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In 1978, when the last pages of Age of Inflation were penned,
President Jimmy Carter was haggling and wrangling with
Congressional leaders about vexatious economic issues.
Consumer prices, which had risen 6.8 percent in 1977, were
climbing at an ever faster rate. In a televised address to the nation,
the President bravely addressed the problem: "It is time for all of
us to make a greater and more coordinated effort." He called for
workers to limit wage increases to 7 percent and asked companies
to hold price increases below those of 1976 and 1977. Yet the
dollar continued to decline. The President then announced a
number of federal actions including massive U.S. intervention in
foreign exchange markets to bolster the dollar. The fall of the
dollar nevertheless accelerated; its purchasing power shrank 7.62
percent in 1978, 11.22 percent in 1979, and 13.58 percent in 1980.
This was not the dawn of the age of inflation. Some
economists point to World War I, when nearly every country in the
world took recourse to nonconvertible paper money. For a few
years after the war, the standard was restored, although gold coins
were no longer in circulation in most countries. It was abolished
again during the great depression, by the United Kingdom in 1931,
the United States in 1933, and most European countries in 1936.
Soon thereafter, not a single country observed the gold standard.

A few American economists hint at the inauguration of the Federal
Reserve System as the beginning of the age of inflation. The
System was established by law in 1913 and began to operate in
November 1914. Its primary functions ever since relate to the
maintenance of monetary and credit conditions favorable to
business activity in all fields. Its primary duties are lending its
funds, which it may...