Since the Federal Reserve opened its doors in 1914, we have had successive periods of great monetary turbulence (of course, there were financial booms and busts under the international gold standard in the previous 40 years but these largely stemmed from great flaws in the U.S. banking industry, in turn induced by perverse regulations for example (Rothbard 2005 and Selgin 2016). These periods of turbulence have all featured inflation, but the mix between goods and services inflation on the one hand and asset inflation on the other has been highly variable. The purpose here is to examine how in principle asset inflation and goods and services inflation relate to each other depending on the particular monetary disorder. The hypotheses developed are tested in one key episode from the laboratory of history, the greatest U.S. peacetime inflation from the mid-1960s to the start of the 1980s.
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