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The National Debt Was a Lot Smaller the Last Time Inflation Was This Bad

Real Money Columnist Jonathan Heller has been looking back to the 1970s to gain some perspective of rising inflation rates these days.

He’s using some familiar consumer products to take the measure of rising prices.

“Recently, I have been served a couple of very stark reminders of the current state of the economy in terms of supply-chain issues and inflation,” Heller wrote on Real Money.

First, Heller cited his failed attempt to secure a fairly common type of roofing shingle in order to complete a new roof on his home. “These shingles are nowhere to be found, and I’m not sure when they will be available,” he wrote on Real Money. “Second is the $7 cup of crab bisque (not cheap to begin with, but the best I’ve ever had) at a local restaurant, which disappeared from the menu a couple of months back. Last week, it was back — -for $15.”

Heller was a teenager during the last big run of inflation in the early 1980s, and he’s curious about the actual numbers.

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“Without looking, I figured there were big CPI increases during the 1979-1981 range, but was shocked when I saw the actual numbers, and how long the run actually lasted — at least as compared to what we’ve been accustomed to the past couple of decades,” Heller wrote.

Here are the numbers . . .

Year Inflation

1973

6.2%

1974

11.1%

1975

9.1%

1976

5.7%

1977

6.5%

1978

7.6%

1979

11.3%

1980

13.5%

1981

10.3%

1982

6.1%

Between 1973 and 1982, prices rose 130.5%. In 1983, the CPI settled down to a 3.2% clip, and the highest the U.S. has seen prior to the current debacle was 5.4% in 1990.

“In recent years the Federal Reserve became “focused” on keeping inflation at a 2% clip or below,” Heller said.  Heller said the Fed that is going to have to “dance” well in order to “manage” inflation, while not shutting the economy down. He also noted that, in 1973, the national debt was $458 billion, the equivalent of $2.9 trillion in today’s dollars. (The U.S. just passed the $30 trillion mark.)

“This, for sure, is a downer,” Heller said. “However, it’s good to look back, and see where we have been in terms of inflation. It doesn’t necessarily mean there will be a repeat, but it’s also not comforting within the scheme of other challenges we face.”



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