The 70s Stagflation was perhaps one of the greatest economic crises that occurred to the US and the world. In normal recessions, money could be spent to combat it, and in normal inflations, the interest rate could be increased to combat it. Indeed, it was once thought that inflation and employment were inversely related, and this was what many of the techniques used to combat recessions and inflations were based upon. However, with stagflation, as the unemployment rate was increasing while inflation grew worse, no usual solutions could possibly work to rectify the state of the economy. It destroyed the logic behind every other economic recovery. As a result, the US was plunged into a decade of economic chaos, and ultimately, it ended when the large 1982 recession caused inflation to go down - a very untraditional solution to a very untraditional problem.
Now, Stagflation began with the Yom Kippur War. The sanctions placed by OAPEC caused a massive economic shock, which resulted in the disastrous economic episode. It is also said to have begun with the Nixon Shock, when the Bretton Woods system was finally phased out, or with the imposition of wage and price controls by Nixon. However, these were not the real causes of Stagflation. They were merely the sparks that lit it. There was much rot in the energy industry even before the 1970s. The trust known as the Seven Sisters, founded in the wake of the 1953 Iranian coup, ruled over much of the oil industry, stopping competition from emerging and stopping the development of economic reserves. And as new nations began to industrialize, the steel industries from the Western nations fell in decline in favour of the ones in developing countries. As such, merely stopping the Yom Kippur War or the Nixon Shock is not enough to stop Stagflation, for the tinderbox was ready to blow at any moment.
Now, how do you stop Stagflation? I guess one way is to stop the coup against Mossadeq and thus stop the formation of the Seven Sisters, but I think such a cartel would form anyways. In order to stop the decline of industry in the West, you could have the West adopt protectionism, but with the free trade consensus that existed at this time, that's hard. A POD to stop Stagflation would need to be a very specialized one, and I have no idea what it would be.
Thoughts?