Inflation graphic reveals how 1970s was 'decade of the price rise' (2023)

The 1970s was a punishing time for Britain's households with crippling inflation pushing up the cost of clothes by 500% in adecade, electricity bills quadrupling and a pint of bitter tripling in price to 37p over the ten years.

The crippling inflation facing Britons today is the worst since that decade, and thisillustration from the Daily Mail on December 19, 1979 - just seven months after Margaret Thatcher became prime minister - provides an insight into how inflation drove up prices.

It showed readers how the cost of everyday items such as a pint of bitter and a pair of jeans had changed over the preceding 10 years.

Among the biggest price increases was the average annual electricity bill which increased from £11 in 1970 to £40 in 1979. The cost of a new Mini went up from £595 to £2,404 and the cost of an average holiday to Spain went up from £126 to £413.

But if prices were to follow a similar trajectory over the next ten years along the scale as shown in the 1970s graphic, our average monthly mortgage payments would go up from £700 to £4,300 (up 513 per cent) by 2032.

The price of a pint in the pub would rise from £4.07 to £13.68 in the UK or £4.84 to £16.26 in London (up 236 per cent)and the Ofgem energy cap for gas and electricity would rise from £1,971 to £7,167 (up 264 per cent).

In 1979 homeowners had seen a huge rise in the costs of goods and services with prices having more than trebled in a decade amid a crash in the standard of living following an inflation rate of 17 per cent over the previous year.

This illustration from the Daily Mail on December 19, 1979 provides an insight into the cost-of-living crisis during the 1970s

The graphic was above a story in the Daily Mail newspaper that day headlined 'Decade of the price rise', which said that 'if you've just taken out a mortgage, wear blue jeans and commute into London each day, you'll be feeling considerably poorer'

The article is shown in the context of a double-page spread about 1970s economics in the Daily Mail on December 19, 1979

At the time the 1970 £1 had become worth just 30p, and the Mail's article mourned that the 'days when a pair of jeans cost £2.50, a pint of bitter 11p and a two-week Spanish holiday for two only £126 have gone forever'.

The graphic was above a story headlined 'Decade of the price rise', which said that 'if you've just taken out a mortgage, wear blue jeans and commute into London each day, you'll be feeling considerably poorer'.

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But the article added, tongue in cheek: 'On the other hand, cigarette, colour TV and washing machine addicts who spend a lot of time in hospital should be feeling considerably more affluent. Hospital beds are still free.'

The concept of a monthly rail season ticket for £59.20, which was the price in 1979 after a rise from £12.30 in 1970, is very much of the past - with even a short commute such as Guildford to London costing £392 a month today.

And the cost of a typical 55-litre tank of petrol in Britain is now £92.20 following the surge in oil and gas prices - up from £70.61 a year ago, and an astonishing rise on the 1979 figure of £6.32, which was itself up from £1.73 in 1970.

Surrounding the feature on the cost of living in the Daily Mail that day were a series of other articles about the economic situation of the 1970s, including one entitled: 'Credit cards and the plastic revolution'

This table looking at purchasing power of wages was also included in the double-page spread in the Mail in December 1979

The Mail's article also looked at items which had fallen in price over the 1970s, with the list including 'records and tapes, fridges, freezers, automatic washing machines, dishwashers, food mixers, cameras, contact lenses, gas bills and umbrellas'

There was also a glossary on the double-page spread of 'economic speak', which said: 'The 1970s were the decade when we all became more conscious of economics, even if we could not always be sure of what the economists' words meant'

Another article on the same page in the Mail referred to tax cuts, saying the 1970s 'began with tax cuts and ended with them'

One article referred to the launch of VAT in 1973 (left) while another looked at the development of cash machines (right)

A further article in the Mail referred to exchange controls where people were given a 'foreign currency allowance'

The newspaper also referred to the 'Great Seventies' Handout' and a 'boardroom bonanza' for unwanted executives

Homeowners in the late 1970s were also contending with a huge rise in electricity bills, which went up from £11 in 1970 to £40 in 1979. The average energy bill in the UK under the Ofgem cap is now £164 a month or £1,971 a year.

However some of the products listed have actually gone down in price since that time - such as a colour TV, which was listed as £260 in both 1970 and 1979. Nowadays Argos sells a 32-inch LG TV for £199, or a 43-inch for £229.

Other products that have gone down in price include a washing machine, which was listed as £136 in 1970 and £244 in 1979 - but today via Argos you could buy a Bush model for £185 or an Indesit machine for £215.

And while the Spain holiday price went up from £126 in 1970 to £413 in 1979, this latter figure is still achievable in the present day for many people, thanks to the boom in low-cost airlines and package holidays in recent decades.

The Mail's article also looked at items which had fallen in price over the 1970s, with the list including 'international air fares, radio cassette recorders, transistor radios, hi-fi equipment, records and tapes, fridges, freezers, automatic washing machines, dishwashers, food mixers, cameras, contact lenses, gas bills and umbrellas.'

