Stagflation

The 1970s ushered in many firsts: the first handheld calculator, the birth of the first test-tube baby, and the first personal computer. And, for the first time in history, high inflation joined a stagnant economy for a prolonged period of time. By 1979, this unprecedented combination had a new name: stagflation.

Inflation Unchecked

Inflation was already underway in the early 1970s because of increased commodity prices, as well as excess liquidity created by countries no longer disciplined by the gold standard. Inflationary pressures increased when the dramatic rise in oil prices raised the price of manufactured goods and food. The resulting decrease in demand and production led to fewer jobs and a stagnant economy.