In the Keynesian heydays of the 1950s and 1960s, most economists and policy makers believed in the “Phillips Curve,” which was the (alleged) tradeoff between unemployment and price inflation. The idea was that the Federal Reserve could cure a recession by printing money, or that the Fed could cure runaway inflation by jacking up interest rates. Each of these moves had its downside, of course, but the point was that the Fed could choose one poison or the other. This Keynesian orthodoxy was shattered in the 1970s when the United States suffered through “stagflation,” which was high unemployment and high … Continue reading The Threat of Hyper-Depression