very competent economists like jim tobin and brookings people said it'll take ten years at low levels of -- high levels of unemployment to do what we have to do. didn't take anything like that. the crowning moment in my history and in other people who have studied the period came in the spring of 1981. the problem was to convince the public that the disinflation was going to carry, carry through even when the unemployment rate rose. one of the first questions that paul volcker faced at "meet the press" after he'd been appointed was from irving r. levine, a major, well-known commentator who asked him, essentially, well, fine about bringing down inflation, but what are you going to do when the unemployment rate rises? and paul gave the right answer. he said, we used to think that you could trade off one for the other, but if you look at the record, the two have risen throughout the '70s, and we're going to bring them down together in the '80s. that's an anti-phillips curve statement. so that was how he set out. now, did he, did he or anyone else anticipate that interest rates would go t

am a strong believer that it was a mistake to strip those models down and this was something we told jim tobin, there were critical for monetary policy and with monetary policy, they have moved away from that. i don't believe they should try to control asset prices. they were a piece of information which told them something about the play in which policy is transmitted. and expected returns and inflation. we have ways of sorting that out. we should use the information that says asset prices are piece of information about where markets are going and is a mistake to believe that the short-term interest rate -- the fed has operated on a model in which the short term interest rate is the only interest rate -- it is solved by them. nothing matters except what? what happens to prices and output. it is a flawed way of thinking about the policy and in my book i make a statement which i think has been proved incorrect but will eventually be correct, that no central bank will ever operate consistently in that model in which asset prices and other things don't have any role at all in the analysis.

this was something which i shared with jim tobin. we both had asset prices and believe that asset prices were critical for monetary policy and that the influence of demand for money. so, the fed has moved away from that. i hope there will move back. having said that, i don't believe they should try to control asset prices. a piece of affirmation which tells us something about the way in which policy is being transmitted. the difficulty is knowing how much of that is expected real return and how much of it is expected inflation. we don't have good ways of supporting those things out. if we did we would be better off, but we don't. we should use the information that says asset prices were a piece of information about where markets are going. it is a mistake to believe that the short-term -- the fed operates on a model in which the short time interest-rate is the only interest-rate. it is solved out by them. nothing matters except, what? except what happens to prices. i think that is a flawed way of thinking about the policy. in my book