NFT: NFT: RIP PAUL VOLCKER

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Named Later : 12/9/2019 10:47 am : link

Tall Paul. He deserves a lot of the credit for busting the Inflation bubble of the 70's and early 80's. I remember trying to get a Mortgage for my first house -- Interest Rates were quoted in double-digits at every lender. But when Inflation came back down to earth, I sold that house for a tidy profit.

Our first mortgage was at 18%

Del Shofner : 12/9/2019 11:15 am : link

Then again, bank CDs were paying like 16%.

Different times.

Does the rule

cjac : 12/9/2019 11:24 am : link

die with him?

I'm sure there's an Econ major here who can help me ...

Csonka : 12/9/2019 12:30 pm : link

Why was fighting inflation so important? I get that it makes your savings worth less. but your assets like a house keep pace. and it greatly devalues the national debt? I sometimes think we need to hyper inflate at some point.

all I know is I had no savings back then and I had to pay 12.9% on a 5 year loan for my first car.

Inflation is destructive to

johnnyb : 12/9/2019 12:58 pm : link

the long term health of the economy. Lower growth, lower incomes, lower standards of living.

Also hurts those on fixed incomes...

Dunedin81 : 12/9/2019 1:09 pm : link

Moderate inflation can actually help a borrower - or a country for that matter - address existing debt, but if your instruments are denominated in the short term (average debt to maturity on the national debt was in the range of 5 years just a few years ago, probably hasn't moved markedly) you're having to roll it over at the new interest rate so it is not beneficial.

I don't think Volcker was so much fighting inflation

GeofromNJ : 12/9/2019 1:40 pm : link

as he was fighting the astronomical jump in housing prices. By raising the fed funds rate, he caused a raise in the prime rate which raised the typical mortgage rate which significantly dampened the housing market. In no way was inflation so bad that it required the increase Volcker engineered.

Inflation was as high as 14%.

johnnyb : 12/9/2019 2:13 pm : link

He was raising rates to fight inflation. Housing prices were actually declining due to the high cost of a mortgage.

RE: Inflation is destructive to

Jim in Fairfax : 12/9/2019 2:40 pm : link

In comment 14708673 johnnyb said:

Quote:

the long term health of the economy. Lower growth, lower incomes, lower standards of living.

Just to clarify: High, runaway inflation is destructive to the long term health of the economy. Low, stable inflation as we�ve had since is healthy for the economy.

RE: ..

if_i_knew : 12/9/2019 3:35 pm : link

In comment 14708444 Named Later said:

Quote:

Tall Paul. He deserves a lot of the credit for busting the Inflation bubble of the 70's and early 80's. I remember trying to get a Mortgage for my first house -- Interest Rates were quoted in double-digits at every lender.

This is why I have little sympathy for recent college grads that complain about high college debt

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NFT: NFT: RIP PAUL VOLCKER