This is the era where the Fed found its backbone...and yeah, it was messy.
We start with how the Fed pegged interest rates during World War II to keep government borrowing cheap, which meant it couldn’t raise rates, even as inflation hit 20% in 1947. Yeah… not ideal. That moment of tension led to the 1951 Treasury-Fed Accord, where the Fed basically said, “We need boundaries.” And just like that, monetary policy and politics went on a much-needed break.
But the real story relevant to today? The 1970s. Enter: stagflation... a nightmare mix of high inflation and high unemployment. And then comes Paul Volcker, the Fed Chair who didn’t just adjust rates, he detonated them. He ditched the traditional playbook and targeted the money supply instead of interest rates, sending borrowing costs through the roof to crush inflation expectations. Two back-to-back recessions followed… but inflation finally came down. And the Fed? It got its credibility back.
It was controversial, painful, and totally necessary. And now, with inflation heating up again, you can see why Papa Powell idolizes Volcker, because price stability isn’t just one goal. It’s the foundation for everything else.
So if you’ve ever wondered why the Fed is allergic to political pressure, why it fights inflation so hard, or why mortgage rates are making you cry, this episode explains exactly how we got here.
The big takeaway?
✨ The Fed learned that price stability is the foundation of everything else: jobs, growth, and economic confidence.
✨ And history shows us what happens when the Fed’s priorities get steered by politics instead of policy.
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Market MakeHer is an investing education podcast taught by a 15-year finance expert to her friend, a beginner investor. Our mission is to demystify the stock market and make financial literacy accessible to all self-directed investors! We teach complex investing topics in a different way - from "Her" perspective.
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