Brad DeLong asks what America can learn from its past bouts of inflation

THE FIRST and most important thing to recognise about the macroeconomic situation in America is that Jerome Powell and his Federal Open Market Committee (FOMC) should be taking victory laps. Two and a half years after the start of the financial crisis in 2007, America’s unemployment rate was kissing 10%, the Federal Reserve realised that it was out of firepower and the Obama administration had just thrown away its ability to help by promising to veto spending and tax bills that were insufficiently austere. After that moment it would take six years for America’s economy to approach full employment. The impact of deficient employment meant that output was $7trn lower in 2013 than it would have been otherwise. Additional losses stemmed from the investments not made, business models not experimented with and workers not trained during the decade of anaemic recovery.