M2 Growth Suggests 1970s Inflation Won't Return
There has been a lot of concern lately about U.S. inflation, and a lot of comparisons to the inflationary 1970s, but here's why that concern might be overblown:
The chart above shows the annual growth in money supply (M2) from 1969 to 2008, and it is easy to see that money growth in the 1970s was much different than today. Notice the three periods in the: a) early 1970s, b) mid-1970s and c) early 1980s of sustained, double-digit money growth (circled in red). Since the early 1980s, money supply growth has been in single digits, except for a brief, double-digit spike around 9-11, and has been growing at around 4-7% for the last 3 years.
To the extent that inflation is a monetary phenomenon, and to the extent that inflation is related to the growth of M2, inflation can't and won't return to the levels of the 1970s - there just hasn't been enough double-digit money growth to make it happen.