Libya Now, Iran Then: How Close Are We to 1979?

Now, what happened after 1979’s Iranian Oil Shock? Like I said: Severe inflation, unemployment, and a Fed that had to raise rates catastrophically, in order to stop an inflation that was spiralling out of control.

But back in 1979, there was no kindling for that inflationary fire. Federal Reserve money policies were fairly responsible. The Federal government’s total debt and liabilities was less than 50% of GDP. Back in 1979, the U-3 unemployment rate was about 5%, compared to over 9% today.

Back in 1979, there was no ZIRP, no QE2, no $1.6 trillion deficit. There weren’t so many freshly-minted dollars sloshing around, looking for yields like army ants looking for dead meat. There wasn’t a total government debt that was bigger than the total gross domestic product of the United States.