Word: cost
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Dates: during 1970-1979
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Admirers of the "Volcker package," is European central bankers are already calling the Fed's moves, praise it mainly for the promise it holds that the U.S. will be able at last to control the availability of credit, as opposed to just its cost. After a full decade of high inflation, economists are pretty much agreed that the levers that have traditionally been used to control the flow of money into the economy?namely, the key interest rates that the Fed manipulates?have failed. This is in large part because the traditional concepts of money itself are outdated...
...ultimate challenge to the Fed's bold new initiative is, of course, the sheer virulence of the nation's inflationary malaise. In the short run, skyrocketing interest rates will just make the plague worse, since rising interest simply pushes up the cost of money. In fact, the new boost in rates makes it even more certain that the actual amount of inflation this year will far exceed the Administration's official forecast; it still maintains that the rise in prices for all of 1979 will be no more than...
...says, "and assuming they follow through, I think it assures that we are going to have more stable money growth." Sprinkel adds that the new policy will reduce the inflationary expectations of consumers, businessmen and domestic and foreign financiers. "If you can get expectations down sooner," says he, "the cost of the renewed recession will be less severe than if those expectations had not been dented...
ALAN GREENSPAN: "The Fed had no alternative," says the former chief economic adviser to President Ford. "The new reserve requirements are significant because they will increase the cost of Eurodollars, which have been one of the major sources of funds flowing into the United States," pumping up credit availability and increasing inflation. "But the key and by far the most important change is to switch to a policy of constraining money supply as distinct from manipulating interest rates." Greenspan grants that "for an interim period, interest rates could be highly unstable; the prime rate could easily...
...fickle ways, he is suddenly surrounded by gold-jacketed runners and other traders clad in bright red, green and purple coats. They talk excitedly about a broker's blunder: the man has made a mistake in filling out a customer's order, and it will cost him $2,500. A runner asks: "Does that mean we won't be going out to dinner tonight?" "No," answers a trader. "It just means we'll be going to McDonald...