Stagflation+and+Its+Causes+-+Blk+2

GROWING STAGFLATION-1967 to 1973 By David Riche



Stagflation is upon us! Lyndon Johnson’s decision to fund the war and social programs through deficit spending has burdened our nation with high inflation. The prices of our goods have become much, much higher than the goods’ actual values. This combined with increased competition in international trade, and a flood of new workers (baby boomers and women) have led the United States to stagflation- high inflation and high unemployment.

Additionally, our nation has become dependent on foreign oil. The oil producing countries of the Middle East, or the OPEC- Organization of Petroleum Exporting Countries, have been steadily raising their prices. In 1973, when we took sides with the Israelis in the Yom Kippur War, we lost our allies of Syria, Egypt, and the rest of the OPEC. They completely cut off our entire oil supply. The next year, 1974, when they resumed sales, the price was quadrupled! This has only worsened our problems of inflation.

President Nixon has tried numerous times to rid our nation of stagflation, but has been relatively unsuccessful. Nixon proposed to raise taxes and cut the budget in order to reverse deficit spending. But Congress refused his plan. To reduce the amount of money in circulation and cut back on inflation, Nixon tried to raise interest rates. Unfortunately, his plan only sent our economy into a slowdown. In August 1971, President Nixon froze workers’ wages as well as business’ prices and fees for 90 days. Our inflation problem ceased for only a short time.

Overall, the nations economy is doing pretty poorly now. We have lost our ties with the Middle East, people are out of work, and prices are up. Here are the big questions for the upcoming year: Can President Nixon fix our ties w/ the OPEC and correct our ease our economic worries? Will our economy ever recover and rid the American people of stagflation?