# Volcker and Inflation

**Published by:** [jer979](https://paragraph.com/@jer979-2/)
**Published on:** 2022-10-06
**URL:** https://paragraph.com/@jer979-2/volcker-and-inflation

## Content

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. 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, the total US debt was $908 billion and debt to GDP was 32%. Today, it is $30 trillion and 124% Meanwhile, the deficit 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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