No. of Recommendations: 26
Thank you Jimmy Carter.

The rate of inflation in 1974 was 12.3%.

Jimmy Carter became President in January, 1977.

At the time Arthur Burns was Chairman of the Fed, a Nixon appointee until 1978. Nixon instituted wage and price controls in a futile attempt to stem inflation. Burns had done what Nixon wanted, which was "easy money" to grease the economic expansion for Nixon's 2nd term. Nixon remembered that a mild recession in 1959 had probably cost him the election against JFK (among other things.)

Jimmy Carter appointed William Miller in 1978, who lasted a year when it was clear that his policies and Carter's did not mesh. Carter then appointed Paul Volker, who raised the Fed rate dramatically and induced a recession which choked off the spiraling wage demands and ability of manufacturers to "forward price" things which customers ere demanding.

Volker told Carter that the policy would likely cause a recession, but Carter gave him the go ahead anyway, knowing that if prices and wages kept spiraling the entire economy would collapse as it always does with a runaway inflation. In 1979 it touched 13.4%. Volker was right, there was a recession, and it cost Carter the 1980 election. Volker was also right, it choked off the inflation - and luckily for Reagan the prices for Arab oil collapsed and dropped by 2/3, helping the economy rebound.

For the record, Gerald Ford also tried to stem inflation in the early 1970's. He introduced "Whip Inflation Now" buttons. No one ever explained how that was going to work.
Print the post  

Announcements

The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.