| Summary: | 博士 === 淡江大學 === 美國研究所 === 89 === Paul Adolph Volcker took charge of the Board of Governors of the Federal Reserve System (the Fed) in 1979-87, worrying about inflation and adhering strictly in anti-inflation. Suggested by the monetarists, the Fed accepted a single rule governing the money-supply should be expanded at a fixed rate for the basic monetary aggregate-M1. The Fed''s new monetary policy caused tight money effect that had forced interest rates up and had imposed the most severe discipline on the economy. Meanwhile, the combination of tight money and high budget deficits had conflicted between monetary and fiscal policy, and had conducted fundamental disorder in the economy and speculation in financial markets.
Research in the ideology, causes, results, and impacts in the implements of Volcker''s Fed policy, I found that a gradual change is better than a big U-turn''s cold-turkey therapy for monetary policy. There is an even keel monetary policy which will benefit for most of the people. Unavoidable, an imbalanced monetary policy could cause a recession.
Any economic policy has its own background, and inflation seems unavoidable in its rising habitat within a growing monetary economy. The inflation circumstances in the 1970s gave a good chance for Volcker to adopt the monetarist idea which held a constant money-supply. But its side-effect, unemployment and high interest rates would happened simultaneously.
To analyze the influence of Volcker''s Fed policy on the five economic goals - the employment, price level, economic growth, balance-of-payments position, and income distribution, all the Volcker''s eight years in the Fed were divided into four periods:
1. the trauma of 1980 in the apocalypse of Volcker Era (October 1979- December 1980);
2. circumstances went from bad to worse, which was the second recession period in Volcker Fed years and the longest miserable years since the Great Depression (1981-1982);
3. the new financial environments after the turn-around change and the golden election of President Reagan (1983-1984); and
4. the swan song of Volcker’s last years (1985-1987).
The negative impact of decreasing money-supply to anti-inflation strictly will result in the higher rate of unemployment, the more closures of plant, the more overextended farmers, and the more families living under the poverty-stricken. Dramatical slowdown the money-supply might be the worst way on the face of the world to fight inflation, except for all the other ways, and the monetary authorities must be very careful when judging it.
After Volcker''s turn loosened his monetary policy, a new financial environment emerged in 1983. Then the inflation held under 4% for 5 continuos years (1983-87), proved the inflation can be conqureed without killing the American economy.
Independence is an immensely complex concept. The Fed should not be brought under political control. Volcker''s experience in conquering inflation showed the wisdom of independence of the Fed. And the Fed could not be abolished or controlled by Treasury Department. But the independence of the Fed is always a relative matter. Only the principals-agent theory of monetary policymaking may accurately depict the variable nature of Fed independence. A collective bargain rules should be built in response of the conflicts arising from the principals-agent: the control of President, the dominance of Congress, and the execution of the Fed. In short, monetary policymaking should not come upon a single unit but upon a multi-institutional framwork ensuring the even keel policy of the Fed.
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