Ever Heard Of Inflation Embedded In The Economy. Dodge This

Back in 1970s, the US downrightly experienced embedded inflation in the name of Wage Price Spiral (also called Wage price inflation). It all spreaded insidiously. The workers, unaware of debilitating consequences, invariably demanded big rases, both to catch up with past inflation and to offset expected future inflation. This rapacious attitude forced the companies to increase the prices of goods to keep up with profits. They also increased prices to catch up with past inflation and to offset future inflation.
The result of this leapfrogging was that inflation became a self sustaining process. The situation was grim, creating an apprehention of another great depression. How was the conundrum resolved?
It was resolved by raising the interest rates by the Fed in early 1980s. The consequences were more deplorable than 1970s. With increase in lending rates the US was at the perils of facing another slump like the great depression. The sceptre still worried the Fed. The US economy was treading water.
Wages are a major source of inflation only if workers consistently recieve raises that substantially exceed productivity growth. So, to contain inflation wages are kept low.

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