In this week’s Grumpy Economist Weekly Rant, John Cochrane begins with an unsettling comparison: today’s inflation picture looks strikingly similar to the one the United States faced in the late 1970s. With prices still elevated and renewed instability in the Middle East, the obvious question follows: Is the country headed toward another round of stagflation?
Cochrane uses that parallel to show what has changed. The US economy is less energy-dependent, America’s position in global oil markets has shifted, and the consequences of disruption no longer fall in the same way they once did. The result is a more complex picture than the analogy first suggests, and a reminder that today’s geopolitical shocks expose not only American risks, but broader global vulnerabilities.
Transcript
Hi, I’m John Cochrane, a senior fellow here at the Hoover Institution, and welcome to my Grumpy Economist Weekly Rant. Today’s rant: Is it 1979 all over again?
Put up a graph here which shows you inflation through the 1970s and inflation up till today, and notice how strikingly parallel the situation is up till today, as of just about the middle of 1979. Are we about to go through the same horrible experience all over again?
Here we are. Inflation is still about 3% too high. The labor market is softening. Good thing nothing dangerous is happening in the Middle East, eh? In fact, my graph bottoms out just about when the Iranian Revolution happened in 1979, and we know what happened after that. Are we headed for a big stagflation and a big recession?
Fortunately, I don’t think so, though, of course, forecasting the future is always difficult.
Why not? It’s different than 1979 in quite a few important ways. First of all, the US is now a big oil exporter. So even though prices going up means a hard thing for oil users or gasoline users, the country as a whole makes a lot of money by exporting oil at higher prices.
Our economy is not anywhere near as energy-dependent as the industrial economy of the 1970s was, so we can weather an oil price rise. The situation there is different. There, all of the oil producers were cutting off the US. Now, it’s simply Iran blocking the Straits of Hormuz.
I cannot imagine that the United States will allow Iran to permanently threaten oil transport through the Straits of Hormuz. Are we really going to lose this war? I hope not. If we were, that would cause more trouble. So all in all, I think we’ll weather this one fairly well.
It’s more of a wake-up call for China, who does get much more of its oil imported from the Middle East, but not a tremendous one for the US economy.
Well, that’s my guess about the future. Of course, forecasts are always wrong.
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Read more on this topic:
“Does History Rhyme?”, The Grumpy Economist, February 2026
John H. Cochrane is the Rose-Marie and Jack Anderson Senior Fellow of the Hoover Institution at Stanford University. An economist specializing in financial economics and macroeconomics, he is the author of The Fiscal Theory of the Price Level. He also authors a popular Substack called The Grumpy Economist.
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