Page 52 - Bloomberg Businessweek-October 29, 2018

◼ ECONOMICS Bloomberg Businessweek October 29, 2018

When the Donald Trump’s repeated public criticism of the
Federal Reserve’s monetary policy seems extraordi-
nary, but he isn’t the first president to oppose raising
President rates. Paul Volcker, 91, has had firsthand experi-
ence with this, both in Lyndon Johnson’s Treasury
Department and as Fed chairman during the Reagan
Pressures administration, as he recalls in Keeping at It: The
Quest for Sound Money and Good Government
(Oct. 30, PublicAffairs), written with Bloomberg
The Fed Markets Editor Christine Harper. Volcker, who was
Fed chairman from 1979 to 1987, is credited with
ending an era of double-digit inflation by pushing
short-term rates as high as 20 percent.

Later in the fall of 1965, Treasury Secretary Henry
Fowler became deeply concerned about a warn-
ing he had received from Fed Chairman William
McChesney Martin. The Fed planned to raise its
discount rate, the rate the Fed charges banks for
short-term loans, with the presumed effect of
raising all market rates. Martin’s clear aim was to
● In excerpts from his forestall inflationary pressures as Vietnam War
memoir, Paul Volcker spending rose in an already fully employed econ-
recounts some unsettling omy. A spirited internal debate developed. The
Council of Economic Advisers and the Bureau of
executive encounters the Budget lined up with Fowler in pleading for
38

◀ Reagan and Volcker
in the Oval Office in 1981

J. SCOTT APPLEWHITE/AP PHOTO