Word: volckerism
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...political workings of our Government," says Donald Marron, chairman of Manhattan's Paine Webber brokerage firm. "This is the highest priority. Congress and the Administration need to form a consensus and move ahead on deficit reduction and tax reform." Business leaders expect Baker to get along well with Paul Volcker, chairman of the Federal Reserve, who was a favorite whipping boy of Regan...
...election campaign heated up, the Administration had harsh words for the Federal Reserve, where Chairman Paul Volcker stood firm for a restrictive policy. Said Treasury Secretary Donald Regan in May: "If the Fed continues on its tight path now, it will have an effect on November and December. Is that politics, and does that have us worried? You bet your life it has us worried...
...Administration's attempts to get everyone into lockstep also extend to the Federal Reserve Board. Regan last week blamed Chairman Paul Volcker's tight-money policy for slower economic growth. Though retail sales appear strong, Regan lashed out at the Fed for preventing a year-end shopping boom. "This is not a great Christmas," contended Regan, "and the reason is that people just aren't spending because the credit terms are so high." Regan said that a study was under way about how to get the independent Fed under some form of Administration control...
...weeks ago Volcker flashed the sign that the White House wanted to see. The Federal Reserve cut the discount rate, which it levies on loans made to member banks, from 9% to 8.5%. It was an unmistakable signal for banks to lower the interest rates they charge customers. Even some of Volcker's harshest critics are now optimistic, if not entirely satisfied. Says Richard Rahn, chief economist for the U.S. Chamber of Commerce: "The Fed has reacted late and it has probably not gone far enough, but I think we can avoid a recession. The economy should rebound." Administration...
...Volcker is too generous with the money and interest rates drop too far, foreigners could start shunning U.S. investments and send the dollar into a steep decline. That might cause a sudden burst of inflation by making imports more expensive. For the moment, though, the dollar seems to be holding its own. On the day Citibank led the prime-rate cuts last week, the dollar surprisingly rose against the deutsche mark and the French franc. One reason for the dollar's continued strength is that foreign central banks, especially in Western Europe, have been reducing interest rates in their...