I was reading this article in WSJ, which basically compares the current economy to just before 1966 rise in inflation. Here is an extract:
A case in point: in 1966, inflation, which had run below 2% for nearly a decade, suddenly accelerated to over 3%. Some of the circumstances echo the present: unemployment had slid to 4%, taxes had been cut and federal spending for the Vietnam War and Lyndon Johnson’s “Great Society” programs was surging. Deutsche Bank economists note the budget deficit jumped by more than 2% of gross domestic product between 1965 and 1968, similar to what they project between 2016 and 2019. Except in recessions, stimulus of this size “is unprecedented outside of these two episodes,” they said.
This scared me enough that I read up a little on the 1970s inflation situation, especially given all the FIRECALC articles on "If you had retired in the early 70s"... This Fed article was pretty good, but it seems to say "Don't worry, we have learnt our lesson".
I get things are different - we are already decoupled from the gold standard, and are less at risk of energy shortages given the US's capacity. But ... I don't know if politicians have gotten smarter, and there have been suggestions in this forum of folks trying to hedge against inflation.
So my question is - what did the smart money do in the 70s to stay ahead of the curve? Conventional wisdom says it makes sense to move away from cash and into assets if inflation is nearby- but most of the folks here seems to be moving the other direction (albeit maybe just away from stocks rather than other types of assets).
Keep in mind that I am 40 and a long way from FIRE (though dreaming). Our assets are in 401K, RE, stocks and cash - in that order. But this means high unemployment in the economy is more of a worry for us, and I want to preserve what we have. What strategies would work in inflation/high unemployment leading to stagnation situation?
Thanks!
A case in point: in 1966, inflation, which had run below 2% for nearly a decade, suddenly accelerated to over 3%. Some of the circumstances echo the present: unemployment had slid to 4%, taxes had been cut and federal spending for the Vietnam War and Lyndon Johnson’s “Great Society” programs was surging. Deutsche Bank economists note the budget deficit jumped by more than 2% of gross domestic product between 1965 and 1968, similar to what they project between 2016 and 2019. Except in recessions, stimulus of this size “is unprecedented outside of these two episodes,” they said.
This scared me enough that I read up a little on the 1970s inflation situation, especially given all the FIRECALC articles on "If you had retired in the early 70s"... This Fed article was pretty good, but it seems to say "Don't worry, we have learnt our lesson".
I get things are different - we are already decoupled from the gold standard, and are less at risk of energy shortages given the US's capacity. But ... I don't know if politicians have gotten smarter, and there have been suggestions in this forum of folks trying to hedge against inflation.
So my question is - what did the smart money do in the 70s to stay ahead of the curve? Conventional wisdom says it makes sense to move away from cash and into assets if inflation is nearby- but most of the folks here seems to be moving the other direction (albeit maybe just away from stocks rather than other types of assets).
Keep in mind that I am 40 and a long way from FIRE (though dreaming). Our assets are in 401K, RE, stocks and cash - in that order. But this means high unemployment in the economy is more of a worry for us, and I want to preserve what we have. What strategies would work in inflation/high unemployment leading to stagnation situation?
Thanks!