The facts from Paul Krugman’s analysis. Keep the Fed Independent and we won’t have Stagflation.
Source: World Bank
Donald Trump says that other countries have been cheating and taking advantage of us all these years. If so, they’ve been doing a remarkably bad job of it.
What this chart doesn’t show, but is easy to document, is that much of this U.S. outperformance can be attributed to U.S. success in adopting new technology and raising productivity, establishing a clear lead over other wealthy nations. The rise of China poses a new threat to U.S. dominance, but that’s another story. What’s clear is that the doom-and-gloom narrative of the early 90s was all wrong.
It’s also worth mentioning that the victory we won against inflation in the 1980s has proved durable. In my third primer on stagflation I noted that while year-to-year inflation has fluctuated since the 1980s, expected inflation has remained low and stable, largely because people believe that an independent Federal Reserve won’t let inflation get out of control again:
