The Great Inflation and Its Aftermath

September 22, 2008
Samuelson, a columnist for the Washington Post
and Newsweek
, presents a highly readable and thought-provoking discussion of the crippling inflation that hit the United States from the mid-1960s to 1982, resulting in four recessions. According to the author, the culprit of inflation was the “collective failure of communication and candor by the nation's economists”; their bad advice became bad policy as both parties in the White House propagated “economic ignorance” that led to the Great Inflation. The memory of the Great Depression led to “a full employment obsession”—among other dangerous myths and stereotypes that were the “major barrier” to economic convalescence—culminating in a stalemate that was only lifted during the “accidental alliance” between Reagan and Federal Reserve chairman Paul Volcker. While business cycles seem milder now (“The Great Moderation”), the author argues that the cycle could repeat. The book's detailed sketches of the working of the Federal Reserve, stock market and corporate America give a comprehensive picture of the economy, which Samuelson describes as a “social, political, and psychological” mechanism encompassing ideas and values as much as trade and finance.