As part of our continuing inflation series, we caught up with Joseph Lavorgna, Natixis’ chief US economist, who just returned from a stint as chief economist of the National Economic Council.

“People forget what real inflation is,” he told us. “I was seven years old during the oil embargo in the 1970’s when there were gas lines. It was a long process getting to that level of inflation. You had the guns-and-butter roll out of costs under LBJ’s Great Society programs plus spending for the Vietnam War. All combined with easy money Fed policies. The 1970’s oil shock took prices from $4/barrel to $40 – a 10-fold increase. Imagine going from $60 oil to $600 today.

“That time comprised some unique elements. First, there was no Fed rate tightening! Then there was the second oil shock in 1979, followed by double digit inflation for several years. But unlike the current period, that era was marked by two decades of bad macro policies and exogenous shocks.

“Today we’ve compressed years of economic build-up into one. And the character of the economy has changed. Inflation expectations are stable, you’ve got a much more global economy, and demand of products and services have outstripped supply. Not a lot of upside pressure on wages, and whatever’s there is offset by productivity gains. The price gains we are seeing represent a post-pandemic price level shift. Further economic reopening will mitigate supply-side bottlenecks.