This Office for National Statistics graph shows the Retail Prices Index inflation since 1948, with the 1970s peak clearly visible

Crowds wait at the entrance to Harrods in London during the sale on July 15, 1979 - the same year as the Mail's article

(Video) Examining Income Inequality In The U.S. Amid Rising Prices Due To Inflation

The coal strike on February 8, 1972 at Saltley in Birmingham after a lorry crashed through the crowds gathered outside

One of the regular power cuts takes out most of the lights in London's Piccadilly Circus during the Three-Day Week in1974

Prime Minister Margaret Thatcher with husband Denis Thatcher at Downing Street following her election win on May 4, 1979

Surrounding the feature on the cost of living in the Daily Mail that day were a series of other articles about the economic situation of the 1970s, including one entitled: 'Credit cards and the plastic revolution'.

This was the Daily Mail's front page on December 19, 1979 - the day of the feature on the 'Decade of the price rise'

This story pointed out that there were 10million credit cards by 1979 compared to 1.5million 1970, adding that spending on credit cards accounted for 5 per cent of consumer spending on transactions over £3.

There was also a glossary of 'economic speak', which said: 'The 1970s were the decade when we all became more conscious of economics, even if we could not always be sure of what the economists' words meant.'

It comes as the UK's present-day cost of living rose at its fastest rate for four decades as soaring energy bills put millions of Britons under pressure, withConsumer Prices Index inflation at 9 per cent in the year to April.

The Office for National Statistics said this figure was up from an already high 7 per cent in March. It was the fastest measured rate since records began in 1989, and the ONS estimates it was the highest since 1982.

A large portion of the rise was due to the price cap on energy bills, which was hiked by 54 per cent for the average household at the start of April - with a further punishing rise in October being predicted by experts.

In the present day, the Resolution Foundation expects that real incomes for working households in Britain will drop by over £1,000 year-on-year, which would be the sharpest decline since the mid-1970s.

The 1970s saw Consumer Prices Index inflation hit 25.3 per cent in August 1975, while months after the decade finished it was at15.6 per cent in April 1980. There was also real wage growth of negative 7.6 per cent in June 1977.

Could your mortgage interest rate head towards double digits? As experts say a serious hike is now inevitable... how the 1970s inflation crisis only came to an end when rates hit 17 PER CENT

  • Inflation in 1970s peaked at 25% and Margaret Thatcher imposed high interest rates to curb rising prices
  • Raising interest rates is one of the few weapons central bankers have to fight inflation
  • It means the cost of borrowing is increased and households therefore tighten their belts
  • By 1979, the Bank of England base rate had risen to 17 per cent, leading to huge mortgagerepayments

By Harry Howard

In the 1970s stubborn inflation saw interest rates raised to historic levels, leaving many homeowners with unaffordable mortgage payments - and most economists today fears rates will rise sharply again as central banks try to control soaring prices.

The decade was marked by sky-high inflation that reached beyond a staggering 25 per cent in 1975, hitting the pockets of ordinary Britons.

Raising interest rates is one of the only weapons central bankers have to fight inflation. It means the cost of borrowing is increased and households therefore tighten their belts, helping to bring rising prices under control.

And by the end of the 1970s, the Bank of England base rate - which was then set by ministers because the institution was only made independent from government in 1997 - had risen to 17 per cent, leading to huge mortgage repayments and a paralysed housing market.

Then, the inflation crisis had been caused by workers' wages rising faster than the UK economy was growing thanks to militant trade unions - and at the same time the price of oil soared as Arab nations constricted supplies over the West's backing for Israel in the Yom Kippur War.

Today prices are soaring thanks to the huge amounts of money in Britons' savings after two years of lockdowns and government handouts. At the same time the war in Ukraine has pushed oil and food prices up.

Headlines from the Daily Mail in 1979 reveal the extent of the inflation crisis that then existed, with one warning of a 'bleak winter outlook' as mortgage repayment rates of 15 per cent loomed.

The costs of electricity, groceries and food all rose by nearly 300 per cent between 1970 and 1979, whilst denim jeans went from costing £2.50 to £15. The price of a new Mini went from £595 in 1970 to around £2,400 in 1979.

The price rises were ultimately halted after the election of Mrs Thatcher in 1979 and her decision to raise interest rates and impose public spending cuts.

Whilst inflation was tamed - because the rise in interest rates meant people had less money to spend due to higher borrowing costs - it came at the cost of pushing the UK into recession, causing unemployment to rise beyond three million for the first time since the 1930s.

In comparison to today's Bank of England base rate of 1 per cent, interest rates in the 1980s remained high throughout Mrs Thatcher's time in office.

But with yesterday's news that the UK's inflation rate rose to nine per cent in April, the prospect of higher interest rates - which had been at historically low levels of less than 1 per cent for more than a decade before they were increased by 0.25 per cent this month - are on the horizon once again.

