Nearly 40 years ago now, the federal government pushed the economy into a recession in order to stop inflation.
On Wednesday, the latest Consumer Price Index release showed us that prices are up nearly 10%, which is the largest 12-month increase since November 1981.
In 1981. the U.S. was suffering a stint of double-digit inflation, gas prices were skyrocketing, and mortgage rates were insane, keeping middle-class individuals from having the chance to buy a home. Additionally, the job market was incredibly weak, and unemployment was above 7%, so essentially, the nation was in full crisis mode.
Economists give credit for ending the crisis to Paul Volcker, who is chair of the Federal Reserve. He got inflation under control through something the economic equivalent of chemotherapy. Essentially, Paul engineered two massive recessions to slash spending and force inflation down.
At the end of the 1980s, inflation was decreasing, and the economy started thriving again.
It's believed that 2022 inflation isn't as bad as that of 1978-1982; however, it is the absolute worst that the U.S. has experienced in years.
Additionally, the Federal Reserve is raising interest rates at an extremely aggressive rate, just like Paul Volcker did. While they're not trying to engineer a recession, the repercussions could cause one.
If inflation continues to be a major problem, demands for an even more aggressive Volcker-style response will be continuing to grow.
The public is furious about what is going on, and they should be. Inflation is rising, and one of the leading reasons for the current inflation is due to stimulus checks that were given to aid people during COVID.
Additionally, wage growth has been slowing down on top of it all.