Word: borrower
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Dates: during 1960-1969
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...response to Washington's battle against inflation, the cost of borrowing from U.S. banks last week climbed to a historic high. For the third time in six weeks, major banks raised their prime rate, the interest that they charge their best corporate customers for loans. The latest increase, from 6¾% to 7%, is in tended to help curb the nation's overexuberant economy by making credit so costly that businessmen will borrow and spend less. Because they operate in directly, such restraints at best take effect only after a time lag of weeks or months. The immediate...
...commercial banks-needs to expand as population and production grow. The Federal Reserve Board controls the expansion, largely by buying or selling Government bonds. In the process, it makes adjustments for peak periods of demand, such as the Christmas shopping season, or times when the Treasury must borrow heavily to finance budget deficits. In addition, the Federal Reserve tries to use its monetary powers to moderate the ups and downs of U.S. business. But Friedman says that the board repeatedly errs in the rate at which it expands or constricts the money supply. As a result, it aggravates the swings...
...stock market. Brokers normally count on a year-end rally, and they have been disappointed only six times in the past 41 years. Last week was one of those times. Mostly because of the Federal Reserve Board's recent moves to make money scarcer and costlier to borrow, the latest slump in stock prices stretched out to a full month...
Deeper down, inflation caused some dangerous distortions in the U.S. economy. Consumers and businessmen rushed to borrow, spend and invest, hustling to convert their cash into goods or services before the value of the dol lar declined still further. All this only stoked inflation, and led to an abnormally steep demand that may cause an abrupt contraction on some less lucky tomorrow. As usual, some of the worst victims of inflation were the poor, who had to pay more for everything and lacked either the resources or the sophistication to invest in property or paper with a rising value...
Credit was plentiful because the Federal Reserve Board, even while raising interest rates, allowed the supply of money in circulation to grow at a rate that proved to be inflationary. The board had to feed funds into the money market so that the Treasury could borrow to finance the federal deficit of $25.4 billion in fiscal 1968. Such great deficit financing, most economists agree, is the fundamental cause of U.S. inflation...