Kai Ryssdal: If you've bought gas lately, the news today about inflation probably came as no surprise. The consumer price index rose last month -- four-tenths percent. That, on the face of it, doesn't sound like a lot. But it is, in fact, the biggest jump in 10 months.
OK, this is the point in most inflation stories where the disclaimer comes, where somebody points out that gas and food prices are volatile. They can rise and correspondingly fall pretty quickly -- which is great.
But still, you've got to buy gas and food, so today's situation is reminding some of inflation from days gone by. Here's Marketplace's Scott Tong to help jog our memory.
Scott Tong: As a young child of the '70s, I can’t say I remember much. But Federal Reserve historian Allan Meltzer does. Gas prices tripled at one point. Prices for everything inflated.
Allan Meltzer: It got up to an average of 17 percent.
Paychecks struggled to keep up, and families suffered.
It began with the Nixon White House. It wanted money for the Vietnam War, and money in people’s pockets. So, Meltzer says, the Fed printed more.
Meltzer: It was a politically motivated decision. It did get more growth initially, but it also produced more inflation.
Which proved hard to tame -– and he fears policymakers are doing the same thing now.
To control prices, the Fed can boost interest rates. Unpopular economic spinach for a Fed chairman, until President Carter appointed Paul Volcker.
Meltzer: Volcker said to him, I’m going to be tougher on inflation than my predecessors. President Carter said that is what I want. I don’t think he understood exactly what he was asking for, because interest rates got to 20 percent or more.
Former Fed Vice Chairman Alan Blinder remembers those interest rates, from when he bought a car.
Alan Blinder: The bank wanted 18 percent and I called up my local credit union. And they only were charging 10 percent, because they hadn’t yet adjusted. And I dashed over to get that 10 percent rate.
High rates broke inflation by the early '80s. But to get there, Volcker upset developers who couldn’t sell homes. At a speech this week, Volcker says even now, some walk up and call him an S.O.B. But others say...
Paul Volcker: My father bought government securities at 15 percent which put me through college. Thank you very much!
Inflation today is only 3 percent. But inflation hawks see it creeping up -– and they warn, do we really want to go through all that pain again?
In Washington, I’m Scott Tong for Marketplace.