Inflation is the one of the form of taxation that can be imposed without Legislation – Milton Friedman.
Paul Adolph Volcker Jr. was an American economist. He was Chairman of the Federal Reserve under U.S. presidents Jimmy Carter and Ronald Reagan from August 1979 to August 1987.
1979 – Took Office
- Interest Rate – 11.09%
- Unemployment Rate – 6%
- Inflation Rate – 13.3%
- GDP Growth Rate – 3.2%
At one point Fed raised rate to 20.5% to stop inflation.
1987 – Left Office
- Interest Rates – 10.33%
- Unemployment Rate – 5.7%
- Inflation Rate – 4.4%
- GDP Growth Rate – 3.5%
Interest rates had shot above 20 percent, millions of Americans had been thrown out of work, and consumer spending had plummeted. The vital industries that built and sold homes and cars were struggling, and thousands of businesses were heading into bankruptcy. Yet, as the Congressmen questioned the one man most responsible for the hard times, Paul A. Volcker Jr., the chairman of the Federal Reserve Board, they drew no comfort. As bad as conditions were, Volcker said on that summer day in 1981, they were only going to get worse.
Paul Volcker, the man of great integrity and thrift, had deliberately orchestrated a stratospheric rise in interest rates right after he took the office in a determined campaign to crush inflation.
As Volcker saw it, he had to strike hard to jolt Americans out of the expectation that prices would inevitably leapfrog higher and that the only way to stay ahead was to keep spending and demanding higher pay.
To his way of thinking, the only way to get price stability was to drive up interest rates to the point where the economy stalled, to where people no longer wanted to buy. Then prices would begin falling and you would begin to see stability replace the upward clime of inflation.
Volcker compares himself to a physician administering medicine: “The doctor says, ‘I know you don’t like this, but it’s good for you.'”
Though almost certainly not something Volcker thought out, the austerity underscored his disdain for materialism and added to his legendary reputation for integrity.
Volcker’s special strength in political Washington drew from a single, fundamental desire he felt throughout his life: to seek nothing beyond the freedom to follow his principles.
Volcker ultimately defeated inflation, putting the country on the path to its greatest run of prosperity in history. In recognition of his success and his unyielding adherence to principles and tactics, his stature has risen to the level of demigod in the world of economics and finance.
One of the most powerful man of his life lived paycheck to paycheck throughout his life and after retiring as Fed Chairman, he joined Corporate world and was able to accumulate wealth of 1.5 million dollars, which he donated to a Hospital.
Do read in its entirety in the book “Paul Volcker – The Making of a Financial Legend” by Joseph B. Treaster.
Inflation eats away your wealth. Currently, the inflation rate is mere 1.5%. That means you are holding up the value of your wealth, which makes you richer. Thanks to Paul Volcker. Volcker died in 2019.