📜 Real history · Advanced
History: The Volcker Shock (1979–1982)
August 1979: inflation is above 11% and rising. New Fed Chair Paul Volcker decides to crush inflation, pushing interest rates toward 20%.
The facts
- Start: August 1979. End: December 1982.
- The Fed tightens dramatically; the federal funds rate averages over 16% in 1981.
- Predict what actually happened by the end of 1982.
Your predictions
What actually happened
Why?
Volcker’s policy worked — but at a high cost. Inflation fell from over 11% to under 4% by the end of 1982. The price was two back-to-back recessions; unemployment climbed to nearly 11% in late 1982, the highest since the Great Depression. Stocks actually ended higher: the market began a historic bull run in August 1982 as investors anticipated lower inflation and interest rates.