Burns spent that whole period insisting inflation was structural and beyond the Fed's reach, fiscal, oil, unions, anything but money. The hot CPI print today gets the same treatment from people who'd rather not own the policy choice. Worth reading him next to whoever's currently explaining why this number doesn't count.
The data has been purposely selected to yield the pattern:
Δt = 47.5 yrs lag between the two sets of data;
n = 90 monthly observations.
X-Y regression
x: CPIAUCSL ∈ [1971.06.01, 1978.10.01]
y: CPIAUCSL ∈ [2019.01.01, 2026.05.01]
y = 0.0763 x^2 - 0.3141 x + 1.7366
r^2 = 0.91
What is the likelihood that other selections would yield similar correlations at other times? The analyst would have to run multiple 90 month data sets to demonstrate that the pattern depicted in the chart is not a random occurrence.
What are the economic factors which would lead to the observed correlation? Unless the economic conditions precedent have some common basis (model), one would have to conclude that the pattern depicted is simply the result of happenstance. What are those common economic conditions found in each of the two 90-month data sets? Your correspondent makes no claims of having analyzed the data to find those common economic factors.
Claiming that it is *solely* data fitting and so almost certainly completely random, is IMO about as bad as claiming that we are almost guaranteed to see the pattern continue for the next 2.5 years.
If you are convinced that it isn't simply happenstance, then provide a proof of your proposition. I am open to being convinced, but only by a rigorous analysis, and not by rhetoric alone.
I don't know you from Adam, Andy. You raised the matter of a wager---you'd take one side if I offered you 10-1 ('one will get you ten') odds, but you'd take the other side if I only offered 4-1 ('one will get you four') odds.
I'm not making book, Andy. Nor am I pontificating. I didn't invite you to a game of golf. You invited yourself. Now you're angry. Suit yourself, it cuts no ice with me.
It might be data fitting, but.... it would probably be a useful exercise to determine the differences between 1979 and 2026 to predict how the charts will diverge. You can do the same exercise with Japan's economic malaise and the dot-com bubble. QE caused that disturbing data-fitting chart to break down. It is a good exercise in how to avoid past mistakes.
In the 1970s, the Federal Reserve (under Arthur Burns) consistently cut rates too early, fearing unemployment. Today, the Fed operates under an explicit 2% inflation target framework and has signaled a much stricter "higher for longer" stance to keep long-term inflation expectations anchored.
The 1970s economy was highly unionized with automatic Cost-of-Living Adjustments (COLAs) embedded into contracts. This created a vicious, self-fulfilling wage-price spiral that is much harder to trigger in today's less unionized, more service-oriented economy.
Today’s aging global workforce and rapid technological integration (like AI and advanced automation) exert structural deflationary pressures that did not exist during the baby-boomer-driven expansion of the 1970s.
Historically, inflation rarely resolves in a single wave. The 1970s experienced an initial surge that peaked in late 1974, subsided, and then accelerated to even higher levels by 1980. The current chart mirrors the initial drop from the 2022 peak, but the recent uptick mimics the dangerous inflection point seen in late 1976/1977.
Both eras were preceded by massive government spending and highly accommodative monetary policy—the "Great Society" and Vietnam War programs in the 1960s/70s, and massive pandemic stimulus packages in the 2020s.
Both periods faced profound global supply disruptions. In the 1970s, it was the OPEC oil embargoes; in the 2020s, it was global pandemic shutdowns, supply chain knots, and geopolitical energy shocks.
This evidence provides tremendous power to the FTPL as a useful heuristic
A reading from the epistle of Arthur Burns 1979 ~ Social, political, economic, monetary, fiscal dynamics
https://fraser.stlouisfed.org/files/docs/publications/FRB/pages/1985-1989/32252_1985-1989.pdf
Burns spent that whole period insisting inflation was structural and beyond the Fed's reach, fiscal, oil, unions, anything but money. The hot CPI print today gets the same treatment from people who'd rather not own the policy choice. Worth reading him next to whoever's currently explaining why this number doesn't count.
It's data fitting, John.
The data has been purposely selected to yield the pattern:
Δt = 47.5 yrs lag between the two sets of data;
n = 90 monthly observations.
