The Economy Needs a Volcker Moment

Source: Ludwig von Mises Institute
by Connor Mortell

“Readers of the Mises Wire are most likely familiar with the Volcker moment. This was when former Fed chair Paul Volcker, in the face of steep price inflation, skyrocketed rates to nearly 20 percent. While critics of the Volcker moment complain that such a move also skyrocketed unemployment to almost 11 percent, it cannot be ignored that the price inflation was finally reined in. Not only did we see the benefit in reduced inflation, but Austrians have an answer regarding the unemployment. Austrian business cycle theory very simply explains this. While ceteris paribus, this unemployment number looks absolutely devastating, the reality is that it was inevitable. These jobs evaporate with inflation not because there is some mathematically divine connection between inflation and unemployment, but rather because the demand for these jobs was artificially created by the inflation misleading entrepreneurs to misread price signals.” (07/26/22)

https://mises.org/wire/economy-needs-volcker-moment