Johnson inherited Kennedy's political legacy and put forward the plan of "Great Society". From 1965 to 1969, the total federal expenditure increased by 55%, with an annual increase of 1 1%, while the annual expenditure in the first three years only increased by 2%. The federal fiscal deficit is rising rapidly, and in addition, there is another expenditure that is also expanding sharply, that is, the war against Vietnam. 1968 at the peak of the Vietnam war, the number of American troops deployed was as high as 53438+0000. The chairman of the Federal Reserve is Martin.
During Martin's tenure, the federal funds rate hardly exceeded the rising inflation rate. In the 1960s, the reputation of the Federal Reserve was very low. Many people think that the Federal Reserve should cooperate with the Ministry of Finance to support the president's unified decision-making. The fiscal deficit of the Johnson administration reached a record $25.2 billion in 1968. 1967- 1968, Martin implemented an expansionary monetary policy, reducing interest rates below 2%, and the supply of M 1 and M2 increased rapidly.
At that time, the field of economics was dominated by Keynesianism: that is, the government stimulated economic growth and increased employment through expansionary fiscal and monetary policies, although this brought inflation. The most popular theory at that time was the "Phillips curve" invented by New Zealand economist william phillips. The inflation rate is negatively correlated with the unemployment rate. If we want to reduce the unemployment rate, we can expand the currency to increase inflation. To 1969, Phillips curve is invalid!
U.S. GDP turned around and fell to 3. 1%. Inflation has risen rapidly, while the unemployment rate has soared directly to 6%. The United States ushered in the first stagflation crisis. After World War II, the golden age of world peace brought sustained growth to Europe and America for more than 20 years. At the end of 1960s, military technology and labor dividends disappeared, West Germany and Japan rose, the competitiveness of American manufacturing industry declined, the proportion of exports declined rapidly, the gold reserves gradually decreased, and the status of the US dollar was challenged.
The American economy has entered a cyclical recession. The appearance of stagflation marks the failure of Phillips curve. From 65438 to 0967, Phillips returned to Australia after a long absence to study China's economy at the Australian National University. From 65438 to 0968, Nixon was successfully elected as the 37th president. Nixon's domestic goal is to curb inflation and revitalize the American economy. After Nixon took office, he established diplomatic relations with China, ended the Vietnam War and eased relations with the Soviet Union.
Nixon knew nothing about economy and finance. At that time, the dollar was teetering and the Bretton Woods system was on the verge of collapse. 1969- 1970 In order to eliminate inflation, Nixon implemented a tight fiscal policy to a certain extent, and the Federal Reserve also raised interest rates. The inflation rate has dropped to 4.5%, but the gross domestic product has not improved. At 1970 and 197 1, it remained at the level of 3.2%, and the unemployment rate reached 6%. 197 1, abandon austerity policy and seek re-election.
197 1- 1972, then Federal Reserve Chairman Burns (Greenspan's teacher) implemented loose monetary policy, and the money supply soared, with the growth rate of M 1 exceeding 6% and that of M2 exceeding 12%. In the first week of May 197 1 the price of gold suddenly soared, and the international foreign exchange market frantically shorted the dollar. People change unwanted dollars into German marks or other strong European currencies.
Deutsche Bank 1 month 2 1 day bought $200 million, and then decided not to engage in currency operations. The central banks of Switzerland, Belgium, the Netherlands and Austria immediately followed suit and closed the foreign exchange market. In the second week of May, $400 million of gold flowed out of the United States. Gold reserves have fallen to their lowest point since World War II. On August 2nd 12, the exchange rate of the German mark against the US dollar rose to the highest level in 20 years. Paul Volcker, Vice Minister of Finance, realized that the collapse of the US dollar was imminent.
1965, Charles de Gaulle transported the gold worth $400 million that France kept in New Zealand back to Paris. At that time, the US Treasury had less than $2 billion in gold, which was less than 15% of the US external repayment obligation. By then, the official price of gold had doubled, from $35 to $70. Volcker put forward an emergency plan: stop the exchange of dollars for gold. Ending the exchange of dollars for gold meant the collapse of the Bretton Woods system, but it was rejected.
