It's Not Your Dad's Oil Story; Because we think higher oil prices caused double-digit inflation in the '70s, we fear it could happen again. The trouble with this: the facts are wrong.

Publication: Newsweek

Publication Date: 31-OCT-05

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Byline: Robert J. Samuelson

We have all the telltale signs of an inflation breakout: a big jump in oil and energy prices; an increase in the price of gold, often an inflation hedge; a low unemployment rate (5.1 percent in September, despite Katrina) that could push up wages. To anyone old enough to remember, the situation seems eerily reminiscent of the 1970s, when oil prices soared and inflation reached peaks of 12.3 percent in 1974 and 13.3 percent in 1979.Well, folks, it ain't gonna happen this time.

Here are three reasons: (1) The Federal Reserve won't let it happen. The Fed would tolerate a recession before again permitting inflation to go bonkers. (2) The economy has become vastly more competitive since the 1970s. It's harder for companies to...

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