I have been taking stock of the reaction to QE3 in some conservative circles, where we talk about issues amongst ourselves. I am completely astonished at how much many have forgotten about the 1980s, or perhaps too many are too young to remember. But I think we need a refresher course about the 1981 recession when Paul Volker “broke the back of inflation”.
The graph below illustrates the CPI rate of inflation from 1979 to 1989
As you can see, the fall in inflation was pretty dramatic. It was also accompanied by a very deep recession, during which there was an enormous amount of pressure on Volker to do something about it. Included in those pressuring Volker was President Reagan who sent Milton Friedman over to the Fed to “help them out”, lest monetary policy could have been run out of the Treasury. It’s very interesting to note what happens to inflation between 1983 and 1988. In the later part of the 1980s, CPI inflation hovered between 4-5% and I don’t remember anyone harping about it as I have now with inflation at historic lows. What gives?
If people want to complain about something, they really should have the decency to at least have an intelligent argument instead of parroting every silly thing Ron Paul and his crazy cult of followers say. Buried in their anti-inflation and gold standard rhetoric, they are happy to say without saying it directly that both Friedman and Reagan were liars, cheats, fraudsters and lovers of big government. They don’t care about you and their ideas shouldn’t be accepted at face value and repeated without understanding the full meaning of their words.
I’m aware that the recession and living through Obama has been quite a shock. But if you’re one of those who are so angry that you just don’t trust anything or anyone, just look back at history and think about the people who genuinely cared about happens to this country and the people in it, and what they did. And yes, THEY DID PRINT MONEY to get a recovery. It didn’t hurt!
Recommended reading for this post:
Chapter 3 – The Control of Money in Capitalism and Freedom by Milton Friedman.