Speaking to MailOnline, experts said that, despite the Bank of England's recent caution, interest rates will need to rise further, meaning mortgage costs will increase.

Chancellor Sunak warned earlier this year that mortgage prepayments could rise by more than £1,000 a year if interest rates increase as expected by 2.5 per cent over the next 12 months.

Susannah Streeter, an economist at Hargreaves Lansdown, said there 'definitely needs to be an increase' in rates and said there is 'some speculation' that they could rise to 3 per cent. She said this 'short, sharp shock' risked a 'longer downturn' where the UK could plunge firmly into recession.

Professor Simon Johnson, the former chief economist at the International Monetary Fund, said it is 'likely' that rates will rise, as he warned that central banks 'have got the most difficult task they have had in 40 years'.

The economists' comments were backed up by Martin Sorrell, who founded the world's largest advertising group WPP. He said he sees 'little prospect' of inflation being tamed without the Bank of England 'significantly increasing interest rates'.

The inflation crisis of the 1970s began in 1973, when the OPEC cartel - which was dominated by Arab producers - raised the price of oil by 17 per cent in retaliation for the West's support of Israel in the Yom Kippur War.

The move prompted inflation to tear through the economy and led to the the Prime Minister Edward Heath declaring a three-day week, as strikes by coal miners led to a drastic shortage of energy.

When Heath was turfed out of office after calling an election in which he asked 'Who governs Britain?', his Labour successor Harold Wilson was then faced with an even worse situation.

By the spring of 1975, prices in the UK were rising five times faster than in Europe as inflation hit 25 per cent. Wage inflation also became rampant.

Whilst the average full-time weekly wages were £41.70 - £2,168 a year - in 1974, this figure had jumped 30 per cent to £54 (£2,808 annually) the following year.

Those who benefited most were workers backed by powerful unions, who forced the government into agreeing to pay rises. The before tax purchasing power of miners rose 146 per cent between 1970 and 1979.

Headlines from the Daily Mail revealed the extent of the hikes, with one from the period warning of a 'bleak winter outlook' as mortgage repayment rates of 15 per cent loomed. Another reported on how mortgages could hit 16.5 per cent

The equivalent for bus drivers was a 144 per cent in crease, whilst railway workers benefited from a 142 per cent rise.

Martin Lewis warns of RIOTS amid cost of living crisis as police chief predicts crime will soar as desperate public try to feed themselves

Martin Lewis today warned the cost of living crisis could cause 'civil unrest' as a police chief predicted a surge in crime - but told officers to consider turning a blind eye to shoplifters stealing food out of desperation.

Andy Cooke, the new chief inspector of constabulary, said there are 'no two ways about' the impact of poverty leading to an increase in offending and that he 'fully support officers using their discretion' for people stealing food to eat.

But he was slapped down by policing minister Kit Malthouse, who accused Mr Cooke of 'old-fashioned thinking' for stating that the economic shock will lead to more crime, as he insisted officers should enforce the law in all instances.

Meanwhile, as inflation hit a 40-year high of nine per cent, money saving expert Mr Lewis warned Britons were 'desperate' and 'angry', and said a predicted rise in the energy price cap this winter from £1,971 to £2,600 could be the final straw.

(Video) U.K. Prime Minister Liz Truss contends with soaring inflation, rising food prices

'I worry about civil unrest,'he told Robert Peston's ITV show last night.

'So the government needs to get a handle on it, and they need to get a handle on it quickly, they need to listen, and they need to stop people making choices of whether they feed themselves or feed their children.

'And we are in that now. We used to have a relative poverty condition in this country and we are moving to absolute poverty, and we cannot allow that to happen.'

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The social historian Dominic Sandbrook has previously highlighted how, in just a year, the price of sugar went up by 184 per cent, carrots by 137 per cent and electricity by 66 per cent.

But, terrified of further crippling strikes that had already brought the country to a halt, ministers were still agreeing to huge pay increases for workers, a factor that contributed further to inflation.

Whilst Wilson and his successor James Callaghan brought inflation down to single figures in 1978 by persuading the unions to accept reduced pay deals, the situation worsened once again late that year, when lorry drivers went on strike to demand higher wages.

The Winter of Discontent saw ports, petrol stations and supermarkets paralysed as supply chains ground to a halt.

With Callaghan hamstrung by an apparent inability to get the situation under control, Mrs Thatcher won the 1979 election on the back of a programme that promised to fix the situation.

One the first acts of the Conservative PM's government was to raise interest rates. They went from 12 per cent in April 1979 - before Mrs Thatcher moved into Downing Street - to 14 per cent the month after she came to office.

They rose again to their highest ever level of 17 per cent in November of that year.

In conjunction, Mrs Thatcher's government - which also included tough-talking employment secretary Norman Tebbit and Chancellor Geoffrey Howe - imposed fierce spending cuts.

