I cannot imagine a prime rate of 21%. It must have been absolutely prohibitive for so many individuals and businesses, but as you said, it ‘broke the back’ of inflation.

I remember stories in the Weimar Republic where people had to carry money in wheelbarrows to the grocery store, and how people literally burned money in the fireplaces to stay warm or cook food because each bill was worth less than pennies, and it kept getting worse.

I don’t believe that can happen in the American Republic, but thinking about that possibility is beyond chilling.

Thank you for your comment.

The Fed is trying to fix problems (the sub prime, real estate mess) brought on by too much credit or easy money with low rates by reducing rates and providing lower cost money. That could be like trying to put out a fire out with gasoline.

The history of the Federal Reserve is pretty much a disaster. The lone exception was in my lifetime the tenure of Paul Volker. Volker said he was going to break the back of inflation with he did. It was painful but necessary. At the time I was 29 with a pregnant wife and had to borrow at 11+% on a mortgage to buy a new house for my wife and me and our soon to be born son. The prime rate shot up to 21%. But I was loaned the money on the house because I could pay it back. Rates eventually fell and we enjoyed relative prosperity for probably 20 + years as a result of Volker’s tough policies. He did not have much help from Congress but compared to today the politicians then were misers.

I think we are headed for real Weimar Republic inflationary trouble in the years ahead because of our present governmental fiscal policies and Chariman and Reserve members like Mr. Bubblicious, Alan Greenspan and apparently the present Chairman. Hopefully I can stick around long enough to see the course change again.