Is the Inflation Cycle Repeating? Why 2026 Looks Like the 1970s

Is inflation coming back? Our guest today is Jeffrey Tucker. He's gonna tell us the signs we should look for to see if inflation is coming back, and if it is, what are the impacts? My big worry was that we'd repeat the experience of the 1970s. People don't remember this, but there were three very clean waves in the early 70s, in the mid-1970s, and the late 1970s. Each time, monetary authorities thought the inflation had been conquered, and we would go back to flat, or 2%, which is the target. But each time, it didn't happen. It just kept getting worse because they got lax. And that's been my fear from the very beginning here. I'm Siamak, and this is Market Insider. Jeffrey, it's great to have you on. Welcome. It's my pleasure. Thank you. We wanna talk to you about a very important topic that actually a lot of people are thinking about now, which is inflation. And the recent data came out, the numbers, it looks like the CPI data is showing 2.3%. It's gone up. Can you tell us what you're seeing out there? Well, the energy price sector doesn't look good, for sure. The increase in gas prices and fuel oil have been quite devastating for the overall indexes. And that is rolling into other forms of real-time inflation. Right now, real-time goods inflation is clocking in at about 4%. That is not where we want it to be right now. It was about a year and four months ago that inflation almost collapsed down to 1% and lower. It looked like we had beaten the inflation of the Biden era, which lopped off anywhere between 25 and 30% of purchasing power of the dollar. It looked like maybe the prices had adjusted upwards to accommodate all the huge expansion of money over the COVID period. That was devastating for the American people and for all dollar holders around the world, really. And it looked like it was at an end, but trends have now changed. In the spring, a year later, and we're starting to see pressure on the upward side right now. And yes, it's led by energy, but we're seeing it now bleed into other goods too. We use the word transitory, the Fed used. Do you think this time is transitory or do you think things have changed? I sure hope it's transitory. My fear from the very beginning of this inflationary bout, which as I say, has been quite devastating. From 2019 up to the present, we have lost anywhere between 30% of purchasing power. In other areas and groceries, it's closer to 45%. Homes, much more aside from that. My big worry was that we'd repeat the experience of the 1970s and people don't remember this, but there were three very clean waves in the early 70s, in the mid 1970s and the late 1970s. Each time monetary authorities thought the inflation had been conquered and we would go back to flat or 2%, you know, which is the target. But each time it didn't happen. It just kept getting worse because they got lax. And that's been my fear from the very beginning here. Do you see that happening? And if you have a case for that happening this time, how would it look like? We're already starting to see the money supply expand. So the Fed is already getting lax. They're being pressured very hard by the Trump administration to lower rates, which they don't wanna do because they're concerned that that would fire up inflation and it would create unsustainable situation. The Federal Reserve is already trying to, is dealing with a broken balance sheet as it is coming out of the COVID period. And then before that 2008, so there's a lot of brokenness within the monetary system right now. But nonetheless, the M2 is still expanding. We're at a higher rate now than we've ever been by far. Not a higher rate of creation, but a higher, just a sheer number of quantity of dollars that are floating in the US and abroad. So that's not a good sign. And then also the elevation of the gas prices as a result of the war is feeding into other sectors. And that combines with tariffs. And nobody really knows what the effects of the tariffs are going to be on the prices of imports or if for that matter, the domestic goods that are no longer having to be competitive with imports, those face price pressure too. So there's a number of different sources here that could lead us into a second wave. It's been my number one fear from the very beginning. I think the lesson of the 1970s is don't do things from a policy point of view that would even tempt a return of inflation because you do that and it will return. That's what we saw. And that lesson seems to have been forgotten because it was 50 years ago. And nobody has a memory that deep. But as a second wave of inflation would push past 4%, reach 8%, if it really is a full second wave, it could go into double digits. And already there are sectors right now that are increasing at double digit rates, depending on what you wanna look at. So it really is just like playing with fire. And the Trump administration has zero interest in backtracking on its tariff policies. We don't know how long this war is gonna go on. There's a great deal of uncertainty in the markets right now about the price of oil, which has gone from like $60 to a peak of 120 in the futures market very rapidly, creating the price shocks that are cascading all over the world. And so a lot of conditions are pointing to the possibility that we're gonna get a restoration of inflation. And I just don't see how people can stand that right now. The American standard of living has already been hit really hard from the last six years. I don't know what the implications of that would be, generally. One of the strange features of many inflations in history is that they don't hit the financial markets in a negative way until quite late. So I think right now people are taking a lot of solace in the fact that the S&P seems to have bounced back. The Dow is not necessarily hitting its highs, but we're not suffering nearly as much as one might expect. But ironically, sometimes that can be not a good sign, but a bad sign. In other words, financial prices can rise in the midst of inflation for a very long time, tricking people into believing that this is economic health, but it's actually not. It's just increasing financials. You're seeing a potential second wave. Do you see it being 20, 30% loss of currency value, or is it milder? What are your thoughts on that? If it follows the trend