Word: volckerism
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...figure on this week's cover was little known a month ago, but, says Washington Economic Correspondent William Blaylock, "last week he seemed to eclipse every other newsmaker in the capital." Indeed, by announcing a tough new set of monetary measures, Federal Reserve Board Chairman Paul A. Volcker grabbed international attention and sent stock and money markets reeling around the globe. This week's cover story, written by Associate Editor Christopher Byron, examines both the hectic financial events of last week and the bold "Volckernomic" policies that triggered them...
...calls "the world champs of legerdemain-economists and bankers." Blaylock is thoroughly qualified for the assignment. He has a graduate degree from the Johns Hopkins School of Advanced International Studies and another from the London School of Economics. It was at Johns Hopkins in 1971 that Blaylock first encountered Volcker, then Treasury Under Secretary for Monetary Affairs. Volcker had been asked to address the students on the future of the dollar and gold in the international monetary system. Blaylock recalls that the Under Secretary, "with a comforting tone of confidence in his voice, said that the dollar looked promising...
...government leaders throughout Europe and bankers and businessmen around the world, the Volcker package was more than just decisive. It made basic monetary sense, something that foreigners have come to long for in the White House's increasingly ineffectual inflation fight. In the past year, not only have prices throughout the economy surged into double digits and stayed there, but the Administration's chief weapon in the struggle, its year-old voluntary wage and price guidelines program, has proved hopelessly inadequate to the task...
...Volcker's approach, however, finance men and bankers now saw not just another quick fix but a direct assault on inflation itself. Said West German Finance Minister Hans Matthöfer: "The package goes straight to the heart of the problem." Brussels Banker Roland Leuschel expressed a conviction shared by almost all European moneymen: "Throttling back on the money supply itself will be much more effective than raising interest rates in the fight against inflation. Paul Volcker is attacking inflation at its source...
...Volcker promptly returned to Washington to draft plans for what could be the second massive dollar-rescue program the U.S. has had to mount in eleven months. Among the steps under discussion...