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Inflation Is Back. The Fear Is Real. Is the Monster?

Hi, it’s Pat. I’m a child of the 1970s, so I grew up hearing adults talking about the rising price of, well, everything. (My dad bought a sw
Inflation Is Back. The Fear Is Real. Is the Monster? 1

Hi, it’s Pat. I’m a child of the 1970s, so I grew up hearing adults talking about the rising price of, well, everything. (My dad bought a sweet moped to save on gas.) In my adult life, inflation has rarely been a serious issue in the U.S., but in October a surprise 6.2% increase in the consumer price index from a year ago has put it back on the table. So we’ve devoted a special section in Bloomberg Businessweek to the dreaded I-word

Perspective matters. We’re nowhere near the 14%-plus peak of 1980, and there are hopeful signs in the economic and market data that we aren’t headed there. The higher prices seem to be a byproduct of a successful mobilization by policymakers to keep the economy alive through a pandemic that threatened far worse. But as my colleague James Ellis, who raised a family in a world of double-digit mortgage rates, recalls, sustained high inflation is frightening, because it undermines people’s sense of control. President Joe Biden is already feeling the backlash, despite falling poverty, improved household savings, and a booming stock market. He could be wrestling with higher prices for a while.

I grew up in the American Rust Belt, so high prices aren’t all I remember about that time—the interest-rate hikes that Federal Reserve Chair Paul Volcker used to kill inflation also destroyed a lot of jobs. Many economists and opinion makers admire Volcker for the tough inflation-fighting credibility he gave the Fed, but Joe Weisenthal writes that current Fed chief Jay Powell faces a different kind of test. Maybe the gutsy move now is to stick to his policy of encouraging maximum employment, and not get blown off of course by a pandemic-induced increase in the CPI. Speaking of intestinal fortitude, Katie Greifeld reports that on Wall Street, making an inflation call could be a career maker—or ender. Click here to read her story, or listen here Pat Regnier, Bloomberg Businessweek finance editor

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Bloomberg Businessweek

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More From Our Special Report on Inflation

Inflation Is Back. The Fear Is Real. Is the Monster? 9 Getting Inflation Right Is a Make-or-Break Moment on Wall Street
For a generation of investing pros, stable prices were a fact of life. What do you do when the old assumptions stop making sense?
Inflation Is Back. The Fear Is Real. Is the Monster? 10 This Is Jerome Powell’s Shot at a Volcker Moment—in Reverse
It took courage to lift rates in 1979 to kill inflation. The gutsy move for today may be to stand fast until we have more jobs.
Inflation Is Back. The Fear Is Real. Is the Monster? 11 Even Transitory Inflation Can Stick Around for a While
The episodes that followed the two world wars also featured big government deficits, loose monetary policy, and supply chain woes.
Inflation Is Back. The Fear Is Real. Is the Monster? 12 Biden Can’t Avoid Blame for Inflation, a Tough Problem to Fix
Robust wage growth, falling poverty, stock market records—rising prices overshadow them all.​​​​​​​
Inflation Is Back. The Fear Is Real. Is the Monster? 13 I Remember 1970s Inflation. Politicians Should, Too
While economists and policymakers argue about the causes and duration of the price surge, average Americans worry about its impact.
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