Word: ratesâ
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...keep interest rates high, no matter what Volcker does. In large part, the jump in interest rates over the past few years represents a belated catchup by the price of money with the rise of all other prices since the mid-1960s. Through years of high inflation, many interest rates???on mortgages, consumer loans, bank savings deposits?were held down by federal or state controls. Most of these controls have been dismantled...
...bankers' bank: it regulates commercial banks that account for more than 70% of all bank deposits, holds the funds that they are required to keep on reserve, clears checks for them. But its most important functions are to determine the supply of money and the level of interest rates???and no questions touch off more disagreement in American policymaking. If the Federal Reserve is not condemned by the AFL-CIO's George Meany for causing unemployment by being too stingy, it is certain to be damned by Economist Milton Friedman for spurring inflation by being too generous. All too often...
...former manufacturer in a labor-intensive industry (knitted gloves) now virtually defunct here, I point out that the greater "efficiency" of foreign makers consists mainly of much cheaper labor rates???as low as one-fifth of American rates. When only a few small industries were hurt, who cared? Now that the pinch becomes apparent in the bigger ones, Congress is listening...
Economists generally agree that governments should shun utopianism and aim at reducing inflation and unemployment to bearable rates???to perhaps 5% for both in America. The U.S. should not repeat a mistake of some past years, when the Government continued to stimulate the economy even after the jobless rate had fallen to 4%, in the hope of getting it still lower; that policy fueled inflation. Completely "full" employment is impossible because some people lack skills that can be marketed, and still others take time off while shifting between jobs...
...record high of $121 billion and ran a deficit of more than $5 billion. Meanwhile, the Federal Reserve Board kept money easier and cheaper than it is in any other major nation, though proudly independent Chairman William McChesney Martin at year's end piloted through an increase in interest rates???thus following the classic anti-inflationary prescription...