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| Am waiting for visitors so might not finish- It began with the spending for Viet Nam & the huge spending programs put into place by President L. Johnson....that set the base for a big stimulus for the economy. In a nutshell, when Nixon was elected international central bankers began to draw down gold from US reserves in exchange for dollars. Inflation was creeping higher, Paul Volker (sp) was under sec. of treasury & concerned & soon Nixon closed the gold window & legalized ownership of gold. When the USSR demand hit the markets & along with weather problems & the heavy spending of previous years started to come home....prices edged higher...foreign owners of dollars--sensed supplies of various commodities tightening and used those cheap dollars to buy commodities, land & etc. driving prices higher...Nixon put price controls in place creating shortages, except for cattle, & prices continued to advance....Volker, now Fed chairman, rather than continue along the fed raising & lowering rates on a pre-determined formula basis...let the market determine rates & along the lines of Milton Friedman began to adjust rates through the supply of money. Rates skyrocketed & I recall using my operating capital "float" buying bank repo agreements renting them my money for the weekend & while I cannot recall all of the exact rates from memory...think I tied up some repo money at 18-20% on a weekend basis.....90 day treasuries I think advanced to 21% for a few days. more later. | |
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early 80s and high interest rates, how and why did this happen
