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The Editors

Toward a New Consensus on Monetary Policy

If you’ve ever experienced high inflation, you’re unlikely to forget it. In the decades between the end of World War II and the creation of Europe’s new currency, Germany’s central bank set the global standard for sound finance and monetary conservatism. Germany’s folk-memory tied the hyperinflation of the 1920s to the destruction of German society and the rise of Adolf Hitler. “Never again” was the idea that motivated, and to some degree still motivates, German monetary policy.

Compared with that, the global stagflation of the 1970s seems hardly worth mentioning -- but it still made quite an impression on those who lived through it. Inflation in the U.S. was more than 12 percent in 1974. It subsided, but under the influence of the decade’s second great oil-price shock, it surged to almost 15 percent in 1980.