The measures led to a recession that saw unemployment rise above 3million in 1982 for the first time since the 1930s. This figure would go on to rise above four million.

But whilst the measures were severe, so too had been the impact of inflation. A tank of petrol had gone from costing £1.73 in 1970 to £6.32 in 1979, a rise of 265 per cent.

A pint of beer went from 11p to 37p, an increase of 236 per cent, whilst the cost of food and groceries increased 277 per cent from £6.63 to £25.

In November 1979, the Daily Mail was warning of the 'toughest winter ever' for mortgages and loans due to the 17 per cent base interest rate set by the Bank of England.

At the time, mortgage rates were set to rise above 15 per cent, a level which the Daily Mail said had previously been considered 'politically unacceptable' but had since become 'inevitable'.

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A news report later in 1982 reported on the 'costly years' and noted how inflation since the 1970s had hit families hard

In February 1982, the Daily Mail reported how shoppers were changing their habits and going for cheaper foods in the face of rising prices. It noted how rising prices had 'particularly hit the meat trade'

After Mrs Thatcher's measures eventually brought inflation under control, interest rates - andconsequently mortgage rates - fell.

How have the cost of goods risen at YOUR supermarket?

Britons looking to cut back on their food bills amid the cost of living crisis are being hit with bigger price rises in discount chains than in their supermarket rivals, according to new data.

Figures show how Aldi and Iceland have upped the cost of an average item in their shops by more than Tesco, Sainsbury's, Asda and Morrisons in the last 12 months.

An average item now costs 31p more than it did 12 months ago in Iceland - a rise of 11 per cent - while Aldi prices have risen by 19p on average - a rise of 9.6 per cent.

The figures, from Trolley.co.uk's Grocery Price Index, also show how three of the 'Big Four' supermarkets, Asda, Tesco and Morrisons, have kept average price rises down to around 3 per cent.

Sainsbury's saw the smallest increase in the average cost of an item of the major supermarkets, with prices rising by 4p - a rise of 1.1 per cent - while Co-Op saw the smallest increase of 0.3 per cent.

Waitrose saw one of the largest monetary increases, with an average 22p rise per item over the last 12 months. However this represented a 4.4 per cent rise, due to Waitrose having a slightly higher price per item to begin with.

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Interest rates reached a low of just over seven per cent in May 1988 but did then rise again above 10 per cent from the late summer onwards and remained there until May 1992.

Writing on the Conservative Home website, the former International Trade Secretary Liam Fox recalled how his 'entire income' as a junior doctor was taken up by mortgage repayments as interest rates hit 14.88 per cent in October 1989.

Mrs Thatcher's economic programme also included a shift from centralised, state-controlled institutions to privatisation and economic reform.

Big British names that were privatised included British Telecom and airline British Airways.

But her policies led to brutal divisions in the country, as they boosted the service sector and home ownership but led to the decline of manufacturing and industries such as coal mining and steel making.

Speaking of the current inflation crisis, Ms Streeter said: 'There definitely needs to be an increase [in rates].

'The market is pricing at raising rates to 2.5 per cent but there is an argument to say they would have to rise above that in the short term before coming down to try and reach the 2 per cent inflation target.

'But that will be some considerable time.

'Obviously the risk is that you make the potential for a deeper recession. But if you don't then take that action the price risks will continue. That is the dilemma the bank of England will have to tread.

'I think rates will inevitably have to increase. We are already at nine per cent inflation.

'There is some speculation that they may be forced to go to 3 per cent to reign it in which does risk a longer downturn. Almost a sharp shock to get the economy to restart with lower inflation.

Professor Johnson said: 'It does look likely that interest rates are going to rise. You never want to be too definitive about that.

(Video) Why corporations are reaping record profits with inflation on the rise

'Do interest rates have to rise a little bit or have to rise a lot like in the 1970s and early 1980s?'

He added: 'The central banks have got the most difficult task that they have had in 40 years. The 2008 financial crisis was relatively straightforward, the question was 'how much do we help people?'

'Now it is about taking away the punch bowl, as they say in American central banking.'

He referenced the actions of Paul Volcker, the chairman of the US Federal Reserve from 1979 to 1987, who is credited with bringing down rampant inflation by hiking rates dramatically.

In 1982, unemployment rose above three million for the first time since the 1930s as Margaret Thatcher's economic policies - imposed to try to curb inflation - started to bite. Above: Unemployed construction workers march in central London in 1982

Unemployed people are seen queuing for the dole in Woolwich, east London, in 1982. The unemployment rate that year reached beyond 3million and eventually climbed to more than 4million later in the 1980s

The last time the level of inflation went beyond nine per cent, in March 1982, Margaret Thatcher was in her fourth year as Prime Minister. Above: The then PM giving a speech in 1982

Mr Sorrell told the BBC this morning: 'I think that [inflation] is going to continue for the foreseeable future.

