What AI Just Said About Inflation and Economic Stability. (You Are NOT Going To Like It...)

From Greg M

Lions.

I uploaded this chart below to AI, which should be familiar to you, as we have covered this in several of my videos and newsletters.

I asked AI to just look at the chart and evaluate it, and this is what AI said.

It starts off with me informing AI that I just uploaded a chart to it, and me then asking AI to evaluate it. (Shaded area).

(Below is the automatic, and detailed, response I got from AI).

PAY PARTICULAR ATTENTION TO POINT #4 POSSIBLE IMPLICATIONS.

The chart you uploaded shows the U.S. inflation rate (CPI) over time, particularly highlighting key periods of high inflation in the 1970s and early 1980s, and compares them to the current situation.

Here’s a breakdown of what I observe:

1. 1970s Inflation Surge:

   • The chart highlights inflation rates in the early 1970s (around 3.4% in 1972) before inflation starts to spike in the mid-1970s. By 1974, the inflation rate hits 12%, which is a sharp increase.

   • The chart notes the 1979-1980 period, where inflation peaked at around 15%. This period of high inflation was caused by a combination of factors including oil price shocks, government spending, and monetary policy failures.

2. Paul Volcker's Response (1980s):

   • The chart mentions the role of Paul Volcker, Chairman of the Federal Reserve, who raised interest rates significantly during this period to combat the inflation crisis. These aggressive rate hikes eventually helped bring inflation under control, though it also led to a sharp recession in the early 1980s. The rate hikes are often credited with breaking the back of inflation but came at a high cost in terms of unemployment and economic slowdown.

3. Current Inflation:

   • The chart draws a parallel between the inflation rates of the 1970s and the current inflationary environment. Today, inflation has spiked similarly, reaching multi-decade highs (often reported around 8-9% in recent years).

   • It appears the potential projection for the future suggests that inflation could continue to rise unless strong actions are taken, potentially following the same path as in the 1970s.

4. Possible Implications:

   • If current trends are similar to the 1970s, this could signal that inflation could turn significantly higher unless direct measures are taken to control it, such as aggressive interest rate hikes.

   • The comparison to the past suggests a looming risk of prolonged inflationary pressure, which could have wide-reaching impacts on purchasing power, savings, and overall economic stability.

In summary, this chart is warning that we could be on a path similar to the 1970s if inflation continues to rise unchecked. It raises the question of whether today’s policymakers will take steps similar to Volcker’s actions—raising rates and tightening the money supply—to curb inflation before it gets out of control.