Word: volckerism
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...higher. This has ballooned inflation to an annual rate of more than 18%. But in the middle of March, according to Alan Greenspan, chairman of the Council of Economic Advisers under Gerald Ford, "somebody pulled the plug on the economy." The somebody was Federal Reserve Chairman Paul A. Volcker, who has been working steadily since last August to get control of the growth of money by raising interest rates. The head of the nation's central bank made it clear that he was ready to risk a serious recession in order to get the price explosion under control...
Beyond reining in consumer expectations, several basic, if familiar, steps are necessary. The first is to reduce the previously excessive growth of money and credit in order to restrain demand and restore stability. Federal Reserve Chairman Paul Volcker has started a series of necessary credit-tightening measures to restrict demand. The second step is to limit severely government spending at the federal, state and local levels. The third step is to increase the supply of goods by giving tax incentives for saving and investment and to relax the regulations that force business to channel scarce capital into projects that...
...Administration's actual position was put repeatedly during congressional testimony by Federal Reserve Chairman Paul Volcker, who stressed that it would be inappropriate to consider any sort of tax cut until the budget for fiscal 1981 was balanced. Chief Economic Adviser Charles Schultze echoed the point in his own congressional testimony, saying, "Balancing the budget is our first priority and remains our first priority." Carter simply said, "When I am absolutely certain that the 1981 budget will indeed be balanced, I will then, and only then, consider tax reductions...
...follow-up press conferences Saturday morning, Federal Reserve Board Chairman Paul Volcker proclaimed that "the greatest risk beyond doubt" facing the economy is accelerating inflation. Not only do rapid price rises bring "direct pain and distortions," he said, they also prepare the way for a serious recession. Said he: "There is no way we can deal with the problems ... other than by placing restraint on people who individually would like more credit." Treasury Secretary G. William Miller similarly asserted that the Administration's first priority "is to demonstrate the political will to bring our budget under control, demonstrate...
Also, the Federal Reserve will be empowered to extend its reserve requirements to banks that are not members of the Federal Reserve System; these banks hold 30% of all deposits. The effect will be to tighten the Fed's control of lendable funds throughout the economy. Fed Chairman Volcker will also undertake, in Carter's words, "a voluntary program, effective immediately, to restrain excessive growth in loans by larger banks." That sounds like more federal jawboning to get banks to stop making loans for unproductive purposes, such as financing mergers or speculative inventory increases...