Part 3/8:
Historical Context: The 1970s and 1980s Inflation Scenarios
Tom draws attention to historical parallels, highlighting how the Federal Reserve’s attempts to cut rates during the 1970s resulted in unforeseen spikes in inflation. In a bid to reverse poor economic conditions, the Fed repeatedly shifted strategies, with rates peaking at an astounding 19% while inflation soared beyond 12%. This scenario led to three consecutive recessions, creating a cycle of booms and busts that investors today are wary of repeating.