Home > Uncategorized > The Golden Grimace (Part Three: The Great Stagflation)

The Golden Grimace (Part Three: The Great Stagflation)

Below is another breakout from the chart we showed you previously. This time, however, we direct your attention to the Great Stagflation period of 1969 to 1980.

The Great Stagflation of the 1970s

The Great Stagflation, according to the Wiki, refers to the period of the 1970s, when the economy was simultaneously rocked by ridiculously high inflation and ridiculously high unemployment. The authors of the entry write:

It is a difficult economic condition for a country, as both inflation and economic stagnation occur simultaneously and no macroeconomic policy can address both of these problems at the same time.

Stagflation was never supposed to happen, according to the then dominant postwar macroeconomic theory, because, in the words of the Wiki, “inflation and recession were regarded as mutually exclusive.”

When inflation got out of control, the government simply instigated a recession to purge working families of their jobs – thus reducing wages with a sudden explosion of unemployment. Once inflation was “wrung” from the economy, prices could be allowed to creep upward again in order to further reduce wages.

As you can see from the chart, however, something went terribly wrong with this alleged theory.

Starting around 1970, the economy, as measured in ounces of gold, began contracting with a viciousness not even seen during the 1930s. By 1974, it had lost 2/3rds of its value, as measured in gold, and, after a bounce, went on to lose 80 percent of its value by the same measure. At the same time, the dollar measure of the economy tripled over the same period.

To put it another way: in 1970, $100 of GDP could buy 2.6 ounces of gold; but, by 1980, that same $100 dollars of GDP could purchase a mere 0.17 ounce of the metal. Relative to the value of gold, $100 worth of wages lost almost 94 percent of its value.

It was a repeat of the collapse of real wages seen during the Great Depression, but on a scale not even imagined by the working families of that generation.

It was all about reducing wages. And, an ever lengthening family work week, as millions of women joined the labor force beside their husbands to make up for lost real wages income by throwing their bodies onto the labor market – all to the inspirational tune of the theme song from Wall Street’s propaganda series, the Mary Tyler Moore Show.

Who can turn the world on with her smile?

Who can take a nothing day, and suddenly make it all seem worthwhile?

Well it’s you girl, and you should know it

With each glance and every little movement you show it

Love is all around, no need to waste it

You can have a town, why don’t you take it

You’re gonna make it after all

How will you make it on your own?

This world is awfully big, girl this time you’re all alone

But it’s time you started living

It’s time you let someone else do some giving

Love is all around, no need to waste it

You can have a town, why don’t you take it

You’re gonna make it after all-

–Sonny Curtis

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