'And the only reason why it would be reversed is if we do go into recession which looks more and more likely.

'I think there is very little the Government in the UK can do in the short term to avoid this.'

The advertising guru said the Government 'should have moved to a low tax economy' after Britain left the EU, but added that the 'goose is cooked' because the 'room to manoeuvre now is much more limited than it was a year or so ago.'

The decade of the price rise: Daily Mail graphic from 1979 shows how inflation sent the price of a pint up 236% to 37p and electricity bills QUADRUPLED to £40 a year

By Mark Duell for MailOnline

The 1970s was a punishing time for Britain's households with mortgage payments rising by more than 500 per cent across the decade, electricity bills quadrupling and a pint of bitter tripling to 37p over the decade.

And this illustration from the Daily Mail on December 19, 1979 - just seven months after Margaret Thatcher became prime minister - provides an insight into a time arguably even worse than the present cost-of-living crisis.

But if prices were to follow a similar trajectory over the next ten years along the scale as shown in the 1970s graphic, our average monthly mortgage payments would go up from £700 to £4,300 (up 513 per cent) by 2032.

The price of a pint in the pub would rise from £4.07 to £13.68 in the UK or £4.84 to £16.26 in London (up 236 per cent)and the Ofgem energy cap for gas and electricity would rise from £1,971 to £7,167 (up 264 per cent).

In 1979 homeowners had seen a huge rise in the costs of goods and services with prices having more than trebled in a decade amid a crash in the standard of living following an inflation rate of 17 per cent over the previous year.

This illustration from the Daily Mail on December 19, 1979 provides an insight into the cost-of-living crisis during the 1970s

The graphic was above a story in the Daily Mail newspaper that day headlined 'Decade of the price rise', which said that 'if you've just taken out a mortgage, wear blue jeans and commute into London each day, you'll be feeling considerably poorer'

The article is shown in the context of a double-page spread about 1970s economics in the Daily Mail on December 19, 1979

At the time the 1970 £1 had become worth just 30p, and the Mail's article mourned that the 'days when a pair of jeans cost £2.50, a pint of bitter 11p and a two-week Spanish holiday for two only £126 have gone forever'.

The graphic was above a story headlined 'Decade of the price rise', which said that 'if you've just taken out a mortgage, wear blue jeans and commute into London each day, you'll be feeling considerably poorer'.

But the article added, tongue in cheek: 'On the other hand, cigarette, colour TV and washing machine addicts who spend a lot of time in hospital should be feeling considerably more affluent. Hospital beds are still free.'

The concept of a monthly rail season ticket for £59.20, which was the price in 1979 after a rise from £12.30 in 1970, is very much of the past - with even a short commute such as Guildford to London costing £392 a month today.

And the cost of a typical 55-litre tank of petrol in Britain is now £92.20 following the surge in oil and gas prices - up from £70.61 a year ago, and an astonishing rise on the 1979 figure of £6.32, which was itself up from £1.73 in 1970.

Surrounding the feature on the cost of living in the Daily Mail that day were a series of other articles about the economic situation of the 1970s, including one entitled: 'Credit cards and the plastic revolution'

This table looking at purchasing power of wages was also included in the double-page spread in the Mail in December 1979

The Mail's article also looked at items which had fallen in price over the 1970s, with the list including 'records and tapes, fridges, freezers, automatic washing machines, dishwashers, food mixers, cameras, contact lenses, gas bills and umbrellas'

(Video) How The U.S. Made Inflation Worse

There was also a glossary on the double-page spread of 'economic speak', which said: 'The 1970s were the decade when we all became more conscious of economics, even if we could not always be sure of what the economists' words meant'

Another article on the same page in the Mail referred to tax cuts, saying the 1970s 'began with tax cuts and ended with them'

One article referred to the launch of VAT in 1973 (left) while another looked at the development of cash machines (right)

A further article in the Mail referred to exchange controls where people were given a 'foreign currency allowance'

The newspaper also referred to the 'Great Seventies' Handout' and a 'boardroom bonanza' for unwanted executives

Homeowners in the late 1970s were also contending with a huge rise in electricity bills, which went up from £11 in 1970 to £40 in 1979. The average energy bill in the UK under the Ofgem cap is now £164 a month or £1,971 a year.

However some of the products listed have actually gone down in price since that time - such as a colour TV, which was listed as £260 in both 1970 and 1979. Nowadays Argos sells a 32-inch LG TV for £199, or a 43-inch for £229.

Other products that have gone down in price include a washing machine, which was listed as £136 in 1970 and £244 in 1979 - but today via Argos you could buy a Bush model for £185 or an Indesit machine for £215.

And while the Spain holiday price went up from £126 in 1970 to £413 in 1979, this latter figure is still achievable in the present day for many people, thanks to the boom in low-cost airlines and package holidays in recent decades.

