This Isn’t 1970s Inflation. I Know. I Was There

It seems analysts and pundits today are trying to compare the present to the past in the hopes of predicting the future. As anyone who has ever managed risk will tell you, it works about half the time if you’re lucky. In other words, toss a coin.?This inflation is nothing like what prices were like in the 1970s.?As a result, the selloff in stocks and bonds and the pricing of accelerated Fed rate hikes is likely overdone.

In the early 1970s, President Nixon imposed and later lifted wage and price controls, ending up damaging the economy in the process. Price controls had been random and did not work because they were politically based.

For example, prices of butchered beef were capped in the hopes of limiting food costs. But the administration, not wanting to lose the farm vote, did not impose price controls on feed stocks. As a result, the cost of raising cattle rose more than what ranchers could sell beef for, so they simply produced less. You guessed it, less supply and steady demand sent prices soaring, not falling.

This time it really is different. Consumers are already adjusting to higher prices by curbing purchases as seen in the latest?retail sales figures.?Housing?is slowing as a result of higher mortgage rates. Even?manufacturers?are feeling the pinch due to higher costs of financing.

All of these factors will damp growth, slow inflation and bring supply and demand back to balance -- a positive scenario for stocks and bonds headed into the second half of 2022 and for 2023.

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To contact the reporter on this story:

Vincent Cignarella?in?New [email protected]