Meltzer describes the Accord as a major achievement for the country, and not at all inevitable. Meltzer points out that "the Truman administration could have appealed to patriotism, to the exigencies of war and to populist sentiment against higher interest rates to keep the [interest rate ceiling] in place" (p. 712). So why did the Accord work? Meltzer offers a few reasons. First, as it turned out, there was not much change in interest rates after the Accord. Truman decided to finance the Korean War by taxes rather than with deficit spending. According to Meltzer, that may have convinced the public that the price-level increase that did occur during the first months of the Korean War was a one-time change and not the start of sustained inflation. Moreover, modest budget surpluses and no gold inflow in the late 1940s and the 1950s were consistent with low inflation and low interest rates. Hence, there was little expected inflation, no inflation premium built into interest rates, and interest rates did not rise much after the Accord.


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