jan 1, 1981 - Volcker Shock

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The Volcker shock happened when Paul Volcker, head of the Fed, decided to double the federal interest rates to about 20% in order to fight inflation.
This caused a chain reaction of interest rates hikes also in other countries ("Why would I buy the 7% German Bond when the US Bond is offering 10%").
The result of this policy had yes, reduced inflation, but it also had caused recessions and high unemployment, as well as destroyed Latin America with debts, as they were borrowing heavily when there were real negative interest rates. Their debt interest rate shot up to 8% in 1982 (every one percent is about 4/5 billion dollars more on their total debt).

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