Mosler Economics has an article explaining the inflation of the 1970s in the article My story of the Thatcher era.
So back to the 70’s, and continuous oil price hikes by a foreign monopolist. All nations experienced pretty much the same inflation.
The point being that inflation was caused by the sudden increase in the cost of oil imposed by OPEC. It was not caused by the government creating too much money. (This leaves out the inflationary pressure of guns and butter policy of LBJ which was a case of the government creating more money than the economy could produce things to buy with that money. In fact this inflation may be what drove OPEC to the drastic action that they took. Of course, it didn’t help that we sent 500,000 people to fight a war in Vietnam when they could have been at home producing goods for the civilian economy. Also much of the goods that our economy was producing were being blown up in Vietnam.)
At the time of the inflation I thought that the “solution” would have been to raise taxes on gasoline. That would have forced the transition to fuel economy much faster and might have concentrated the inflation in the energy sector and away from general inflation. Others were saying that petroleum products were already too expensive and we didn’t need to make the situation worse.
Mosler does not address my “solution” to the problem.
By the way, the price of oil didn’t just happen to drop. Reagan threw us into a near depression, and that’s what suddenly cut the demand for OPEC petroleum. I think my way of cutting demand for OPEC’s product would have been less painful.
Thanks to Kristjan Andre for the link to this article. I requested such a link because I had never heard a leading light of the Modern Monetary Theory crowd address the inflation of the 1970s in any depth. This story is exactly what I wanted to hear from one of those leading lights such as Warren Mosler. I didn’t want MMT proponents to keep saying that WW II was the last time we faced inflationary pressures.