PA

Name: McWeeney

Course: PA 315

Date:1/13/15

Title of Article or Video: The Secret History of the Credit Card

Citation/URL

Author: Samuelson

Length:

column

Subject: Collaboration between the President and the FED on economic recovery in the 1980s

1. Describe the problem or issue that was the subject of article/video

During the 1960’s and 1070’s inflation was growing out of control – reaching a rate of 13% by the early 1970s. This was seriously hurting fixed savings and retirement accounts and causing a loss in overall confidence about the future. All traditional approaches tried over the previous decade had not improved the situation

2. What do you think was the root cause of the problem?

Government policies that tried to fight inflationary pressures while maintaining full employment.

3. List three important points you learned in the article/video

1. Leadership actions in the 1960’s and 1070’s, such as wage and price controls during the Nixon Administration, made inflation worse

2. FED Chairman Paul Volker unilaterally reduced the money supply, intentionally causing a recession, thinking that was the best way to fight inflation

3. Ronald Reagan refused to do the easy political thing and call for the FED to relax its control of the money supply – and he suffered losses in the mid term elections of 1982 because of it.

4. Within 18 months, inflation was diminished, ushering in a 20 period of prosperity

4. Is this a problem of business, government, or a both?

Both. Government made decisions that caused the problem. Business resisted all changes to slow the economy by tightening the money supply. Volcker and Reagan acting unilaterally were able to break through all barriers. This was a demonstration of real leadership

5. On a scale of 5 to 1 (with 5 being high), how would you rate the quality of the article/video?

Please explain your answer

4 – it painted a very compelling picture of the problem and Samuelsson made a compelling argument, The article would have been improved with more information about the cause of the inflationary spiral

6. What do you see as a possible solution? What should government do? What should business do? Can non-profits help?

Government should use this as an example that illustrates why traditional approaches don’t always work in a new crisis. The inflationary spiral of the 1970s was unique for the US in the 20th Century – yet approaches tried to deal with it were standard economic and relatively painless fixes that did not address the core problem. Govt must be willing to try innovative measures in trying to address intractable problems. And business must help by providing the innovative solutions and accepting the difficult path that follows the tough choices. Today’s deficit and debt problem are the best example of an area demanding innovation.

7. Why is this article/ video relevant to the study of business and government?

The article paints a good example of how real collaboration among all stakeholders makes it possible to achieve solutions that would mot otherwise be possible. Samuelsson makes it clear that the Fed could not have been successful without White House support and that the White House could never have devised policy to address the problem alone. The banks and the government all shared in the program and in the outcome. It was a win-win situation\