of the 1970s, and there's nothing about history that's guaranteed to repeat itself, right? But still there are lessons to be learned and patterns that you notice. The second wave would be in the lower double digits. It would be 10 to 12%. And then there would be a third wave that would get us into the 15 to 20% realm. And each wave would last about three years if we're gonna repeat that experience. And then after that, yeah, I don't know what the implications of that would be from a standard of living of the average American. You know, it's hard to say. Already we're dealing with a very different situation now than we were in the 1970s because of the indebtedness of the American household and the indebtedness of the government, which gives people a far less flexibility in terms of suddenly becoming frugal about spending or being able to adapt monetary policy to tighten money. The debt makes that essentially impossible. So if we really do go through a second, much less a third wave, we'll be in completely uncharted territory. And unless something's done to mitigate against that, you could see something as terrible as like what we've seen in history, which is something like a crack up boom where you really do have everything fall apart all at once. It's not an imminent danger. I don't think that we're facing anything like that right now, but it would be foolish to neglect the potential for a catastrophe if we stay on the present path. What do you see out there? Will the cost of borrowing go up significantly? Would people stop buying things? How would it look like for the consumers? You would have to see the cost of borrowing go up, but also credit standards would be extremely tightened. So borrowing would simply not be available to most people. So you're looking at waves and waves of defaults. Most businesses now are leveraged up in ways they weren't in the 1970s. So the cost of servicing that kind of loans would be extremely high. We're already seeing an example of that in the private equity markets right now where that thrived mostly on a loose credit regime with very low interest rates. And they became a main lending and investing alternative to conventional banking system. When interest rates shifted direction in 2022, we started seeing the financial position of these private equity companies start to erode. And then they were themselves pressed for revenue to service their highly leveraged positions. Investors have recently become very concerned about them and attempted to withdraw funds from many private equity positions. But contractually, these companies, these gigantic companies are not under any obligation to pay out. So they're very behind now on payouts. And that's a problematic sector. We're watching that one really carefully right now. And if that unravels entirely, that will have devastating effects on a whole range of industries because private equity has involved itself so heavily in the American retail sector and insurance and many other areas. So if that falls apart, that could be a trigger. Another really vulnerable area right now is commercial real estate. And just like what happened in 2008 with MBS products, you've got MBS products that are mortgage-backed securities that pertain to commercial real estate, which has never really recovered from the lockdown period and the work-from-home movement that made everything vulnerable. But these properties don't adjust as quickly as like home prices. So they take longer to fall apart. So I would think that that would be the second effect after the collapse of the private equity market would be, and all the bankruptcies that would thereby be associated with that, would be the collapse of the commercial real estate markets in light of the failure of these MBS products to obtain any kind of market value, which is very similar to what happened in 2008. So that's not a very pretty picture. And recession and stagflation would be a foregone conclusion at that point. So the combination of depressed economic conditions, a simultaneous collapse of many sectors of business enterprise alongside roaring inflation that nobody seems to be able to control. That's the kind of dangers that we're looking at in a worst-case scenario. Now, Jeffrey, based on what we've been told is the reason we had, some experts argue, the reason we had this significant amount of inflation, some of it had to do with the significant amount of government spending, along with the Fed policies. How do you see this second wave, if it comes, where would it come from? How would it come? We're already seeing pressure on the monetary side, and Congress has not curbed its spending appetites at all. We had hoped that we were going to see dramatic cuts. I mean, early on in the Trump administration, people were talking about $2 trillion in cuts, thanks to the work of DOGE, the Department of Government Efficiency, and rooting out waste and fraud and all this stuff. That never materialized. I think in the end, $2 trillion was curbed to something like 180 billion, but even that got swallowed up by huge increases in military spending. This all has to be paid for somehow. The way it works is that Congress spends the money, the Treasury Department digs around, can't find the revenue to fund it, so it creates the debt, and then the debt markets get to work, and the Federal Reserve starts buying, and they buy with newly created money, and that's, I think, the essential source of the growing money supply right now, and as that money supply grows, it eventually waters down the value of all existing currency in circulation. When I say in circulation, it's mainly electronic, and so that's a devaluation that takes place, and that and devaluation and inflation are just two words for the same phenomenon, which is that your purchasing power goes into decline. Ideally, Congress would restrain the spending, right? That would be the ultimate fix, and there are many easy fixes for this problem, but none of which Washington's interested in pursuing. There's absolutely no spending restraint on Capitol Hill right now, and they're not thinking about the future. They're just thinking about the next election, as always, but it's coming at the expense of the American people. Most Americans, by about two or even three years ago, were fully expecting that prices would revert to 2019, okay? That was never going to happen, and