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This paper examines the influence of monetary policy during the Great Inflation of 1965-82.  Four presidents, three Fed chairs, and many Keynesian economists made wrong decisions. Many were misled by the Phillips Curve Theory which turned out to be wrong. They failed to learn from the history of 1946-63. Three times there were outbursts of inflation: the WWII inflation, the Korean War inflation, and the inflation of 1955-6. And three times the inflation was eliminated. What did Truman, Eisenhower, and the Fed do correctly that the others did wrong later on? The  WWII inflation situation was capped by price and wage controls. When the controls were removed prices and wages (aided by strikes) popped up to where they would have been without the controls. The inflation was stopped because the money stock went from 109.27 to 107.72 from 3Q47 to 3Q49, a two year negative annual growth rate of -.71%. This restraint was strong enough to eliminate the inflation and also push us into the recession of 1948-9. The initial Korean War "panic" buying inflation subsided during UN occupation. In January price controls were introduced, but were loosened periodically and when taken off by Eisenhower in April 1953 inflation actually dropped due to a sharp drop in money growth from 4.62% at the end of 1952 to .61% a year later, enough to stop inflation and lead to another recession. The inflation of 1955-6 and 1Q57 is a bit puzzling since money growth from 2Q55 to 1Q57 averaged a modest annual rate of 1.29%. Then money growth went to a negative rate of -.60% over the next year, enough restraint to stop inflation and cause a recession

monetary policy, finance