Word: creditable
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Dates: during 1980-1980
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Whatever happens to the economy in 1981 will depend to a large degree on the actions of the Federal Reserve Bank and its controversial chairman, Paul Volcker. As the nation's central bank, the Federal Reserve regulates the availability of both money and credit in the economy, which helps determine the level of interest rates for borrowers and lenders alike. In October 1979, the Fed announced that it was scrapping its traditional inflation-fighting tactic of trying to regulate overall economic activity by manipulating interest rates within a narrow and relatively low range. The bank decided instead to attack...
...only game in town." When inflation roared to an annual rate of 18.2% in the first quarter and bond markets collapsed following Jimmy Carter's proposal of a fiscal 1981 budget with a $ 15.8 billion deficit, the Fed hit the brakes hard. It imposed credit controls on consumer borrowing and clamped down on bank lending. The prime rate, which began the year at 15.25%, quickly climbed to a then record 20% in April. The price of stocks and gold, which had been strong, fell quickly. But the economy cooled so that inflation declined to the year...
Business, however, ran into a wall. Between April and June, the economy declined at an annual rate of 9.6%, the fastest drop since World War II. But then, with the arrival of summer and the acceleration of Carter's re-election campaign, credit controls were loosened and money became less restricted. The prime rate fell to a low of 11% in July. Yet, after November's presidential election and a new burst of inflation, the Federal Reserve Board once again tightened money, and interest rates began another steep rise, quickly passing the spring's historic interest rate...
...squeeze on credit was a major burden on business all year long. Companies began avoiding new debt financing through the long-term bond market because high rates made that too expensive. Instead, they turned to banks for short-term loans that would not lock them into high rates for ten years or more. Industries that depend heavily on credit, particularly home building and auto sales, have been staggering. Lone Star Industries, the country's largest cement producer, last week took out full-page newspaper ads featuring a large skull and crossbones and the warning POISON...
Nancy H. Teeters, who has opposed the credit tightening, said that excessive monetary restraint will result in a business decline. "It's very simple," Mrs. Teeters said. "Rates are too high...