The Fed has long approached its dual mandate of price stability and maximum employment as a tradeoff between inflation and joblessness. Times of low unemployment and low interest rates were seen as threats to price stability, prompting the Fed to raise interest rates to avoid spikes in inflation.
That view was largely shaped by the legacy of former Fed Chairman Paul Volcker’s crusade against staggering inflation during the early 1980s, which topped 10 percent annually. The Fed under his watch hiked rates to induce a recession that slowed the economy but also the pace of price increases.
Volker. He rode roughshod over the default years when prices were nutty. After the 72 gold default there was a streak of mass hysteria, starting in Japan. The trauma worsened and we got a 'This time is different' psychosis. I guess in the 70s we discovered out government is mostly comprised of lunatic politicians.
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