X-Y regression
x: CPIAUCSL ∈ [1971.06.01, 1978.10.01]
y: CPIAUCSL ∈ [2019.01.01, 2026.05.01]
y = 0.0763 x^2 - 0.3141 x + 1.7366
r^2 = 0.91
What is the likelihood that other selections would yield similar correlations at other times? The analyst would have to run multiple 90 month data sets to demonstrate that the pattern depicted in the chart is not a random occurrence.
What are the economic factors which would lead to the observed correlation? Unless the economic conditions precedent have some common basis (model), one would have to conclude that the pattern depicted is simply the result of happenstance. What are those common economic conditions found in each of the two 90-month data sets? Your correspondent makes no claims of having analyzed the data to find those common economic factors.
Hmmph.
It is indeed partly data fitting.
Claiming that it is *solely* data fitting and so almost certainly completely random, is IMO about as bad as claiming that we are almost guaranteed to see the pattern continue for the next 2.5 years.
If you are convinced that it isn't simply happenstance, then provide a proof of your proposition. I am open to being convinced, but only by a rigorous analysis, and not by rhetoric alone.
My point is no more and no less that certainty, or even near certainty, in either direction in this case is unwarranted.
I am not at all convinced that it isn’t happenstance.
But my point is that you should not be convinced of the opposite.
If you gave me 10-1 odds, I’d gladly take the “not happenstance” bet.
If you gave me 4-1 odds, I’d gladly take the “happenstance” bet.
I'm not making a book, if that is what you're looking for. There's no wager. Present your analysis, either way, or be done with it.
You don’t get to dictate the terms of all debate.
You fail to understand - or you do, and are being disingenuous - that no proof is possible re: a forecast of the future.
It is all about probabilities.
And since you refuse to put your money where your mouth is, your claims should not be taken particularly seriously.
It’s easy to pontificate when you have no skin in the game.
I don't know you from Adam, Andy. You raised the matter of a wager---you'd take one side if I offered you 10-1 ('one will get you ten') odds, but you'd take the other side if I only offered 4-1 ('one will get you four') odds.
I'm not making book, Andy. Nor am I pontificating. I didn't invite you to a game of golf. You invited yourself. Now you're angry. Suit yourself, it cuts no ice with me.
It’s just a pretty chart to ponder, not a forecast or an analysis
That is not what John is saying in his post (see above).
I read pondering-“ is it fair? Some different some same.”
No forecast or analysis.
Hence my original post, Treeamigo. 'Make the case or go home', in essence.
Let’s compare real rates
And fiscal deficits
Isn't the graph just plotting the inflation rates from one period on to another?
It might be data fitting, but.... it would probably be a useful exercise to determine the differences between 1979 and 2026 to predict how the charts will diverge. You can do the same exercise with Japan's economic malaise and the dot-com bubble. QE caused that disturbing data-fitting chart to break down. It is a good exercise in how to avoid past mistakes.
The correlation is very obvious, Roach.
The Case for "Much is Different"
In the 1970s, the Federal Reserve (under Arthur Burns) consistently cut rates too early, fearing unemployment. Today, the Fed operates under an explicit 2% inflation target framework and has signaled a much stricter "higher for longer" stance to keep long-term inflation expectations anchored.
The 1970s economy was highly unionized with automatic Cost-of-Living Adjustments (COLAs) embedded into contracts. This created a vicious, self-fulfilling wage-price spiral that is much harder to trigger in today's less unionized, more service-oriented economy.
Today’s aging global workforce and rapid technological integration (like AI and advanced automation) exert structural deflationary pressures that did not exist during the baby-boomer-driven expansion of the 1970s.
The Case for "Much is the Same"
Historically, inflation rarely resolves in a single wave. The 1970s experienced an initial surge that peaked in late 1974, subsided, and then accelerated to even higher levels by 1980. The current chart mirrors the initial drop from the 2022 peak, but the recent uptick mimics the dangerous inflection point seen in late 1976/1977.
Both eras were preceded by massive government spending and highly accommodative monetary policy—the "Great Society" and Vietnam War programs in the 1960s/70s, and massive pandemic stimulus packages in the 2020s.
Both periods faced profound global supply disruptions. In the 1970s, it was the OPEC oil embargoes; in the 2020s, it was global pandemic shutdowns, supply chain knots, and geopolitical energy shocks.