ValueMags on Government Intervention with Inflation


According to Valuemags, government intervention was necessary throughout the 20th century because inflation was volatile in the United States until the 1990’s. Before the 1970’s, the government intervened mostly and only in times of war. After the 1970’s and when the United States went off the Gold Standard, inflation was and continues to be sustained and controlled by the government.

The first time that the United States government effectively intervened with policy making, excluding the World Wars, was during the 1970`s when the United States went off of the Gold Standard and there was an international oil crisis as a result. The United States economy is heavily correlated with the Canadian economy and other world economies; therefore everything that affects their economy is highly likely to affect the world. The opposite applies for all of the United States allies too. At the time, the United States was a big importer of oil from the middle-east. So, when Nixon disassociated the US dollar from the Gold Standard, to which every currency around the world was linked, all Hell broke loose explains Valuemags executives. Soon enough, the Canadian and United States governments began to panic because their shift in currency caused stagflation. Stagflation is the low growth, higher unemployment and higher inflation. In response to the spiked rates and wages not meeting the inflation rates,, the Canadian Trudeau government introduced wage and price controls under the Anti-Inflation Act which was imposed on the United States and America adopted similar acts and laws.

 Among the many aspects of this government intervention, the Trudeau government was forced to reduce federal government spending, increase regulations on monetary policy, and implement government restrictions on fiscal policy. Unfortunately for the Trudeau government, their intervention was a failure and soon after the Anti-Inflation Act was abolished. Replacing the Anti-Inflation Act in 1975 and who is still operating today is the AIB. ValueMags says that if economists closely look at the United States History, the United States should have followed what Canada did to control inflation more closely.

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