The Federal Reserve Chair Who Saved America From Mass Inflation
The 1970s were a decade of economic malaise for the United States. From the rising inflation to long lines at the gas station, Americans witnessed an unprecedented level of economic upheaval throughout this decade.
All presidents — Richard Nixon, Gerald Ford, and Jimmy Carter — during the 1970s had to confront the four ton economic elephant in the living room. For the most part, they all failed.
Though the case of Carter (1976–1980) was intriguing. During his final year in office, inflation hovered around 15%. On top of that, he presided over notable foreign policy blunders such as the Iranian hostage crisis of 1979. Despite all the problems Carter was facing, he did make one unheralded move that ended up saving the country in the long-term. Namely, his nomination of Paul Volcker as Chair of the Federal Reserve in 1979.
In contrast to his predecessors such as Arthur Burns (1970–1978) and George William Miller (1978–1979), Volcker took some hard-nosed tight-money policies such as raising interest rates. From August 1979 to April 1980, Volcker raised interest rates from 10.5% to 17.5%. Despite these hikes, inflation was still hovering around 11.1% by the fourth quarter of 1980, which motivated Volcker to raise interest rates. Interest rates eventually reached 19% by July 1981.
In a similar vein, Volcker limited the Fed’s balance sheet growth rate to less than 5% by 1982. During the first years of the administration of Ronald Reagan, the US economy was knee deep in a recession. Naturally, politicians at the time became energetic about calling for massive government intervention and big spending programs at the time. On top of that, they were not pleased with Volcker’s tight monetary policies.
What made Volcker special during this period was his commitment to maintaining the Fed’s independence during the Carter and Reagan administrations. This was most apparent when he presided over the aforementioned interest rate hike that kicked off a short-term recession towards the end of the Carter administration.
By October 1982, inflation plummeted to 5% under Volcker’s watch. Once Ronald Reagan was able to get substantial tax reform through, the combination of his pro-business reforms and Volcker’s tight monetary policy was able to get the US out of the economic doldrums. Against the backdrop of an economic downturn, Volcker did not fall for the Siren Song of government intervention and ultimately stood his ground. Say what you want about Volcker, he understood why monetary contraction is necessary in certain economic contexts. On top of that, he respected the role interest rates and savings play in the economic livelihood of everyday people.
Unfortunately, Volcker’s Fed Chair successor in Alan Greenspan did not exercise such restraint. Ironically, Greenspan was a major advocate of the gold standard in the earlier days of his career. However, once he became assimilated into the Fed blob, Greenspan became just another easy money booster who presided over the tech and real estate bubbles. Greenspan’s failings are a story for another day.
In the grand scheme of things, Volcker was the exception rather than the rule when it came to his performance as Fed Chair. Few public officials will show economic restraint in an epoch when there’s constant pressure to give people free economic handouts and keep the economy booming through artificial credit expansion.
This is the order of the day in DC policy circles. And it’s not likely changing anytime soon. There’s not much you can do about it….
However, you can align your interests with that of the government and central banks — the two most powerful forces on this planet.
We’re living in a time of inflation. For the average salaried worker, this is a nightmare as they see their savings get annihilated. But for the income property investors, opportunity abounds.
You see, inflation cheapens debt. When you take out a mortgage to buy a property, you’ll see how this process works in real time.
As a savvy income property investor, you’ll rent out this property to a tenant who takes on the carrying cost of the property. In effect, you kill two birds with stones by having a tenant giving you steady cash flows through rent payment, all while inflation makes your mortgage cheaper.
Moreover, your property’s appreciation rate outpaces the inflation rate. That’s the benefit of investing in real estate, the most historically proven asset class. The home is the center of the universe and will always be in demand.
In this era of mass inflation, it pays to be prepared for what the central banks throw at you.
At the Empowered Investor Pro, you’ll learn how to thrive in inflationary times. Empowered Investor Pro is a community of real estate investors laden with high-level knowledge on real estate investing.
This is the kind of content you won’t find at business schools or even from so-called real estate “experts.”
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During a time when inflation is wreaking havoc, it pays to be in top-tier investing networks. Getting your financial house in order is crucial in this precarious economic environment.
Joining the Empowered Investor Pro community is your one-way ticket to financial sovereignty.
Defeat mass inflation by joining Empowered Investor Pro today!
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