inflation
In 1966 the nation was alarmed when the Consumer Price Index increased more than 3 percent, the steepest inflation in fifteen years. ... With a brief recession followed by the wage-and-price controls imposed by Richard Nixon, the inflation rate subsided for a time, but still remained about 3 percent. ... Yet when the economy recovered and resumed its growth, so did inflation. Indeed, the disorders got worse; the rate of inflation rose toward double digits again but the economy never returned to anything resembling full employment. In the Keynesian analysis, these twin aggravations- inflation and high unemployment- were not supposed to occur simultaneously. What exactly was causing this modern spiral of inflation? ... All of these diffuse factors were relevant to the inflation, yet the very complexity was unsatisfying. ... Milton Friedman offered a much simpler answer to the question: inflation was caused by the Federal Reserve. His scholarly dictum, often quoted, was actually an accusation: Inflation is everywhere and anywhere a monetary phenomenon. ... The monetarist prescription, a fixed rule for money, was an alluring solution to the instabilities of inflation, and many rushed to embrace it, but it begged an important question: if Friedman was correct, why did not the Federal Reserve follow such a rule itself? ... Their capital was replenished and amply compensated for their earlier grievances against inflation. ... Reviving inflation was beyond discussion.