Zaid

Inflation climbed to double digits in the 1970s.

But here's the thing, a part of the reason the Fed kept rates low was because of political pressure.

At the time, President Richard Nixon leaned heavily on Fed Chair Arthur Burns to keep rates low heading into the 1972 election.

Arthur Burns gave in and inflation just got out of control.

And that's the exact nightmare scenario an independent Fed is supposed to prevent.

So this disaster of the 1970s led to major reforms of the Fed.

In 1977, Congress passed the Federal Reserve Reform Act.

This was huge because it formally gave the Fed its dual mandate, which we talked about before, which is maximum employment and price stability.

This law also required the Fed to report regularly to Congress on how it was meeting those goals.

On top of that, it made structural changes.

For the first time, the Fed chair and vice chair had to be confirmed by the Senate and their terms were limited to four years.

So this created more accountability at the Fed while still preserving the independents.

So then in 1979, Paul Volcker became the Fed chair and Volcker did what needed to be done.

He jacked up interest rates to nearly 20% to break the back of inflation.

Now look, this move was very unpopular.

It led to economic pain, massive job losses, and a recession.

But it worked.

By the mid-1980s, inflation was under control.

And that is a great example of why an independent Fed is so important.

Because they have to make difficult choices that a lot of times might not be politically popular.