In the 1970s, inflation was increasing, federal government budget deficits were escalating, energy prices were rising, interest rates were spiking, and the country was gripped by a wage-price spiral.
Fed Chairman Arthur Burns and President Jimmy Carter didn’t seem to know what to do. Disastrous results followed.
Eventually the high inflation led to a recession in 1973 and a double dip recession in 1975. Fed Chair Burns was reluctant to raise interest rates and, except for a brief time in the mid-1970s, kept the Federal Funds Rate near 5%. That relatively low rate added to the excess demand that kept inflation growing.
Volker slowed money supply growth and pushed interest rates to extremely high levels. Noting that inflation reached 13.5% in 1980, Volker said that the extremely high interest rates would take enough demand out of the economy to put downward pressure on prices and eventually reduce inflation. Biden, like Carter has taken no action to increase energy production in the US. In fact, his policies have reduced energy production in both the short term and the long term.
However, had Biden not cancelled the Keystone pipeline, not withdrawn leases to drill on federal land, and not made the permitting process much more difficult and expensive, U.S. oil production this year would exceed 14 million barrels per day. Biden is becoming another Carter.
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