Though the interest rates were a result of Fed policy, the money-supply target let Volcker avoid the politically explosive appearance of directly raising rates himself. As money became more scarce, banks would raise interest rates, limiting the amount of liquidity available in the overall economy. This would be accomplished by limiting the growth of bank reserves, which the Fed influenced by buying and selling government securities to member banks. On October 6, 1979, after an unscheduled meeting of the Fed’s Open Market Committee, Volcker announced that he would start limiting the growth of the nation’s money supply. These were the years when the industrial workers’ movement was defeated in the United States and the United Kingdom, and third-world debt crises exploded. As chair of the Federal Reserve from 1979 to 1987, Volcker was the most powerful central banker in the world. If someone were to make a movie about neoliberalism, there would need to be a starring role for the character of Paul Volcker.
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