Word: volckerism
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...world jumped, in different directions. International financiers praised Volcker's move; after all, he announced the policy immediately after returning from an International Monetary Fund conference in Belgrade, where those same financiers had most likely given him a pep talk for such a program. Stock market investors ran scared, seeing only the deepening recession Volcker's plan would induce. Liberal politicians didn't like this talk of lowering the standard of living for the sake of such unromantic concepts as "managing the money aggregates." Bankers, who had always looked to the Fed as a bellwether for interest rates, were...
...monetarists, those epigones of Milton Friedman who are among the only Americans with reason to rejoice over Volcker's moves, waffled. For the first time a financial official seemed to be taking their advice to heart; conservative monetarists have called for direct control of the money supply for years. But Friedman wrote a week after the program's announcement that the new Fed policy had to be fully carried through or it wouldn't work. In other words, if the policy reduces inflation then the monetarists will take credit, but if it doesn't they can say their ideas failed...
WHILE ACADEMIC ECONOMICS roils in disagreement, Volcker has set the terms for a larger national debate from now till the 1980 elections. No one doubts that inflation is the American public's white whale, the unknown menace the government must first locate and then destroy. But experts and laymen alike disagree over where to begin looking. Liberal economists and their political bedfellows argue that narrow monetary policy can't solve domestic inflation when well over half that inflation traces its lineage to the tankered waters of the Persian Gulf. If OPEC intends further price hikes--as it apparently does--then...
...monetarists are in control, and they have tied President Carter's hands as well. He couldn't come up with an anti-inflation policy of his own that businessmen wouldn't laugh at, so he's stuck with Volcker's by default. And we will suffer, in the coming months, through the recession that will, undoubtedly, cause the "drop in living standards" Volcker and businessmen everywhere prattle about, with all the compassion of a Hammurabi...
...standard of living, however, can crumble in different ways. Volcker's chosen poison is to take up inflation's slack by letting prices and business production outstrip the consumer's buying power. As Andrew Tobias has pointed out, though, the U.S. pays $65 billion annually to foreign oil producers, and that by far should be the chief target of any anti-inflationary program. Let the "living standard" that has Americans riding mammoth cars and wasting electricity fall, not the standard that keeps food on their tables and money in their savings accounts...