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Brief: A combination that hit the US economy in the 1970s is looming

Friedrich Hegel said: “The only thing we learn from history is that we do not learn anything from history”. It will if inflation accelerates (report, FT.com, Nov 11). The seeds of the great 1970s inflation were sown when President Lyndon B. Johnson argued that society could have both guns and butter – in fact, budget constraints were irrelevant.

President Joe Biden passed a $ 1.9 trillion stimulus package in March when the US economy was running its largest budget deficit since World War II. These budget deficits, combined with boundless monetary expansion, fueled inflation by pushing spending beyond what even global supply chains could handle.

Not only is inflation rising, but inflation risk premiums are also emerging in the bond markets. This combination decimated the US economy in the 1970s. Let’s hope the adults in Washington don’t let that h -pen again.

Willem Thorbecke
Senior Fellow, Research Institute for Business, Trade and Industry
Tokyo, J -an

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