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For Lessons on Fighting Inflation, Skip Over Volcker to 1946

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For Lessons on Fighting Inflation, Skip Over Volcker to 1946

Guggenheim Investments,

5 min read
3 take-aways
Audio & text

What's inside?

Current inflation is alarming, but post-World War II monetary policy might provide the solutions.

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9

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Recommendation

With inflation today at levels not seen since the early 1980s, many are looking back to that period for guidance on how to tackle rising prices. But markets expert Scott Minerd says to go further back – to 1946, when US economic conditions more closely resembled today’s. He explains how the Federal Reserve then was able to reduce inflationary pressures and avoid a serious recession, though he notes the present-day Fed’s challenges in achieving price stability and full employment. Executives, financial professionals and investors will find this a fresh take on inflation and monetary policy.

Summary

Policy experts may be misguidedly looking at the early 1980s for inflation-fighting strategies.

To counter runaway prices in the 1980s, Federal Reserve Chairman Paul Volcker raised interest rates dramatically. While this monetary prescription ultimately drove down inflation, a deep recession ensued. In the current environment, Fed Chairman Jerome Powell faces the daunting task of mitigating inflation while avoiding an economic decline. Many look to Volcker’s actions as a blueprint for solving today’s inflation. However, that framework may not be suitable, because existing economic conditions are more similar to those of the post-World War II era.

From 1946 to ...

About the Author

Scott Minerd is the global chief investment officer at Guggenheim Investments and a founding managing partner of Guggenheim Partners.

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