Word: volckerism
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...Volcker's critics charge that he has turned the economy topsy-turvy through misguided management of the nation's money supply, and that his two-year-old struggle to fight inflation by slowing the growth of money and credit has sent interest rates leaping and lurching wildly. Since October 1979, when the Fed first began concentrating on directly controlling monetary growth while letting interest rates move more freely, the prime rate charged by large commercial banks has slumped to as low as 11% and rocketed to as high as 21.5%, wrecking budgets and spending plans for families...
...last week the escalating attacks on Volcker both by the Administration and in Congress had reached their shrillest pitch yet. Said Senate Majority Leader Howard Baker of Tennessee in graphically blunt terms: "It is time for the Fed to give us a little air, to get its foot off the nation's neck and give the economy an opportunity to recover...
Meanwhile, weeks of behind-the-scenes sniping between Volcker and Treasury Secretary Donald Regan burst into the open during separate appearances before a congressional committee. In testimony to the Joint Economic Committee, the towering, cigar-smoking Fed chairman argued that the Administration was following a loose fiscal policy that threatened to push budget deficits into triple-digit figures, and said that interest rates had begun to rise simply in anticipation of the Government's gargantuan borrowing requirement for later this year...
...explanation being bruited about is that people might recently and mysteriously have begun switching their money from savings accounts to various interest-bearing checking accounts, thereby distorting conventional capital flow patterns and skewing the data. If so, not even Volcker seems to know why. He asked of a group of senior citizens meeting in Washington last week: "If any of you have ideas why people are shifting their money into NOW accounts, I'd like to know about them...
...fact that the Federal Reserve cannot explain what is going on with its figures is being given as evidence of Volcker's failure. Says Economist Beryl Sprinkel, the Administration's Under Secretary of the Treasury for Monetary Affairs: "I assume that he is trying as hard as he can. After all, he has got the same goals that we do. But you evaluate a man on goals and performance, and between the two, performance is more important. What we want is stable, moderate growth of money, and the growth has been anything but stable...