Word: volckerism
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...whipping boy for the public's dismay over an economy that is not working very well. For the time being, that may prove to be good politics. Certainly, if the economy does not begin to correct itself as next November's congressional elections approach, the pressure on Volcker to expand the money supply will increase sharply. In the end, though, the level of inflation and interest rates will be strongly influenced by the size of the federal deficit. That is a problem that will not go away no matter how much politicians harass and harangue the Federal Reserve...
...hope for is to keep the increase in the money supply generally within its guidelines, accepting weekly blips and bumps in the figures as an inevitable result of the system. Says Princeton University Economist David Bradford: "The Fed is doing what has to be done. I am convinced that Volcker is being attacked by people who are unfamiliar with economic truths...
...Volcker supporters agree with the Fed chairman that the high interest rate problem ultimately goes back to the Administration and its budget policies. Says Donald Nichols, a professor of economics at the University of Wisconsin: "The Administration's economic program is seriously unbalanced because there is an overreliance on monetary policy to carry the burden of the fight on inflation. Meanwhile, the Government merrily pumps money into the economy with an easy fiscal policy...
...slowed steadily in the past two years. During 1981, prices rose at an annual rate of 8.9%, compared with 12.4% in 1980. During the last three months of 1981, prices were increasing at a moderate 5.3% annual rate. Many economists anticipate still further gains in the months ahead. Says Volcker somewhat sardonically: "If we get blamed for high interest rates, we at least ought to get some credit for the improved inflation statistics...
...fact, Volcker and the Federal Reserve have become scapegoats for Congress's and the Administration's multiplying frustrations with the economy and the failure of supply-side economics to live up to its earlier promises. Says one top Fed official candidly: "Reagan's wish is for the impossible dream of supply-side economics running hand in hand with tight monetarism. That is something that you just cannot have in the real world...