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24 October, 22:24

The Post-Vietnam period was politically highly contentious. Of all the challenges the country faced in the period between 1973 and 1980, which do you think was most severe? Why do you think this was most severe? How was this challenge faced by Americans and the government? Was there any "outcome" positive or negative?

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  1. 25 October, 00:04
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    Stagflation

    Explanation:

    Stagflation is a period with high inflation, that is to say, prices of all goods and services rise very fast, and high unemployment. This phenomenon surprised economists because they believed that inflation and unemployment were inversely proportional: in inflation is high, unemployment is low, and viceversa.

    Stagflation affected the US during the Nixon and Carter administrations. Nixon tried to combat inflation by raising taxes and lowering spending, but Congress refused. In the end, by the end of the carter administration, the task of ending stagflation was left to the Federal Reserve, led by Paul Volcker.

    Paul Volcker, inspired by the theories of Milton Friedman, tackled inflation by lowering the money supply, and it worked. This is why Milton Friendman's views on inflation, which came to be known as monetarism, have become the standard monetary policy not only in the United States, but in the rest of the world.

    Americans were obviously very unhappy with the economic condition. They became more pessimistic, they did not feel that America was as great as it was in the 1950s and 1960s. Many of them believed that Japan would soon overtake America's spot as the top 1 economy in the world. Others were paranoid about the Soviet Union becoming more powerful and launching a direct war. Nixon was especially paranoid and tried to hide the stagflation crisis from the Soviets in order to prevent them from thinking that capitalism had failed.

    In conclusion, Staglfation was a deep economic challenge in the post-war period, and it only fully ended by the half of the first Reagan Administration.
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