There were basically three oil shocks/market disruptions, Nixon's closing of the gold window in 1971, i.e. letting the world price of the dollar, which oil is priced in, float, and you know in what direction, the Yom Kippur War based embargo from October 1973 to March 1974, and oil and gas not being removed from Nixon's price controls. All of those lead to the '70s energy crisis, which Reagan started zapping with a stroke of the pen upon becoming president, and than had a good effect on inflation. Prior to then the DoE decided where every gallon of gasoline and diesel went; my father constructed a small tank farm with 55 gallon barrels of gasoline, but they turned out to be unneeded because we're in a farming area and those bureaucrats made damn sure those had enough fuel even while they were pinching the big urban areas.
I don't claim to have a good understanding of macroeconomics (not sure anyone really does), but I'm pretty sure fiscal policy has some effect. But since we're discussing a sequence of numbers, that hardly matters. What does is that Carter did indeed "find religion" on a number of fronts (including defense after the Soviet invasion of Afghanistan), and in the case of the Fed, replaced Burns with Volcker in August 1979, albeit way too late to save his presidency. What's critical with Reagan is that he recognized Volcker was the right guy for the job and fully supported him when things got ugly, e.g. big hikes in interest rates (to a prime rate > 20%!!!) that along with the delayed phase in of the supply side tax rate cuts gave us a nasty, sharp recession.
That's when Reagan's economic policies were labeled Reaganomics, a term which our betters dropped like a hot potato when they had their desired effect and Reagan ran a "It's morning in America" 1984 reelection campaign. He deserves more than a little credit for the moral courage to persevere in the face of near G. W. Bush opprobrium while he let that harsh medicine work.
And the bottom line is seen in those numbers. Whatever Reaganomics was, it manifestly wasn't an increase in inflation.
I'm claiming Reaganomics hasn't anything to do with inflation.
Once a Fed Chairman is selected by the president he cannot be removed during his term. This is the principle of central bank independence. When the board decides that they will hike rates there isn't anything to stop them. They can be dismissed only after each their terms end (7 years, 4 years for the chairman and vice-chairman).
That inflation is mostly a monetary matter is a key lesson from the 70s and there is very convincing evidence especially from that period. Germany was restrained monetarily and performed much better than France, Britain or the US. (Highest inflation was 8%).
There are of course cases where fiscal policy has an indirect effect on inflation through monetary policy:
* Countries sometimes pressure CBs to lower rates to finance government deficits. This is a big problem in developing countries.
* Fixed exchange rate regimes.
* Intervening in the supply or demand of some significantly weighted component of the CPI ()
* The liquidity trap (not really known, this is really recent and not much data on it)
I don't claim to have a good understanding of macroeconomics (not sure anyone really does), but I'm pretty sure fiscal policy has some effect. But since we're discussing a sequence of numbers, that hardly matters. What does is that Carter did indeed "find religion" on a number of fronts (including defense after the Soviet invasion of Afghanistan), and in the case of the Fed, replaced Burns with Volcker in August 1979, albeit way too late to save his presidency. What's critical with Reagan is that he recognized Volcker was the right guy for the job and fully supported him when things got ugly, e.g. big hikes in interest rates (to a prime rate > 20%!!!) that along with the delayed phase in of the supply side tax rate cuts gave us a nasty, sharp recession.
That's when Reagan's economic policies were labeled Reaganomics, a term which our betters dropped like a hot potato when they had their desired effect and Reagan ran a "It's morning in America" 1984 reelection campaign. He deserves more than a little credit for the moral courage to persevere in the face of near G. W. Bush opprobrium while he let that harsh medicine work.
And the bottom line is seen in those numbers. Whatever Reaganomics was, it manifestly wasn't an increase in inflation.