Well worth reading it all, although I think our discussion here on ET in a previous diary of mine ranged more widely - and in looking at a wider timespan and range of variables concluded that there were some deeper things going on than Studebaker describes.

However, I'd endorse his conclusions for sure:

Stagflation: What Really Happened in the 70′s « Benjamin Studebaker

So what we see here really is not any kind of complicated challenge to the notion that expansionary Keynesian policy is expansionary and contractionary Keynesian policy is contractionary. What we instead see is a crisis in the price of a very necessary good, namely oil, which creates an unacceptably high basic inflation rate and makes doing all kinds of business prohibitively more expensive.

All the normal Keynesian rules applied during the seventies-higher interest rates meant less inflation and more unemployment, lower rates meant less unemployment and more inflation. The only difference was that the baseline for inflation was much higher-the choice was between insane inflation and high inflation, not between high inflation and some kind of normal or acceptable level. Ultimately in both the mid-seventies case and the early eighties case, inflation only comes down permanently from its high baseline when the economy has adjusted to the higher oil price as a new normal and/or when the oil price itself comes down.

What would have prevented us from enduring the misery of the seventies? Less economic dependence on oil, both in terms of energy and throughout the wider economy. Jimmy Carter made a pitch for it, though the country declined to take him up on it at the time.

The issue was never one of needing to switch from stimulus spending to tax cuts for the rich, or of needing to care exclusively about inflation and ignore unemployment. People who interpreted the seventies in that fashion misunderstood fatally what was going on. That misunderstanding fuels and feeds their misunderstanding of the present problems.

There is not going to be hyperinflation or stagflation or any of the various seventies style horrors the economic right likes to conjure in its criticisms of stimulus and Keynesianism, because there is no giant spike in any ubiquitous, necessary thing like oil. Ronald Reagan dropped the interest rate and increased state spending in 82/83, and that, in tandem with falling oil prices, is what brought about "morning in America". Those are Keynesian tactics; there's no paradigm shift here. The conventional wisdom about this period in our history is just wrong-to the extent that Reagan did good economically, he did good not because of some new conservative economic agenda, but because he followed Keynesian orthodoxy and had the good fortune to see oil prices fall during his presidency.

The only lesson that can be taken from the seventies is that it is a very foolish thing for a state to become dependent on a particular resource or product that it cannot make for itself and must import, because that puts the economic welfare of that state at the mercy of the exporting nations. No matter how powerful a country is, if it is dependent in this way, otherwise small, powerless nations can bring it to its knees.

I'd also remark that the difference between imported inflation in inelastic goods and general inflation seems to be a major theme of current economic crises and misunderstanding of those crises by the powers that be.

Austerity/recession (via interest rates or other means) may be a workable treatment for general inflation, but it has much less meaningful effect on inflation of imported essentials like food or fuel that are rising in price because of worldwide demand.