No Paul Volcker- US economy

manav95

Banned
So lets say Paul Volcker dies sometime in the late 70s before he can be appointed Federal Reserve Chancellor. What happens to the US economy if someone else, less of an inflation hawk perhaps, becomes the Chancellor?
 

Deleted member 1487

Personally I don't think he was necessary to get inflation under control, the end of the oil shocks was the primary cause of that. However Volcker was against Reagan's deregulation schemes, which ultimately got him fired according Joe Stiglitz. Probably you'd get someone equally hawkish on inflation, because there really wasn't any other option at that point, but someone more willing to deregulate, which would cause all sorts of issues down the road.
 
the end of the oil shocks was the primary cause of that.

I dont think it was, nor is quite that simple. After all, oil has gone from $10 a barrel in 1999 to 150 in 2008 with no inflation to speak of.

As to the OP, you would really need to know who the likely alternatives were and try to get a sense as to what their views were at the time. It's quite possible others would have acted similarly. Or perhaps not. Either way it requires a bit of research or someone here that has a fantastic memory. I mean, who were the alternatives to Bernanke or Yellen. With Yellen I can remember a couple but Bernanke?
 

Deleted member 1487

I dont think it was, nor is quite that simple. After all, oil has gone from $10 a barrel in 1999 to 150 in 2008 with no inflation to speak of.
Supplies weren't restricted, the price was being manipulated; the issue in 1979 was that there was a 4% reduction in supply due to the Iranian crisis and panic after remembering the recent rationing crisis in 1973. Prices shot up far faster than they had in 1999-2008, nearly a ten year period and that peak quickly went away, while the spike in 1979 came far faster and lasted into the mid-1980s. In fact the inflation problem tracks highly with oil prices in that period.
https://en.wikipedia.org/wiki/1979_energy_crisis

Edit:
its not a perfect correlation, but once the energy crisis resolved inflation resolved around the same time.
 
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Supplies weren't restricted, the price was being manipulated; the issue in 1979 was that there was a 4% reduction in supply due to the Iranian crisis and panic after remembering the recent rationing crisis in 1973. Prices shot up far faster than they had in 1999-2008, nearly a ten year period and that peak quickly went away, while the spike in 1979 came far faster and lasted into the mid-1980s. In fact the inflation problem tracks highly with oil prices in that period.
https://en.wikipedia.org/wiki/1979_energy_crisis

There were also inflexible labor markets and a shortage of spare capacity. Whenever capacity utilization shot above the low 80s inflation also shot up. The oil shocks were a major part of it but inflation is not that simple. And you might want to look at this chart to compare oil price swings.

http://upload.wikimedia.org/wikipedia/commons/b/b0/Crude_oil_prices_since_1861.png
 
Another POD is Gerald Ford winning reelection. There's a good chance that he appoints Alan Greenspan as Fed Chair instead of Volcker. He'd probably take an equally hawkish monetary policy while supporting deregulation.
 
Another POD is Gerald Ford winning reelection. There's a good chance that he appoints Alan Greenspan as Fed Chair instead of Volcker. He'd probably take an equally hawkish monetary policy while supporting deregulation.

Are we gonna include that in "The Cause"?
 

manav95

Banned
How would the economy play out if Volcker doesn't become Chairman? Would stagflation last longer or would Reagan budget cutting restrain inflation?
 
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