The New Inflation

Abstract

Inflation, endemic in the United States since 1939, is now well beyond the mid-point of its fourth decade and is the longest and most severe in our history. Depending on the indexes used, prices today are four to four and one-half times higher than in 1939. It is the purpose of this article to show that the current inflation is new or different in at least two respects: (1) Previous periods of inflation have been temporary aberrations with no significant long-run effects on the economy, and (2) the current inflation indicates a potentially fatal flaw in the market system as it now operates in this country. For our purpose, inflation is defined as an increase in the general price level as measured by an acceptable index of prices. We realize, of course, that the price indexes prior to 1900 are somewhat suspect, and we are aware of the current criticisms of the BLS indexes. Nevertheless, it will be assumed that a substantive change in any of the indexes used does reflect, to some extent, a change in the actual price level. Three other points should be noted. First, space limitations prevent any detailed presentation of the data supporting the statements made in the text. Second, the analysis is confined to the United States, although there is good reason to believe that the same could be applied to many