Read more on this subject: Economy – Economics USA
News Story Source: https://www.zerohedge.com, by John Rubino
In the 1960s the US entered the expensive and divisive Vietnam War, while simultaneously creating major entitlement programs including (also very expensive) Medicare. In the 1970s, commodity prices, led by oil, started to rise due in part to the billions of new dollars sloshing around in the world, and in part to Middle East turmoil.
The above combined to produce rising inflation and a falling dollar, wreaking havoc in the foreign exchange markets and raising doubts about the viability of the dollar as the world's reserve currency. It was a huge mess.
But the US recognized the gravity of the situation and, led by Federal Reserve chairman Paul Volcker, responded aggressively by jacking up interest rates to double-digit levels. The Fed Funds rate hit nearly 16% in late 1979.
This spike in interest rates, not surprisingly, sent the economy into recession in 1981 and shaved about 25% from the S&P 500.
But the harsh medicine saved the patient. Higher inter
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