What Caused The Great Inflation Of The 1970s?

October 9, 1974: Close-up of President Gerald Ford during a press conference in the White House Rose Garden. He is wearing a WIN ("Whip Inflation Now") button-a symbol of the fight against inflation. Source: Bettmann/Getty Images

In the early 1970s, the stock market slumped, unemployment rose and the United States found itself suffering from an inflation crisis -- also known as the "Great Inflation" -- that lasted a decade. The causes of the Great Inflation of the 1970s have been analyzed and debated ever since. And certainly, at the time, there was no shortage of finger pointing: the rich were too greedy, the unions wanted too much money, the Arab oil-producing nations screwed the U.S., Nixon blew it, the Federal Reserve Bank blew it, the economic policy was all wrong.

That last theory is a popular one -- Wharton professor Jeremy Siegel summed it up as "the greatest failure of American macroeconomic policy in the postwar period."

There was no quick fix to the Great Inflation, much to the chagrin of President Gerald Ford. Ford tried to will America out of inflation with pep talks and a stillborn PR campaign called "WIN -- Whip Inflation Now." 

There was also no tidy explanation of the causes of the Great Inflation of the 1970s. It happeded due to a variety of factors that played into a sustained inflation in the United States that affected the rest of the world as well. The key thing to remember is that none of the players involved were actively trying to send America into a recession with out of control inflation.