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Back to back administrations in the late 70s and 80s were unable to prevent the specter of stagflation from taking over the economy.

Back-to-back administrations in the late 70s and 80s were unable to prevent the specter of stagflation from taking over the economy. Although every macroeconomic policy under the sun was attempted, and both Carter and Reagan were undermined by sea change in America’s debt structure, the increasing sale of national debt to foreign governments to finance further deficit spending.

What is stagflation?

Stagflation is both stagnant economic growth and inflationary pressure (when the money supply artificially increases the value of one unit of currency). It is an unusual phenomenon because most weak economies do not produce enough growth to cause dangerous inflation.

The Cause of Stagflation

Stagflation occurs when the government expands monetary supply while the jobs market is weak. The money supply can be expanded by the printing of money or the sale of national debt, especially when there is no limit to the amount of money that can be printed. As it happened, automation was taking hold of the economy as early as the 1950’s. And the US government simultaneously sold massive amounts of debt to foreign entities.

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