1971August 15 night, Nixon suddenly announced to the world that the dollar was decoupled from gold and closed the dollar exchange window; Implement wage and price control for three months and intervene in labor negotiations. The next day, the stock price of NYSE plummeted by 3%, the foreign exchange market was in chaos, the Bretton Woods system collapsed, and the international financial situation was turbulent. 197 10 June10, Nixon once again made a speech to the whole country, focusing on price intervention and controlling inflation.
From 1972 to 1973, eggs rose by 49% and meat prices rose by 25% as a whole. 1973 in April, housewives launched a week-long nationwide boycott of meat. Nixon spent a whole year trying to control prices, and as a result, prices got out of control and even caused a serious shortage disaster. For the first time in peacetime, the demand of Americans was in short supply, and a lot of beef and food on the market disappeared. President Nixon was a supporter of Keynesianism.
654381October 6, Egypt and Syria declared war on Israel, and the fourth Middle East war broke out. In retaliation for Nixon's supply of weapons to Israel, Saudi Arabia announced an oil embargo on the United States on the 20th. When the first oil crisis broke out, oil prices rose wildly. The oil price rose from $3 per barrel to $0/2 per barrel, and Nixon abused his power to "massacre" the Ministry of Justice at the end of the party. At 365,438+0, the House of Representatives initiated impeachment proceedings against Nixon, which was the Watergate Incident.
In May 1974, the price rose in retaliation. In August, the economy fell into a trough, Nixon stepped down and Vice President Ford took over. 1974 The real GDP growth rate was -0.5%, the price rose 12%, and the unemployment rate reached 9%. The Standard & Poor's 500 Index fell nearly 43.3%, the biggest drop in previous adjustments. The second serious stagflation crisis broke out in the United States. Americans have found that global oil prices have fallen, while the United States is deeply mired in stagflation, and the root of stagflation problem lies in the United States itself.
Ford government implemented tax reduction law, cut government expenditure, balanced budget and other measures, while the Federal Reserve implemented a relatively tight monetary policy. In the two years since Ford took over, the GDP growth rate has rebounded, and inflation has dropped to around 4%, but the unemployment rate has not dropped significantly. 1976 Ford should have been re-elected, but because Ford was dissatisfied with Nixon's Amnesty after he took office, and the unemployment rate remained high, he finally lost to Carter.
The Carter administration abandoned the austerity policy and chose the expansion policy to stimulate economic growth. The maximum growth rate of M 1 reached 8%, and the growth rate of M2 remained above 12%. After the negative growth of 1975, the GDP growth rate of the United States is around 5%. The unemployment rate and CPI in the United States are still higher than the GDP growth rate. 1979 When the Iran-Iraq war broke out, oil prices tripled in just one year. The second oil crisis broke out.
The inflation rate in the United States soared from16% in 1976 to 12.7% in the fourth quarter of 1979. The unemployment rate remained above 6%, while the GDP growth rate plummeted, with a growth rate of only 3. 17% in/979. Carter blamed inflation on people's excessive consumption and greed and their heavy dependence on oil. Throughout the 1970s, the American government warned people to reduce demand and save oil.
Carter was so unstable that he fired 13 members of the entire cabinet in one breath, so he appointed Walker as the chairman of the Federal Reserve. He pushed President Nixon to decouple the dollar from gold, which led to the disintegration of the Bretton Woods system. Now, the dollar is besieged around the world, and the United States is caught in the quagmire of stagflation. He wants to save something. Volcker is not bound by any theory, insists on pragmatism and is known for his tough hand.
Volcker actually adopted a two-pronged approach, that is, pegged to interest rates and the total amount of money. At the beginning of 1980, the inflation rate soared wildly. 65438+1October 2 1, and the price of gold reached an all-time high of $850 per ounce. Volcker raised the federal benchmark interest rate to 12.5% for the first time, and further raised it to an unprecedented 2 1% in April. The inflation rate in May was as high as 15%. This year, the appreciation rate of US GDP dropped to -0.26%. The American economy slipped into the third stagflation crisis.
Volcker's violent deleveraging stifled market liquidity, completely sacrificed economic growth and employment, and smashed President Carter's job. In the past few years when President Carter was in power, in addition to the overall decline in unemployment rate, inflation rate and economic growth rate, the US dollar also faced a serious international credibility crisis, and even beggars in Paris openly refused to accept the US dollar. The government's fiscal deficit keeps rising, reaching $74 billion in 1980.
