Word: volckerism
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...Volcker's future is also of intense concern outside the Washington-Wall Street axis. Even those businessmen who normally do not pay much attention to the arcane ways of the Fed or meetings of its powerful Open Market Committee are watching the situation closely. They are acutely aware that the actions of Volcker or his successor will have a crucial influence on interest rates and the availability of credit and that this will determine the health of the economy. "Everywhere I go in my district, people ask me about you," New Jersey Congresswoman Marge Roukema told Volcker last week...
President Reagan has until Aug. 6 to reappoint Volcker to a new term or name a successor. But experts predict that he will probably act sooner, perhaps in early June. Waiting any longer would create great uncertainty in world money markets and not allow time for a smooth transition in case Volcker does not stay. On the other hand, Wall Streeters believe Reagan is unlikely to move before the late-May meeting in Williamsburg, Va., of the leaders of the seven leading industrial powers...
Indeed, Jimmy Carter did not have a lot of freedom when he appointed Volcker in 1979 to replace G. William Miller, who became Treasury Secretary during a wrenching Administration shuffle in which Carter fired four Cabinet members and then retreated to Camp David for a chaotic series of conferences about the future of his Administration. World money markets were so shaken and the dollar so weak at the moment that Carter had to turn to someone who epitomized stability and competence and inspired international confidence. Volcker, then the president of the New York Federal Reserve, was the obvious...
Once he got into office, Volcker showed an independence from White House pressure that has pleased financiers but irritated both the Carter and Reagan Administrations. In the fall of 1979, under heavy pressure from world money markets as the dollar was falling sharply, Volcker abruptly changed the focus of the Federal Reserve's policy from manipulating interest rates to setting targets to slow the growth of money and credit. This helped push the prime rate to 21½% by December 1980 and sent the economy into recession. But the payoff was a sharp drop in inflation. Prices were increasing...
...early 1982, though, Volcker began coming under criticism because the tight-money policies were holding back the longed-for recovery. Many politicians were ready to declare victory over inflation and wanted to return to economic expansion. Finally last summer the Federal Reserve started allowing the money supply to grow, thus setting the stage for the present recovery...