Word: volckers
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...VOLCKER ASSERTS U.S. MUST TRIM LIVING STANDARD --New York Times, October...
...Paul A. Volcker, the cigar-chomping chairman of the Federal Reserve Board, sent America off on its latest economic wilderness adventure by announcing two weeks ago an anti-inflation program that did not just raise the discount rate--the Fed's interest rate on money it lends to member banks--but changed the very nature of how the Fed controls the money supply. Instead of trying to curtail the boom in credit by manipulating interest rates, Volcker announced, the Fed would henceforth apply direct controls to the money supply, raising member banks' reserve requirements and using other methods to keep...
...Instead it dropped, indicating that the economy was far more resistant to a downturn that might check price boosts than had been supposed. Consequently, though Okun is usually vehemently opposed to a policy of relying primarily on money-supply policy to combat inflation, he proclaims himself "not horrified" by Volcker's actions. Okun fears that "interest rates could become so unstable as to be a major source of disturbance in the markets," but hopes that businessmen will now stop an inventory buildup that he judges to be troublesome...
MURRAY WEIDENBAUM: "I really don't have any criticism of Volcker's approach," says this visiting scholar at the conservative American Enterprise Institute. "The Fed, by and large, is the economic bastion of strength and savvy in Washington." Up to now, he says, the Federal Reserve has been following a policy of "expensive easy credit," meaning high interest rates, but free availability of funds; direct control of the money supply, he asserts, is preferable. But Weidenbaum cautions that there is "no guarantee" the new policy can bring down inflation, while in his mind it produces "more certainty...
JOSEPH PECHMAN: "Volcker is headed in the right direction," says the director of economic studies at Brookings. But Pechman fears the move will increase chances that the recession will be longer and deeper than expected. He says that "unemployment will hit 8% sooner than expected" and might go even higher. To curb inflation without pressing down too hard on the economy, Pechman wishes that the Carter Administration would institute a more vigorous wage-price policy to supplement the Federal Reserve moves. Says he: "We ought to try, somehow, to have business and labor moderate their price and wage demands...