Business: Inflation's Stubborn Resistance

Question: Faced with runaway inflation, the Government adopts policies that cause a year and a half of falling production, dropping profits, financial squeeze and—most important—sharply rising unemployment. What is the result?

Answer: More inflation.

THAT answer would draw an F in just about any class in economic theory, and it could yet earn Richard Nixon an F from the voters. It flies in the face of just about everything that economists have believed, but it describes a grim fact of life in the U.S. today. Unexplainable by the philosophy of Adam Smith, John Maynard Keynes or even Milton Friedman,...

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