Quote:
Originally Posted by Shadywood
Paul Volcker was a Democrat installed by Jimmy Carter. He was the guy who CREATED the inflation that you say he solved.
I guess it must have been sheer coincidence that the moment Volker's boss became Ronald Reagan, he suddenly found religion and realized that all he needed to do to solve the 20% inflation he'd created under Carter was to quit printing money. Well, either coincidence or he just wanted to keep his job.
And yes, it's true -- if you're not paying your bills with fake money, it's a sure bet you're going into debt if you don't have enough real money. Sorry, but that seems like a poor reason to go back into the counterfeiting business to me. Maybe if Tip O'Neil had cooperated with Reagan's plan to live within our means, we could have had low inflation without tripling the debt.
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First, it was Carter not Reagan who appointed Volcker a full 14 months before Reagan became president. Carter knew that Volcker would raise rates sharply probably causing a recession but told his counselors who advised against the appointment to let him worry about the politics.
The Federal Funds rate was 11 percent when Carter appointed Volcker in August 1979. By the time Reagan took office in January 1981, Volcker had pushed the rate to 20 percent (the prime was 21 percent) and rates never went higher. So contrary to the mythology, Carter took the political risks not Reagan
Carter took on bruising political fights with Congress to end price fixing by airlines (1978) and trucking companies and railroads (1980). He opened the auto and steel industries to more intense competition (1980), as well as oil, natural gas, and electricity (1978) with the same anti-inflationary results. These were political fights in Congress against powerful interests that Reagan never had to take on.
In the election year of 1980, Carter also broke the U.S. auto cartel —- the Big Three —- by refusing to protect American car makers from foreign imports even though the trade laws gave him a politically attractive way to do so. Ford, Chrysler and the auto workers wanted him to limit this competition, but Carter refused. This is why many working class Democrats in Michigan jumped to support Reagan in 1980
It also was Carter not Reagan who battled for two years to pass legislation that gradually expanded competition in natural gas, oil, and electricity. U.S. inflation was fueled by rising energy prices between 1972 and 1979 linked to OPEC and instability in the Middle East. The public blamed Carter for high prices while Reagan benefited from their long decline after 1980.
When people repeat the myth about the courageous steps Ronald Reagan took to fight inflation, don’t buy it. Instead tell them about Carter’s record for which you can cite data from the Fed itself and legislative chapter and verse.