened three other times. Economists believed that the Federal Reserve tamed the business cycle. Of course, that was not the case.

Even in the 2020 recession, the economy contracted compared to the previous year.

We can argue that 2009 was a recession caused by a financial crisis. The same was true in the 1970s and early 1980s, when bank failures contributed to the recession.

Why this time is different

The 2020 recession was unique. The plague brought it.

But the termination of government programs initiated during the epidemic is likely to lead to the next recession. As central banks remove liquidity from the market and governments reduce spending, a recession seems increasingly likely.

The next recession may coincide with a bear market. The bear market will push stocks by 30% to 50% or more, and the economy will once again need time to recover.

The Bottom Line: High inflation, a weak stock market and ineffective political leaders. It sounds very much like the 70s. But this time it is different and could be much worse.


knock Here join True Options Masters.

It’s the ‘70s Again … or Worse Source link It’s the ‘70s Again … or Worse

Related Articles

Back to top button