Great Society by Amity Shlaes tells the story of the disappointments of Johnson’s signature program; the lessons are many. The inflation of the 1970’s had numerous causes and led many of us to conclude that the deficits of the most recent decade under both Obama and Trump would lead to a similar inflationary challenge. It hasn’t and that has made me curious why. Clearly there is much about inflation that we do not understand. Nixon’s Fed Chairman Arthur Burns had to admit that most of the economic assumptions his profession relied on no longer held true. It was possible to have inflation with a deteriorating economy and high unemployment.

With record deficits why are we not experiencing the inflation of the 1970s? Johnson was unable to choose between guns and butter, but he also had institutional limits that no longer exist.

The closing of the gold window and the floating of the exchange rates led to inflation at the time, but the world has adjusted. Fixed artificial rates are now market driven; adjustments are much quicker.

Competition has increased though globalization keeping prices low. Technology has been deployed to bring prices of many items down. Leadership in old industries have passed on to new names. Nucor is the largest American steel producer, not US Steel or Bethlehem.

Globalization has also spread wealth around the world and these new wealthy in 2nd and 3rd tier nations need stable government bonds in first world countries, even at record low yields.

Inflation and deflation measurements may be unrepresentative of the whole economy; we experience both at the same time in different segments of the economy.

Central banks may have learned from prior crashes and learned to mitigate emergencies such as 2009 better.

But these explanations leave me uneasy. Without the pain of excessive government debt is there ever an end to it? It seems doubtful that scarcity has been erased from economic reality. The absence of short-term firewalls has historically led to larger more painful reconciliations, and it just seems immoral to consume more that you can pay for. In 50 years gold has risen from $35 to $1517.99 an ounce (1/1/20), does anybody care? The dollar is strong, and the American economy is performing better than any other in the world, even if that only provides a low bar.

Without the pain of inflation, unemployment, or slow economic growth there is no demand to control the deficit from either party. The fact that we cannot predict the outcome of this deficit brings me no comfort.