but in 1975, the fed, under the chairmanship of arthur burns, faced a new and troubling dilemma -- caughtween persistent inflation and a growing recession, how did chairman burns keep the economy on course? by late 1974, inflation had become a serious economic problem. under pressure from rising fuel prices, inflation rose to a staggering 12%. inflated interest rates had driven up the price of mortgages and brought the building industry to a standstill. sales of new cars and home appliances plunged. in september, president gerald ford asked congress to join him in a battle against inflation. my first priority is to work with you to bring inflation under control. inflation is domestic enemy number one. schoumacher: the federal reserve was also committed to fighting inflation and, under the chairmanship of arthur burns, held to a policy of keeping money tight. robert c. holland served on the fed's policy-making board of governors. when the federal reserve wants to fight inflation, what it does is provide funds -- basic funds we call reserves, funds to the banking system -- less fast than ba

worsening stagflation, despite the message from the economic summit, neither president ford nor arthur burns the time, could bring themselves to alter the policy of fighting inflation above all else. in october, the president offered his anti-inflationary program to a joint session of congress. it relied on the old formulas -- a tight ceiling on federal spending and a tax surcharge. and for the public... it bears the single word "win." schoumacher: participation in a special campaign. i will call upon every american schoumacher: participation in to join incampaign. this massive mobilization and stick with it until we do win as a nation and as a people. [ applause ] schoumacher: while government concentrated on fighting inflation, gnp continued to fall, unemployment continued to rise. why was it so difficult for the government to adapt to the signs of the developing recession? the first was the tremendous fear of inflation that was all over the country. it wasn't only in washington but all over the country, which really effectively paralyzed those arms of government policy that might fight re

. >> i just -- i yearn for arthur burns. >> our third front-page story is what is going on in ukraine. they had to reinforce their eastern border with russia. they will draw their own troops. pro-russian troops -- >> they have their own currency? eu leaders are meeting in brussels. they will talk about sanctions and the response. ruble?t they take the >> i don't know. they have switched to moscow time. there we are. sanctions? on >> there will be a lot of talk. >> we will continue to talk about malaysia air flight 370. as scarlet mentions, it is thursday in australia. the discovery of debris far off the coast of peterth -- about the distance of new york to miami. david gallo joins us. they say they cannot locate the debris. mr. gallo is legendary. he is at the woods hole institute with m.i.t. he led the search for air france. gallo, what is the single thing you would like to tell people that they're not getting in the media frenzy? >> at the core of this, everything that is found is a piece of evidence. the tough part and now has been sorting out what is real evidence and what has bee

life this is not your father's fed, like, and less your brother grew up in the arthur burns arrow.i. i would say that this is a fed that actually wants moderately higher inflation. it is not the volcker or greenspan but that was against inflation. i do not think they will lean against it that hard. the reality is you cannot keep all rates close to zero to perpetuity at a time when nominal gdp growth by this time next year will probably be pressing near 4%. i think you will see that process. they look site we will be talking about this in 2003 and lo and behold they and bark in 2004. i am looking at much the same. >> mike, are you going to see more people, the trend of people going into the labor force, seeking jobs? >> that is almost impossible to say the way we have been going the last couple of years because every time we think that is going to happen, something happens and it changes. but it is what you would normally see in a recovery. now we are way into the recovery, but you would normally see more people coming in as they perceive they can get jobs. and that pushes upward, p

even the head of the fed, arthur burns said in a speech said the economy is not working the way the textbook tell us. inflation and unemployment is going up together. his critics told him you do what you always need to do, which is control money growth. which volcker eventually did. the period after the volcker disinflation, is another relatively mild period of fed behavior as judged by the inflation rate. again, i should say that the inflation rate isn't a direct measure of what the fed is doing but it's an indirect measure and it's something the fed can control if they put their mind to it. so they can be held responsible for it. not on a month to month basis but on a year by year basis. anyway, this 20 year period from 1984 somewhere around 2004 has become known as the great moderation. there's a lot of optimism that the fed had finally settled on the right model of the economy and now knew what to do. now it was steering the ship in the appropriate way. the inflation rate was behaving itself not quite as well as it had in the 1950's but better than it had in the 1960's and 1970's. there