# Volcker and Inflation

By [jer979](https://paragraph.com/@jer979-2) · 2022-10-06

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One of the things I’ve been hearing a lot is a comparison between what people expect the Fed to do today to curb inflation versus what Fed Chairman [Paul Volcker did in the late 70s and early 1980s.](https://graphics.reuters.com/USA-FED/HIKES/mopandgebva/)

During that time, inflation hit 14% and Volcker raised interest rates to 18% to slow things down.

It worked.

Here’s the question I was asking myself this morning…

*   What was the total US debt at that time?
    
*   What was the US gov’t deficit at that time?
    
*   What were the debt and deficit to GDP ratios?
    

So I looked it up.

[In 1980, for example,](https://www.thebalance.com/national-debt-by-year-compared-to-gdp-and-major-events-3306287) the total US debt was $908 billion and debt to GDP was 32%.

Today, it is $30 trillion and 124%

Meanwhile, the [deficit](https://www.thebalance.com/us-deficit-by-year-3306306) was $74 billion and a deficit to GDP ratio of 2.6%

Today it is $12.7 trillion and 12.1%, with the last two years being the first time since WWII that that ratio eclipsed double digits.

There was an Op-Ed in the WSJ the other day, which I can’t find at the moment, talking about the impact to interest payments if the Fed continues to raise rates.

Bottom line: not good. They soon become overwhelming, which is why I am skeptical that it can continue.

My bet is that the Fed would rather have higher inflation and not crush the government’s ability to function, than the reverse.

I’m not a macro-economist, but that’s how I’m reading the tea leaves today.

The numbers just don’t intuitively add up for me.

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*Originally published on [jer979](https://paragraph.com/@jer979-2/volcker-and-inflation)*