Suffering Mid-Life Crises: Confronting Severe Inflation and Financial Meltdown in Adulthood—February 1970–January 2014

Abstract

The central bank is always caught up in, and reacting to, the swirl of powerful historical currents. But Fed actions in turn also have importantly influenced the direction of those forces, both for good and ill. It is a crucial actor in the saga of American history, but it plays a part that, owing to its complexity and technicality, is underappreciated not only by the media in the noisy onrush of daily events but also even by historians, who have the luxury of quiet reflection on broad developments. This chapter’s glimpse of the main cast of characters and patterns of policy design, implementation, and communication since the era of Chairman Martin, which ended in January 1970, makes an effort to identify the crucial elements. The names of the chairmen of the Board of Governors and of the House and Senate Banking Committees since early 1970 appear in Table 4.1. The dates of the major turning points in the FOMC’s design, implementation, and communication of policy are presented in Tables 4.2, 4.3, and 4.4. Back in junior high school I remember another student asserting what was to become a cliché later in my education: History is just a collection of names and dates. Fortunately, that student’s observation was in error, because if it actually were the case, then all the subsequent chapters that put analytical meat on these bones in the Bernanke era would be superfluous. Still, the tables do allow the chapter to close with a narrative covering the Fed’s influence since early 1970 that can be brief.