A Letter From The Publisher, Oct. 22, 1979

The figure on this week's cover was little known a month ago, but, says Washington Economic Correspondent William Blaylock, "last week he seemed to eclipse every other newsmaker in the capital." Indeed, by announcing a tough new set of monetary measures, Federal Reserve Board Chairman Paul A. Volcker grabbed international attention and sent stock and money markets reeling around the globe. This week's cover story, written by Associate Editor Christopher Byron, examines both the hectic financial events of last week and the bold "Volckernomic" policies that triggered them.

To make sense out of the monetary muddle, Blaylock interviewed more than two dozen members of a club he calls "the world champs of legerdemain—economists and bankers." Blaylock is thoroughly qualified for the assignment. He has a graduate degree from the Johns Hopkins School of Advanced International Studies and another from the London School of Economics. It was at Johns Hopkins in 1971 that Blaylock first encountered Volcker, then Treasury Under Secretary for Monetary Affairs. Volcker had been asked to address the students on the future of the dollar and gold in the international monetary system. Blaylock recalls that the Under Secretary, "with a comforting tone of confidence in his voice, said that the dollar looked promising, but gold, well, that one was nearing extinction." Thus, says Blaylock, "even this nation's newest commander of monetary policy has had his ego bruised by the dollar's poor performance."

European Economic Correspondent Friedel Ungeheuer, who reported foreign reaction to the U.S. monetary moves, studied economics at Harvard (Class of '56) under John Kenneth Galbraith. "After breaking his leg in a skiing accident," says Ungeheuer, "Galbraith regaled his students with an unsentimental view of human fallibility, reminding them that man's greed and short memory make monetary history eminently repeatable." Such lessons, notes Ungeheuer, "blessed us with that indispensable tool of economic journalism: magnificent hindsight." Last year, however, when reporting on the coming gold rush for TIME, Ungeheuer demonstrated the much rarer gift of economic foresight, predicting in January 1978 that gold would break the $200-an-ounce barrier later that year. Alas, says Ungeheuer, "I failed to back this premonition with any of my own money. I guess that's why I will always be a journalist."