so now we've adjusted our expectations in terms of price. We go to the grocery store. We're shocked at what we're seeing. We look for cars. We're amazed at the prices of cars. We remember back when we used to pay $5,000 for a good used car, and now you can't get anything for less than $25,000, $30,000 so we remember these things. We've made that adjustment in real terms. It looks like medium income is holding on, but that's not quite accurate. I don't think there are many people who have experienced a 30% raise in their wages and salaries over the last six years. I think that's pretty unusual, so in real terms, Americans are very likely poorer now than we were six years ago, so a second wave would only ding that yet again and drive us further into a situation of pessimism and near despair. I was looking at charts yesterday that are published by the Federal Reserve Bank of St. Louis from the OECD that does very interesting surveys of consumer expectations of outlook on economic life. This consistent survey goes all the way back to the early 1970s, so they've been doing it for 50 years. The most recent numbers came out in February, and they are lower than they've ever been. They're lower than in 2008 and lower than they were in 1980 when there was a political revolution in this country. People despise inflation, and right now, they're lower than they were in the two lowest points in my lifetime, like shockingly low. This is from the Organization of Economic Cooperation and Development, a very credible survey that they've been running for 50 years. So we're already starting off with certainly not a golden age but a lot of despair among the citizenry, consumers, small businesses, and everybody else, gravely uncertain economic times. What kind of indicators are you looking at to tell that this second wave is coming or not coming? What are you analyzing? What would you look at? Most people look at the CPI, and it's important to break that down. But all these numbers, you have to look at them very carefully because with the CPI, they're typically reported year over year, which means that if you're looking at March CPI in 2026, you annualize it by looking at the cumulative inflation from one year ago March, so March 2025. That's one way to look at it. But the thing is about that, we had such low numbers in January, February, and March of 2025, that those low numbers are subsidizing and maybe distorting recent trends. In other words, underestimating the trend just because you're looking at it year over year. If on the other hand, you annualize and compound the present CPI reporting, you get numbers that are double what you're seeing from the CPI if you just merely look year over year. So there's two ways to look at this, and it's important to look at both of them and then sector by sector. And it's the same thing with the PPI. The producer price index usually comes out a few days after the CPI, and you can do the same. The most recent PPI did not have good numbers, especially for energy. And usually the PPI is going to be forecasting consumer prices, something like four to six months in advance of having those prices bleed into the future. So CPI, PPI, but the other number I really think is highly credible is there's a service that's mostly paid, but it's called Truflation. And they are looking at millions of different prices all day, every day through algorithms and looking at what's happening outside the window like right now. And here you're seeing numbers that are closer to, I think today they're clocking at about 1.8% real time annualized, but that's a dramatic increase over what it was six or eight months ago. And that's just for all goods, but if you look at all goods and services, but if you look at just their goods numbers, those are coming in at about 4%, which is pretty bad. And that's again, year over year. So I look at Truflation for that. And then finally, I like to monitor the money supply very carefully. So, and that's kind of an old fashioned way to do it, but it is a law of economics, which we call the equation of exchange, which is roughly stated that a price level is a function of money times velocity as adjusted for output. So if you're seeing relatively low output, which we are right now, it keeps being adjusted downwards by the way. I mean, these GDP figures magically mutate one month to the next in ways you can't really anticipate. So very low GDP figures, an elevated money supply with a stable velocity, that is mathematically speaking, all else equal going to lead to higher prices, which you can absolutely know looking at the whole of modern history of monetary systems. Jeffrey, when you mentioned the consumer confidence, that the way consumer feels, but at the same time, we're seeing the consumers are still spending. What are your thoughts on that? Even though they have a very pessimistic view of the economy. Yeah, it's remarkable. I've thought about this a lot because, yeah, you're right, the restaurants are full. It always just amazes me. I think this might have something to do with an unwillingness on the part of consumers to adjust their spending habits in light of inflation and in light of indebtedness. So they're burning through credit cards. We're seeing credit card debt historically high, which is amazing when you consider that the interest rates on credit cards are running 22%. Why anybody would set up a revolving credit card under these conditions is utterly mystifying to me, except when you consider the extent to which the consuming public is absolutely addicted to their lifestyles and unwilling to make any kinds of adjustments. And in terms of the business sector, money has been so loose for the most part for about 25 years, really badly, for about 18 of those 25 years, that the commercial sector became wildly addicted to leverage. And if you weren't levered up, you just simply couldn't compete with those who were. So our whole system has dramatically changed from a production-based system to a purely debt-financed-based system. And this has happened over 50 years, but in particular, over the last 20 years, to the point that it seems like we're available. These days, people can evade reality in a much more viable way than they ever did in the past. But living off debt, as the US economy is right now, is not the same thing as economic health, and it's certainly not the same