Bernanke: Great Inflation of the 1960s and ’70s ‘almost certainly’ won’t be repeated now

Former Federal Reserve chair Ben Bernanke wrote in an opinion piece published Tuesday that despite current high inflation, the U.S. is likely not in danger of repeating the experiences of the 1960s and 1970s.

Bernanke wrote in The New York Times that while inflation in recent months “evokes memories of America’s Great Inflation of the 1960s and ’70s,” the country is “almost certainly not” heading for a repeat of that era.

Bernanke admitted that the current economic situation had some similarities to the past, such as heavy federal spending and shocks on global energy and food prices, but he wrote that there are critical differences as well.

The former Federal Reserve chair said that inflation was met with “stiff political resistance” in the past, first using former President Lyndon Johnson as an example.

“President Lyndon Johnson, attempting to insulate the public from the economic costs of an unpopular war, put intense pressure on the Fed chairman, William McChesney Martin, to keep interest rates low,” Bernanke wrote.

“Mr. Johnson promised to raise taxes to pay for the war, and Mr. Martin accordingly refrained from raising rates for a time, but Mr. Johnson’s temporary tax surcharge in 1968 failed to cool an overheated economy, allowing inflation to gain a toehold,” he added.

Bernanke also noted that former President Nixon, who was aiming for reelection in 1972, made it clear to Arthur Burns, Martin’s successor, “that he would not tolerate an economic slowdown before the election,” adding that Burns also did not make any significant progress in lowering inflation.

“Even after Mr. Nixon resigned in 1974, Congress continued to pressure Mr. Burns and the Fed to avoid anti-inflation policies that might slow the economy,” Bernanke wrote.

Bernanke stressed, however, that the current Fed chairman, Jerome Powell, has “considerable support from both the White House and Congress” to bring down inflation, which has led the branch to be more independent. That independence allows it “to make policy decisions based solely on the economic data and in the longer-run interests of the economy, not on short-term political considerations,” he added.

Bernanke wrote that a key difference is seen in the Fed’s views on both “the sources of inflation and its own responsibility to control the pace of price increases have changed markedly.”

Bernanke’s op-ed reiterates sentiments expressed in a recent CNN interview, in which he said that the Fed could address inflation with a “soft-ish landing,” to avoid a recession.