Federal Reserve Must Follow Paul Volcker's Approach in Decisively Beating Inflation (user search)
       |           

Welcome, Guest. Please login or register.
Did you miss your activation email?
February 08, 2023, 09:37:40 AM
News: Election Simulator 2.0 Released. Senate/Gubernatorial maps, proportional electoral votes, and more - Read more

  Talk Elections
  General Politics
  Economics (Moderator: Torie)
  Federal Reserve Must Follow Paul Volcker's Approach in Decisively Beating Inflation (search mode)
Pages: [1]
Author Topic: Federal Reserve Must Follow Paul Volcker's Approach in Decisively Beating Inflation  (Read 1156 times)
Frodo
Atlas Star
*****
Posts: 23,634
United States


WWW
« on: July 23, 2022, 06:23:04 PM »
« edited: July 23, 2022, 06:37:21 PM by Frodo »

The Fed must emulate the tactics of Volcker’s fight against inflation
Jay Powell mirrors the former Fed chair’s bravery but not his methods

Quote
US Federal Reserve chair Jay Powell has expressed deep admiration for Paul Volcker, his legendary predecessor who defeated the high inflation that plagued the US economy from 1965 to 1982.

Then, as now, Volcker was fighting more than a decade of loose monetary policy, combined with supply shocks stemming from geopolitical turmoil. But though he extols the man, Powell is deviating from Volcker’s methods. This is perhaps why inflation continues to accelerate, now topping 9 per cent in the US and spreading rapidly throughout the world.


Quote
Volcker kept monetary policy tight through the recessions of 1980 and 1981-82, despite populist revolt, bipartisan demands for his firing, even a public call from the US Treasury secretary to ease money supply, which he famously dismissed as an “unusual communication”. During this time, unemployment rose to double digits, but he held firm until inflation finally fell, from more than 14.8 per cent in 1980 to less than 5 per cent by the end of 1982.

His predecessors had pursued “stop and go” policies, continually raising rates when unemployment was falling and lowering them again when jobless levels rose. This had hurt the Fed’s credibility, whipsawed markets, and further entrenched inflation in the economy. Volcker wisely and bravely refused to revert to that tactic.

Given this history, it would be folly for Powell and the Fed to embrace “stop and go” again today. They should also follow Volcker’s example by restraining money supply. Too much money chasing too few goods and services lies at the heart of this and every other inflationary moment.


And here is the non-paywall version. 

Logged
Pages: [1]  
Jump to:  


Login with username, password and session length

Terms of Service - DMCA Agent and Policy - Privacy Policy and Cookies

Powered by SMF 1.1.21 | SMF © 2015, Simple Machines

Page created in 0.042 seconds with 13 queries.