1980 Reagan was elected president. Laffer served as Reagan's economic adviser, Friedman's monetarism successfully entered the Federal Reserve, Mundell and Laffer's supply school entered the White House, Keynesianism lost its political dominance, and American economic decision-making began to be dominated by the new economic theory. In the second year, the American economy experienced the worst moment since the Great Depression, with severe recession, high unemployment rate and inflation rate.
Volcker has always adopted a high interest rate policy, insisting on a high degree of austerity and not relaxing. The White House is like a cat on hot bricks. 1981on March 30th, Reagan's assassination won him many sympathy votes. On August 4, Reagan's tax reduction bill was successfully passed in the Senate and House of Representatives. However, Greenspan and Burns in Reagan's team do not fully support tax cuts, and they are worried that tax cuts will increase the government deficit. The government's fiscal deficit has set a new record this year.
Volcker and Reagan reached an understanding in exchange for a slight reduction in interest rates, prompting the Reagan administration to tighten its finances and increase taxes. In August 1982, the tax increase bill was passed. The economy of 1982 actually collapsed, and the annual GDP growth rate dropped to the worst-1.8%. Industrial production declined 1 1.8% for 44 months, and the worst stock, debt and credit markets were in a state of imminent collapse.
Members of the Federal Reserve voted to "stop increasing the money supply" in the first quarter of 1982 and raised the federal funds rate to 14%. All Volcker can do is stick to it. At that time, a group of farmers from Ohio drove tractors to protest in front of the Federal Reserve, demanding that Walker step down and cancel the Federal Reserve. Everyone including Reagan gnashed his teeth at Volcker. Finally, at 1983, the inflation rate dropped to 3.2%.
1982 10, the Dow rose from 770 in August to 1000, and this crisis raged from 1970 to 1982 for thirteen years. The number of bankrupt enterprises reached 25,300, the average GDP growth rate was only 2.9%, the average annual inflation rate reached 10.46%, and the highest unemployment rate reached 10.8%. Both set a record after World War II. 1in the winter of 982, the American economy and even the world economy quietly entered a historic turning point.
1986, the inflation rate dropped to 1.9%. 1983 witnessed a strong economic rebound with a GDP growth rate of 4.5%, and 1984 reached 7.2%. In the 25 years after 1982, the annual growth rate reached 3.3%, which was equivalent to the growth level in the 25 years after World War II. A large amount of investment has shifted from commodity investment with high inflation to stocks, bonds and money funds. The big bull market that lasted for decades kicked off. It turns out that Volcker was right to endure short-term pain and curb inflation first.
Money is an economic stabilizer; If the currency depreciates sharply, the market price will be completely distorted, the market mechanism will fail as a whole, the economy will fall into chaos, and economic recession, stagnation and large-scale unemployment will be inevitable. Only when the currency price is stable and inflation is controlled will the economy and employment increase. Only in the process of fighting inflation, the currency has been greatly tightened, which has brought the pain and suffering of economic downturn and unemployment growth, which makes people miserable.
Volcker created a stable price environment for American economy, promoted the self-recovery of market mechanism, and brewed information technology revolution, bioengineering, new materials and nuclear energy technology. 197 1 after the collapse of the Bretton Woods system, a new international order and financial market centered on the US dollar were created, which prompted a large amount of international capital to flow into the United States and created a bull market in real estate, stock and finance for decades.
1983, the chairman of the Federal Reserve changed and Walker was re-elected. Later, Reagan appointed four directors, Martin and Siegel, who controlled the majority of votes and tried to implement a loose monetary policy. 1 987 June1Volcker submitted his resignation letter. Greenspan became chairman of the Federal Reserve. From 65438 to 0990, Greenspan abandoned the Friedman-era monetary quantity target and turned to interest rate adjustment. Since then, the money supply has been completely out of control.
In 2008, when the financial crisis broke out, the Federal Reserve led by Bernanke implemented quantitative easing policy. Since then, the stagflation crisis has added more elements: debt crisis, asset bubble, exchange rate crisis, property market crisis ... 20 10 On February 2, 83-year-old Volcker said at the top of his lungs: I want to tell you clearly here that if banking institutions still rely on taxpayers' money to provide protection and continue to speculate at will, the crisis will still occur. ...
Chapter 1: Summary of environmental protection work in the first quarter.
In 20 18, under the correct leadership of the county party Committee a