Pop goes the weasel

From the St Louis Fed: 

Managing a New Policy Framework: Paul Volcker, the St. Louis Fed, and the 1979-82 War on Inflation (PDF, 32 pages) by Kevin L. Kliesen and David C. Wheelock

Whether you applaud or outright reject monetarism, 1979-1982 is a significant moment in US economic history. I started reading their paper soon as I found it, one o'clock in the morning no matter.

I got to the fifth paragraph before I had to stop and respond. Kliesen and Wheelock write:

Volcker was a forceful leader who acted on his conviction that a regime change was necessary to bring inflation under control. Many of the obituaries and commentary after his death cited approvingly Volker’s commitment to restoring price stability and the Fed’s credibility. Volcker’s policies were controversial at the time, however, and arguably contributed to a severe “double-dip” recession in 1980-81.

Arguably contributed? Volcker's // oh my god they spell his name two ways in that paragraph! Even the Blogger editor recognizes the misspelling and offers to add a "c".

They say Volcker's policies arguably contributed to a double-dip recession. That's shirking responsibility: There's nothing "arguable" about it. Milton Friedman in Money Mischief:

slow growth and high unemployment are not cures for inflation. They are side effects of a successful cure -- as we found out in 1980-83.

FRED's recession dates (from NBER) for the double-dip -- I don't think I've heard anyone call it that since the 1980s -- are

Peak		Trough
1980-01-01		1980-07-01
1981-07-01		1982-11-01

Date discrepancy: Kliesen and Wheelock refer to the two recessions by their start dates; Friedman captures the whole of those recessions with his dates. Do Kliesen and Wheelock use the dates they use as a way to weasel out of admitting monetary policy's responsibility for the recessions? POP! 

Probably not. I wouldn't even mention it, if not for their use of the word "arguably".

Paul Krugman:

A lot of what we think we know about recession and recovery comes from the experience of the 70s and 80s. But the recessions of that era were very different from the recessions since. Each of the slumps — 1969-70, 1973-75, and the double-dip slump from 1979 to 1982 — were caused, basically, by high interest rates imposed by the Fed to control inflation...

Since the mid 1980s, however, we’ve had the “Great Moderation,” with inflation quiescent. Post-moderation recessions haven’t been deliberately engineered by the Fed ...

There it is again -- "double-dip". Like me, Krugman is old enough to remember that description in use at the time.

In addition to the recessions identified by Krugman, there was the near-recession of 1966-67: 

Having choked off the money supply as an anti-inflation device in 1966 so tightly that it produced a serious slump in housing and construction (called by some a "mini-recession"), the central bank started pouring out money too quickly and too generously in 1967 and thereby spoon-fed a new inflation.
Source: Stabilizing America's Economy, George A. Nikolaieff, editor; from "Nixonomics: How the Game Plan Went Wrong," by Rowland Evans Jr. and Robert D. Novak, as it appeared in Atlantic Monthly, 228:66-80. July 1971.

And on that note, there is Milton Friedman in Newsweek, October 17, 1966:

The only way to make an expansion of this kind last is to continue to accelerate monetary growth. However, that would produce still more rapid inflation. To avoid this consequence, the Federal Reserve has already sharply reduced monetary growth—indeed, too sharply—to a rate of about 3 per cent a year since April.

The tapering off of monetary growth, like the initial monetary expansion, will at first affect production more than prices...

It is probably too late to avoid a mild recession...

Friedman wasn't afraid to admit that tight money can cause recession.