The Mail's article also looked at items which had fallen in price over the 1970s, with the list including 'international air fares, radio cassette recorders, transistor radios, hi-fi equipment, records and tapes, fridges, freezers, automatic washing machines, dishwashers, food mixers, cameras, contact lenses, gas bills and umbrellas.'

This Office for National Statistics graph shows the Retail Prices Index inflation since 1948, with the 1970s peak clearly visible

Crowds wait at the entrance to Harrods in London during the sale on July 15, 1979 - the same year as the Mail's article

The coal strike on February 8, 1972 at Saltley in Birmingham after a lorry crashed through the crowds gathered outside

One of the regular power cuts takes out most of the lights in London's Piccadilly Circus during the Three-Day Week in1974

Prime Minister Margaret Thatcher with husband Denis Thatcher at Downing Street following her election win on May 4, 1979

Surrounding the feature on the cost of living in the Daily Mail that day were a series of other articles about the economic situation of the 1970s, including one entitled: 'Credit cards and the plastic revolution'.

This was the Daily Mail's front page on December 19, 1979 - the day of the feature on the 'Decade of the price rise'

This story pointed out that there were 10million credit cards by 1979 compared to 1.5million 1970, adding that spending on credit cards accounted for 5 per cent of consumer spending on transactions over £3.

There was also a glossary of 'economic speak', which said: 'The 1970s were the decade when we all became more conscious of economics, even if we could not always be sure of what the economists' words meant.'

It comes as the UK's present-day cost of living rose at its fastest rate for four decades as soaring energy bills put millions of Britons under pressure, withConsumer Prices Index inflation at 9 per cent in the year to April.

The Office for National Statistics said this figure was up from an already high 7 per cent in March. It was the fastest measured rate since records began in 1989, and the ONS estimates it was the highest since 1982.

A large portion of the rise was due to the price cap on energy bills, which was hiked by 54 per cent for the average household at the start of April - with a further punishing rise in October being predicted by experts.

In the present day, the Resolution Foundation expects that real incomes for working households in Britain will drop by over £1,000 year-on-year, which would be the sharpest decline since the mid-1970s.

The 1970s saw Consumer Prices Index inflation hit 25.3 per cent in August 1975, while months after the decade finished it was at15.6 per cent in April 1980. There was also real wage growth of negative 7.6 per cent in June 1977.

FAQs

Can the inflation of the 1970s be explained? ›

The 1970s saw some of the highest rates of inflation in the United States in recent history. In turn, interest rates rose to nearly 20%. Fed policy, the abandonment of the gold window, Keynesian economic policy, and market psychology all contributed to the high inflation.

What caused the inflation of the 1970's? ›

An oil crisis contributed to a period of double-digit inflation in the 1970s. The 1970s are starting to trend – for all the wrong reasons. Today, prices for everything from gasoline to groceries are surging as the economy roars back from the pandemic recession.

What was the inflation rate in the 1970's? ›

The 1970s was the decade of inflation in the United States. While it may be surprising to some that the average inflation rate for the decade as a whole was only 6.8%, this rate is double the long-run historical average and nearly triple the rate of the previous two decades (see table 12.1).

What caused the economic problems of the 1970s were avoidable Why or why not? ›

What caused the economic problems of the 1970s? Were they avoidable? The increased international competition, the expense of the Vietnam War, and the decline of manufacturing jobs. yes.

What happened to the economy in the 1970's? ›

Stagflation in the 1970s combined high inflation with disappointingly uneven economic growth. High budget deficits, low interest rates, oil embargos and the collapse of managed currency rates were among the main causes of stagflation.

What the 70s were known for? ›

The 1970s are famous for bell-bottoms and the rise of disco, but it was also an era of economic struggle, cultural change and technological innovation.

What was happening in the 1970's? ›

Many remember the 1970s as a decade of soaring inflation, political upheaval, and the erosion of United States' prestige worldwide. But the significance of the seventies goes beyond high gas prices, Watergate, and Vietnam - profound changes to American politics, societal norms, and the nation's economy took root.

What happened to the stock market during the 1970s inflation? ›

Stock markets around the world were volatile in the 1970s. The S&P500 fell almost 40% during a bear market that lasted for most of 1973 and 1974, before rebounding over the next five years.

What caused this inflation? ›

Monetarists understand inflation to be caused by too many dollars chasing too few goods. In other words, the supply of money has grown too large. According to this theory, money's value is subject to the law of supply and demand, just like any other good in the market. As the supply grows, the value goes down.

How do you solve for inflation? ›

One of the main tools The Fed uses to fix inflation is raising interest rates. This is an example of monetary policy. The government can introduce fiscal policies to reduce inflation by increasing taxes or cutting spending.

