Monday, June 7, 2010

I Have a Question

Remember the really bad inflation we had in the 1970s? Not so bad in the '50s, a little worse in the '60s, then double-digit inflation in the '70s, then not so bad anymore in the '80s and '90s and the years since.

My question: Where do those trend changes show up on this FRED graph?

...Or on this log-scale version of the graph?

I just don't see it. I see a kink in the second graph around 1962. Base money started growing faster then. But it didn't vary much after that point. Money growth follows a straight line from 1962 right up to 2006 or so, where it slowed down to nothing... and immediately we had a fiscal crisis and recession. That's what I see. A brief interruption of base-money growth, followed immediately by trauma.

But there is definitely no pick-up of money-growth that accounts for greater inflation in the 1970s. And there is definitely no slow-down of money growth that accounts for the much-reduced inflation since the 1980s.

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