loosening the credit reins), interest rates would drop. During the 1970s, however, after the Ford and Carter administrations greatly expanded credit to cushion the oil-price shocks, inflation soared. Investors decided that loose credit caused infla- tion. Interest rates rose. "Almost overnight," Morris writes, "the financial headlines executed an about-face: if the Federal Reserve loosened credit, itwas thenceforth taken for granted that interest rates would rise, not fall."
The...