thing as economic freedom. So this is a genuine concern of mine. In fact, I'm preparing to do a large study for Epoch Times on the Americans' attitudes and use of debt finance now as compared to half a century ago. It's a dramatic change, I think, much more so for the worse. There is a lot of also investment that's coming to the US. There's a lot of promise of investment coming to the US, and also there's a lot of investment going to AI and data centers and all that. And some people have argued that this is gonna create a big boost for the economy because when the dollars get invested, it creates jobs and gonna grow the GDP significantly. What are your thoughts on that front of things? Yeah, again, this is an industry that's so levered up based on living off expectations of the future, high earnings from valuations in financial markets, and also highly indebted to, of all things, private equity. So the debt runs both ways, private equity, right, both borrowers and lenders. So there's a lot of ways in which you could look at the AI sector today as one of history's largest bubbles. I mean, maybe it all works out and there's an immense production, and a lot of people believe that. Unfortunately, it's gonna come at the expense of the kind of jobs that people are used to holding. There is a kind of a wild disruption associated with the success of AI to achieve its promise, but there's another form of disruption if AI turns into something like the dot-com bubble of 1999, which I would guess that that is more likely the case than not. And from what you're seeing, what would you tell people? How should people position themselves financially or any recommendations you have for them? Well, you know, there's no magic way to survive something like this, the worst possible conditions. But, you know, I always recommend in these kinds of cases that the old fashioned advice that a balanced portfolio is the best one. I mean, if you're worried about safety, treasuries, there seems to be no danger to treasuries right now, and it's better treasuries than losing a valuation on holding cash. It's not the case that financial markets perform poorly under stagflationary conditions. Sometimes it's exactly the opposite. But implausibly, what we're seeing right now, and this is proof of the last several days and really over the last year, the precious metals market is doing extremely well. Gold and silver, which you can hold now in a financial form of ETFs, or if you're really old fashioned, you can take physical possession of it. And, you know, it seems to me inconceivable that anybody who's alert these days as to the vulnerability of economic conditions would neglect the importance of diversifying in a way that's inclusive of these old fashioned flights to safety, your gold and silver. I mean, certainly China seems to know that. We're seeing China's central bank and many central banks around the world trading dollars for gold right now. That's a sign. What about, you mentioned, so these are hard assets. What about real estate? Do you think it's gonna be different for real estate compared to these gold and silver? Well, there's many ways to look at real estate. Commercial real estate is not healthy right now. And I'm not bullish on that at all. In fact, just the reverse. On the other hand, you know, in a genuine crisis, land values are definitely going to rise. So there's never a problem in finding a nice piece of land somewhere for residential use or under worse conditions, opening up your own farm, which everybody's telling me to do, but I don't know. I can't even get my tomatoes to grow on my porch. So I'm not sure that's for me, but. What about other commodities, things like copper and other types of commodities that are used for industrial uses? By the way, the silver market has been, is seriously bolstered by the rise of AI. So that's something to consider. There's no conductor of electricity in the world that compares with silver. So that's a major feature of that. But in inflations, it's always the commodities that move faster than everything else. So, and I'm not one for the futures market, but if you are expecting a large inflation in the future, then that would seem to be an excellent place for your money. By the way, I have friends of mine that don't entirely agree with me on my analysis here. They imagine that with debt levels like we're facing right now, we could actually experience simultaneous inflation in some goods and dramatic deflation in others. I've listened to their arguments many times. I'm not entirely convinced, but it's also crucial to realize that we really are entering into unknown territory with this level of debt, consumer business and government debt has reached astronomical levels like we've never seen no matter how you measure it. There's nothing in history to compare. So we are going to learn a lot from whatever is around the corner. Now, the question of how to avoid this is easily answered. It's like, stop doing what you're doing, right? I mean, like, this is not the time to play more with trade disruptions. It's not a good time for deciding to go to war in ways that risk the closing of transportation channels. It's not a good time for Congress to spend like drunken sailors, like all these things should be cut. There's enough health and enthusiasm in the enterprising sectors of the American economy that if we would just stop doing bad things, the rest would just take care of itself on its own. But what I'm seeing in Washington right now is a complete lack of urgency about this problem, which is why I've been sounding the alarm for the last years. Don't do bad things because bad things could result. But unfortunately, I don't seem to be having much influence. We'll see. Jeffrey Tucker, President of Brownstone Institute and Senior Economic Contributor for Epoch Times, it was great to have you on Market Insider. It's my pleasure, thank you. This is a critical time for the U.S. economy. Some people are arguing that we're gonna have significant amount of productivity growth, and as a result of it, inflation will come back, prices will go down. And some people like Jeffrey Tucker argue that there is a chance that inflation could come back, and we're kind of experiencing what it was like in the 70s. What do you think? Let us know in the comments. I'm Siamak, this is Market Insider. We'll see you next time.