How did the great inflation affect people? ›

High inflation incontestably destabilized the economy, leading to four recessions (those of 1969-70, 1973-75, 1980 and 1981-82) of growing severity; monthly unemployment peaked at 10.8 percent in late 1982. High inflation stunted the increase of living standards through lower productivity growth.

How did 70s inflation end? ›

Eventually, aggressive monetary policy tightening in the late 1970s and early 1980s sharply reduced inflation in advanced economies and established central bank credibility, although often at the cost of deep recessions (Goodfriend 2007).

What were the major causes for the decline of the US economy in the 1970s? ›

Overview. In the early 1970s, the post-World War II economic boom began to wane, due to increased international competition, the expense of the Vietnam War, and the decline of manufacturing jobs.

Which is the best definition of inflation? ›

Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.

Is inflation good or bad? ›

While high inflation can be harmful, too little inflation can also weaken the economy. When the economy is struggling and inflation is too low, the Fed will take the opposite approach by lowering interest rates or buying assets to increase cash circulation.

Which of these words was first used during the 1970s economic crisis? ›

Stagflation occurred in the 1970s as a result of monetary and fiscal policies and an oil embargo. Concern about stagflation has emerged as economic growth cools and inflation remains high amid the COVID-19 recovery.

What was the 1970s recession like? ›

The U.S. Bureau of Labor Statistics estimates that 2.3 million jobs were lost during the recession; at the time, this was a post-war record. Although the recession ended in March 1975, the unemployment rate did not peak for several months. In May 1975, the rate reached its height for the cycle of 9 percent.

What was the 1970s era called? ›

Novelist Tom Wolfe coined the term " 'Me' decade" in his essay "The 'Me' Decade and the Third Great Awakening", published by New York Magazine in August 1976 referring to the 1970s.

What was it like to grow up in the 70s? ›

The '70s were a fun time to grow up. It was a simpler life and easier in many ways. We spent more time together as a family and led less busy lives. I value my childhood years and sometimes wish I could go back to those easier times.

What was the theme of the 1970s? ›

Disco Theme

The 1970s gave birth to disco fever. And what better way to celebrate it than by hosting a disco party of your own?

What big event happened in 1970? ›

From the first Boeing 747 commercial flight to London, the disbandment of The Beatles and the Apollo 13 space mission, these 1970 events are ones to never forget.

What was popular in the year 1970? ›

Popular Culture 1970

Artists include Jimi Hendrix, The Who, The Doors, Chicago, Richie Havens, John Sebastian, Joan Baez, Ten Years After, Emerson, Lake and Palmer and Jethro Tull. Simon and Garfunkel release their final album together, Bridge Over Troubled Water. The Title Track won the Grammy for song of the year.

Which of the following was a major problem for the United States in the late 1970's? ›

Which of the following was a major problem for the United States in the late 1970s? Iranian radicals holding U.S. hostages. What did Reaganomics do? Deregulate industries.

What performed well during 1970s inflation? ›

Gold Was the Number One Asset of the 1970s

Again, history is a valuable guide. The best asset to own in the 1970s was gold, which went from $35 an ounce at the beginning of the decade to as high as $850 by 1980.

What happened in the 1970s stock market? ›

The 1973–1974 stock market crash caused a bear market between January 1973 and December 1974. Affecting all the major stock markets in the world, particularly the United Kingdom, it was one of the worst stock market downturns since the Great Depression, the other being the financial crisis of 2007–2008.

What stocks did well during 70s inflation? ›

According to asset management firm Schroders, gold, which is viewed as a safe-haven asset, was the best-performing asset in the 1970s, rallying more than 22%. Other commodities, such as raw materials and energy, also outperformed, rising 15%. Thus, stocks dealing in those commodities are a great place to start.

What is an example of inflation? ›

Example: if petrol prices increase much more than the prices of other goods and services, people who use a car frequently may “feel” a rate of inflation that exceeds the HICP because their personal expenditure on petrol is higher than average.

What's causing inflation 2022? ›

Mark Zandi, chief economist of Moody's Analytics, analyzed United States Consumer Price Index components following the May 2022 report that showed an 8.6% inflation rate in the US. He found that by then the 2022 Russian invasion of Ukraine was the principal cause of higher inflation, comprising 3.5% of the 8.6%.

Why are the prices of everything going up 2022? ›

Supply chains are still struggling to handle pre-pandemic demand. Increased inventory shortages mean slower deliveries. This leads to supply and demand challenges, where there is less supply of the goods people want (and need) coupled with their increasing demand, putting upward pressure on higher priced goods.

Who benefits from inflation? ›

2. Equity and Commodity Investors. Despite low economic growth rates, investors can benefit from inflation if they hold the correct stocks and commodities in their portfolios. Equity investors: Putting your money in stocks is much better than holding cash during times of high inflation.

Why is it important to control inflation? ›

It provides for wealth accumulation, debt reduction and better standards of living for many individuals and can act as a stimulus for the overall economy. But too much inflation can make it difficult for small businesses to stay on track, particularly if they are unable to pass those cost increases onto consumers.

