What’s Worse Than Inflation? Fighting Inflation.
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Inflation is a cancer. It eats away at savings and consumer confidence. But the tools the United States government uses to fight inflation are often worse—they’re a form of chemotherapy that’s even more likely to kill the economy than the underlying disease. When your car is careening down a hill, slamming on the brakes is an inexperienced driver’s first instinct. But it’s the last thing you should do. Unfortunately, the history of inflation-fighting indicates that monetary policymakers seem to prefer crashes to soft landings. Fueled in large part by massive deficit spending as the Pentagon tried to bomb its way to victory in the unwinnable Vietnam war, inflation ran rampant from the latter part of the presidency of Richard Nixon through that of his successor Gerald Ford, and infamously contributed to the destruction of Jimmy Carter’s reelection chances. Inflation encourages consumer spending because, if you put off a purchase, it will cost more later. Enter Paul Volcker, appointed…
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