The Inflation Temptation
The risk-taking New York real estate developer William Zeckendorf loved to say he would “rather be alive at 20 percent than dead at the prime rate.” But in 1980, four years after his death, the prime rate itself stood at 20 percent. Inflation that year reached a staggering 13.5 percent, by far the highest rate in American history (save wartime or the immediate aftermath of war).
It took a rough recession, induced by the Federal Reserve under its then-chairman Paul Volcker, to break the back of that inflation. Volcker’s measures caused a horrific jump in unemployment, which peaked at 10.8 percent in November 1983. But when the recession ended, the inflation did not return, and the world entered into a period of monetary stability, prosperity, and economic growth unparalleled in history.
About the Author
John Steele Gordon writes frequently for COMMENTARY. His own economic history of the United States, An Empire of Wealth, was published in 2004.