The return of the 1970s?

From stagflation risks to oil price shocks, there are parallels to the 1970s. But the more interesting insights are how (not) to respond to economic regime change.

‘History doesn't repeat itself, but it often rhymes’, Mark Twain

Inflation is at multi-decade highs, energy and commodity prices have moved sharply higher, there is weakening economic activity from Europe to China, as well as geopolitical conflict and tensions, and a fragmenting global economy. 

Three decades on from the post-Cold War settlement, the global economy is entering a new regime.

There are parallels to the 1970s.  Inflation rose sharply in many advanced economies from the early 1970s, partly in response to expansionary macro policy.  And the oil price shocks that came after the Yom Kippur War in 1973 and the 1979 Iranian Revolution created price pressures as well as a major economic hit across advanced economies.

International economic and financial turbulence increased after the US unilaterally exited the Bretton Woods system in 1971 and the world moved bumpily to a floating exchange rate system.  And the 1970s saw widespread domestic and international political tension and v…