What are the effects of inflation? ›

While inflation reduces purchasing power, it also reduces the value of debt. During a period of deflation, on the other hand, debt becomes more expensive. Additionally, consumers can protect themselves to an extent during periods of inflation.

What is inflation in one word? ›

a persistent, substantial rise in the general level of prices related to an increase in the volume of money and resulting in the loss of value of currency (opposed to deflation).

When was inflation this bad? ›

1965–1982. The Great Inflation was the defining macroeconomic period of the second half of the twentieth century. Lasting from 1965 to 1982, it led economists to rethink the policies of the Fed and other central banks.

How was the inflation of the 1970s eventually tamed? ›

Eventually, aggressive monetary policy tightening in the late 1970s and early 1980s sharply reduced inflation in advanced economies and established central bank credibility, although often at the cost of deep recessions (Goodfriend 2007).

What would one pound in 1970 be worth today? ›

The British pound has lost 95% its value since 1970

A pound today only buys 5.470% of what it could buy back then. The inflation rate in 1970 was 6.40%. The current inflation rate compared to last year is now 13.20%. If this number holds, £100 today will be equivalent in buying power to £113.20 next year.

How was inflation stopped in the 70s? ›

Nixon introduced a 90-day freeze on prices and wages in 1971, helping to cool inflation for a while and secure a landslide Republican victory in the 1972 presidential election. But the policy backfired, artificially boosting demand and making it even harder to keep prices under control.

How long did stagflation last in the 1970s? ›

When did stagflation last occur? In the 1970s, this toxic stew of high unemployment and high inflation persisted for over a decade as the U.S., U.K. and parts of Europe. The OPEC oil embargo in 1973 and a drop in oil production after the 1979 Iranian revolution bookended the decade.

How was the great inflation solved? ›

The crisis would end, and most economists give credit for ending it to Paul Volcker, the chair of the Federal Reserve. Volcker got inflation under control through the economic equivalent of chemotherapy: He engineered two massive, but brief, recessions, to slash spending and force inflation down.

What caused this inflation? ›

Monetarists understand inflation to be caused by too many dollars chasing too few goods. In other words, the supply of money has grown too large. According to this theory, money's value is subject to the law of supply and demand, just like any other good in the market. As the supply grows, the value goes down.

Is inflation good or bad? ›

While high inflation can be harmful, too little inflation can also weaken the economy. When the economy is struggling and inflation is too low, the Fed will take the opposite approach by lowering interest rates or buying assets to increase cash circulation.

How much was $1 dollar worth in 1970? ›

Value of $1 from 1970 to 2022

$1 in 1970 is equivalent in purchasing power to about $7.47 today, an increase of $6.47 over 52 years. The dollar had an average inflation rate of 3.94% per year between 1970 and today, producing a cumulative price increase of 646.58%.

How much is a million dollars in 1970 worth today? ›

$1,000,000 in 1970 is equivalent in purchasing power to about $7,649,690.72 today, an increase of $6,649,690.72 over 52 years. The dollar had an average inflation rate of 3.99% per year between 1970 and today, producing a cumulative price increase of 664.97%.

How much is money in 1959 worth today? ›

What is $1 in 1959 worth in today's money? Adjusted for inflation, $1.00 in 1959 is equal to $9.65 in 2022. Annual inflation over this period was 3.66%.

What was a chief cause of the rising prices of the 1970s? ›

The 1970s saw even higher stretches of double-digit U.S. inflation than this year, after the supply shock caused by OPEC quadrupling crude oil prices, while unemployment also rose and the economy foundered — a condition that came to be known as “stagflation.” The current inflation surge, in contrast, is due in large ...

What happens after an inflation? ›

Erodes Purchasing Power

An overall rise in prices over time reduces the purchasing power of consumers, since a fixed amount of money will afford progressively less consumption. Consumers lose purchasing power whether inflation is running at 2% or at 4%; they just lose it twice as fast at the higher rate.

What happened to interest rates in the 70s? ›

1970s. Thanks to Freddie Mac, there's solid data available for 30-year fixed-rate mortgage rates beginning in 1971. Rates in 1971 were in the mid-7% range, and they moved up steadily until they were at 9.19% in 1974. They briefly dipped down into the mid- to high-8% range before climbing to 11.20% in 1979.

How does stagflation affect the economy? ›

Stagflation is typically marked by slow economic growth combined with relatively high unemployment and rising prices — think late 1970s and early 1980s. Concerns about stagflation have emerged because high inflation is widespread and growth is slowing in some markets.

What stagflation means? ›

Stagflation is the simultaneous appearance in an economy of slow growth, high unemployment, and rising prices. Once thought by economists to be impossible, stagflation has occurred repeatedly in the developed world since the 1970s. Policy solutions for slow growth tend to worsen inflation, and vice versa.

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