International: inflation and slowing growth plague the world economy

Inflation cast a deep shadow over the world economy in 1979. Rapidly rising prices of goods and services in nearly every country in the world eroded the purchasing power of consumers everywhere, disrupted business investment decisions, left deep marks on the balance of payments and external values of currencies of individual countries, and, together with the rising political tension in the world, contributed to the skyrocketing price of gold. A growing concern of governments in industrial countries over the pernicious impact of inflation on their economies led, in many instances, to the adoption of increasingly stringent monetary and fiscal policies. These policies tended to impede the industrial countries' economic growth, and—given the high degree of economic interdependence in today's world—stymied economic progress worldwide. In the meantime, a sharp increase in oil prices by OPEC during the year gave a new boost to inflationary pressure everywhere and severely disrupted progress toward regional equilibrium in the world's balance of payments. And so, the world economy entered 1980 with the gloomy prospects of declining economic activity, rising unemployment, high inflation, and major disequilibria in balance of payments.