Name: What Paul Volcker taught us about taming inflation Charts That Count
Uploaded: 2019-12-16T10:31:07.000Z
Duration: 3 min 20 s
Description: Thousands of YouTube videos with English-Chinese subtitles! Now you can learn to understand native speakers, expand your vocabulary, and improve your pronunciation...

00:00:05,135 --> 00:00:07,125 Today we're going to talk about Paul Volcker.

going to discuss his legacy and what's relevant to today.

00:00:15,670 --> 00:00:18,610 Mr Volcker was president of the US Federal Reserve

And at the time, inflation was crazy high.

This red line is the 12-month percentage change in inflation.

So what that means is in this year, inflation was almost 14

per cent higher than it had been the year before.

And that means that prices were going up really, really,

And that's part of the reason that President Jimmy Carter

actually appointed Paul Volcker to be the president of the US

And what he did was to raise interest rates really,

really high in order to bring down inflation,

because remember, when interest rates are higher,

But what that did is that it pushed the US into a recession.

Now, as you can imagine, folks were really mad

as 20 per cent, which meant that things like housing

People were really upset, including lawmakers and just

He stood by his decision to keep interest rates high

because he knew it was important to bring inflation down.

And he was justified because that's exactly what happened,

And one of the things that Mr Volcker is credited with

is that if you look over the course of this chart,

inflation has never been as high as it was during that period.

And so he gets a lot of credit for sticking

by that difficult decision, even though people were really upset

is because he restored credibility to the Fed.

Now when financial institutions don't believe that the rules

enforcers are going to actually enforce the rules,

in a risky way, which is what happened in 2008

And you can see the GDP sink here during that time period.

was the Volcker Rule, which came into effect after the 2008

crisis as part of the Dodd-Frank Act, which ended

And today, inflation, as you can see, is not as high as it was.

We're really not facing the same problems

that he faced when he was the Fed president back in the '70s

if inflation was just a little bit higher, since its target is

All in all, I think that the most important lesson

from this time period is that it's important for regulators

even if that means being unpopular for a little while.