M1: 1975 to 1990

Gary North

November 20, 2008

The M1 data indicate that the Federal Reserve System in the first year of Paul Volcker's tenure as chairman stabilized money. You can see the result: the recession of 1980.

When a prior period of monetary inflation is called to a halt, the result is a recession.

In the months before the recession of 1981, the worst recession in post-War history (so far), the FED stabilized money again.

Volcker resumed the policy of monetary inflation in 1981. This accelerated in 1985. Greenspan did not replace Volcker until October 1987, a week before the famous one-day 22% decline in the U.S. stock market, with comparable declines in the world's stock markets.