A Study On Reasons Of Stagflation In U.S.from1973to1975

Stagflation crisis has been received a lot of attentions as a macro-economyphenomenon from academia both domestic and overseas since it appeared in worldhistory. There is realistic significance for policy options of Chinese economy grownsmoothly to analyse the reasons of stagflation. At the same time, stagflation madegreat influences both macro-economy management and international political andeconomical orders. So, it has academic value of analysing the reasons of stagflation.Chapter1The formation of stagflation and its manifestationThis chapter discusses the golden age of U.S. economy since the end of theWorld War II. U.S. economy made a great success after the World War II. Thesocial-welfare system, standard of people"s living and the whole society all improvedconstantly. As a result of total demand management of Keynesian policy madegovernment procurement keep growing and the release of consumer demand limitedduring the World War II. U.S. economy achieved a great booming time. However, theworld economy became more and more unstable since1970s. Even the greatesteconomic entity in the world like U.S. also flowed away its advantages of economichegemony in the world. Stagflation crisis in1970s struck the politicians, economistsand common people who believe in Keynesianism. U.S. economy sunk into the mostterrible conditions since Great Depression in1930s.Chapter2The system reasons of stagflationThis chapter discusses the system reasons of stagflation in five fields. Largecompanies and labor unions monopolize lands, capitals and human resources ofmeans of production, so the cost began to go up; As international transaction currencyand reserve currency. U.S. dollar faces with Triffin Dilemma. Fluidity surplus of U.S.dollar causes it’s difficult to control inflation; U.S. economy entered into down periodof economic circle in1970s. Social demand descended and economy grown slowly;After World War II, U.S. government had a blind faith to Keynesian anti-crisis effects.It made surplus production capacity can not be adjusted in time because adoptedKeynesian policy excessively to expand domestic demand. The economy will bedecline when stop the deficit financing. The defects of Keynesianism began to show up. Social-welfare payment became an important tool of U.S. government to regulateand control economy. Social-welfare payment was the major consumer of long-termdeficit financing. And it drove the inflation rate up.Chapter3The accidental reasons of stagflationThis chapter discusses the reasons of stagflation from accidental factors. Eventhough these actors are not fundamental, the effects of these factors still veryremarkable in the process of stagflation, even we can say these are indispensable. Thefourth Middle East War exploded in Oct.1973. OPEC members carried out oilembargo policy to west countries, it made international oil price rises up four timesviolently just in two years. This change attacked U.S. economy badly and lead tostagflation directly; A bad effect from food crisis has the same affect as energy crisis.Global foods shortage happened in the early years of1970s. The rise of food pricedrove inflation rate up by a wide margin; Enormous military expenses by VietnamWar advanced economy growth, but above all, it also drove inflation rate up.In conclusion, the first reason of stagflation is system crisis, and secondly, wealso can not ignore the effects of accidental events. Basically, stagflation caused bythe imbalance of supply and demand among monetary market and commodity market.It’s a fateful result of economic system imbalance. Excessive currency publishingmakes demand rise up. Domestic investment weak, corporation profit margin decline,oil crisis and food crisis causes supply shortage. The final result is to devaluate U.S.dollar, appreciate commodity and lead to inflation. The most reason of currencypublished excessive is social-welfare payment that depends on Keynesianism toomuch and the newly increased currency because the expenses of Vietnam War. Thereasons of unemployment rate goes up is the excessively expand of large companiesthat made profit rate decline and the economy was in down period of economic circleat that moment.