jared on Nostr: This chart from the Federal Reserve Economic Data (FRED) shows the Consumer Price ...
This chart from the Federal Reserve Economic Data (FRED) shows the Consumer Price Index (CPI) from 1950 to 2024, with a base year of 1982-1984 set to 100. What's striking is the correlation between the U.S. going off the gold standard in 1971 and the subsequent rise in CPI.
- Pre-1971: The CPI was relatively stable, indicating low inflation rates.
- Post-1971: There's a noticeable increase in the CPI, suggesting higher inflation. This period marks when President Nixon ended the Bretton Woods system, which had pegged the U.S. dollar to gold.
- Gold Standard:When countries are on the gold standard, the supply of money is limited by gold reserves, which can stabilize prices.
- Fiat Currency:After 1971, the U.S. dollar became a fiat currency, meaning its value wasn't backed by gold but by government assurance. This shift allowed for more flexible monetary policy but also potentially led to higher inflation rates as seen in the chart.
The removal from the gold standard gave the U.S. more control over its monetary policy but at the cost of price stability. This chart visually represents how economic policies can have long-term effects on inflation.
#Economics #GoldStandard #Inflation #MonetaryPolicy
- Pre-1971: The CPI was relatively stable, indicating low inflation rates.
- Post-1971: There's a noticeable increase in the CPI, suggesting higher inflation. This period marks when President Nixon ended the Bretton Woods system, which had pegged the U.S. dollar to gold.
- Gold Standard:When countries are on the gold standard, the supply of money is limited by gold reserves, which can stabilize prices.
- Fiat Currency:After 1971, the U.S. dollar became a fiat currency, meaning its value wasn't backed by gold but by government assurance. This shift allowed for more flexible monetary policy but also potentially led to higher inflation rates as seen in the chart.
The removal from the gold standard gave the U.S. more control over its monetary policy but at the cost of price stability. This chart visually represents how economic policies can have long-term effects on inflation.
#Economics #GoldStandard #Inflation #MonetaryPolicy