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WIN: Gerald Ford’s Inflation Folly Did Not Work Then, but Maybe Now…?

By Brian Riley
June 28, 2022
in Analysts Coverage, Credit
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WIN: Gerald Ford’s Inflation Folly Did Not Work Then, but Maybe Now...?

WIN: Gerald Ford’s Inflation Folly Did Not Work Then, but Maybe Now...?

Inflation is a reality in business cycles. Reserve banks across the globe struggle with the issue, as their mission often requires an aim on financial stability. As the Atlantic mentioned, “It Feels Like 1979 Again,” and many expect things to get worse.

The Washington Post reported that WIN lapel button sales reached 15 million decades ago, a record shy of the sales for smiley face buttons. You can still find WIN buttons available on eBay.

Under the rubric of WIN, which stood for Whip Inflation Now, consumers should pull back spending and not buy goods that were more costly than pre-inflation 1970 prices. The effort was soon shuttered, and you can see the resounding effects on the prime rate here, as it hit a whopping 13% in June 1984. It takes a while to curb the beast.

Comedians did not miss a beat, according to the Times. Bob Hope had a moment:

When President Ford was roundly ridiculed for encouraging people to wear “WIN” buttons as part of a plan to “Whip Inflation Now,” Hope said of President Ford’s trip to Japan, “Hirohito gave the president a jeweled sword with a crest of the Imperial Order of the Setting Sun, and the President gave him a WIN button.

The president told him, ‘Millions of Americans are wearing these.’ And Hirohito said, ‘I know. We make them.’ “

Inflation peaked in the U.S. in 1980, when the March rate hit a 14.8% rate, and life was challenging until rates began to stabilize in single digits.

The immediate action to control inflation centers on interest rates. Once the Federal Open Market Committee (FOMC) starts tweaking rates, purchasing tightens. That $800,000 dream home has a different proposition when interest rates are at 3%, as last year, versus a 5.6% rate at Chase today. The same works with restaurants. That $60 meal for two now runs you $75, so instead of going out on a date night each week, you do it every six weeks.

There is a direct impact on consumers and how they use and pay with credit cards. As times get tight, revolving debt tends to bulk up, and as the economy moves towards recession, more borrowers become delinquent. Card issuers tighten their lending standards, and the cycle continues.

It is easy to see where things are headed today. Inflation today, Recession tomorrow are the likely play. But there are some excellent thoughts in the WIN Strategy: discipline, savings, and steadiness.

For consumers, brace yourself. The WIN idea translated into being more financially conservative, and with the price of gas in California at >$6, now might not be the time to cruise California Highway 1. Instead, shifting expenses and increasing savings is a promising idea.

And for credit card issuers, many get bonuses tied to portfolio growth, but as 2023 approaches, watch delinquency rates. Not all credit lines need to be cut, but you need to consider net revenue and know that one bad debt charge of $5,000 can cannibalize the profit of 15 credit card revolvers or four times as many credit card transactions.

WIN Now? It would not work today. But self-control and a business sense towards the changing cycles are essential.

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Tags: CreditCredit CardCredit Card Interest RatesCredit CardsEconomic RecessionInflationInterestInterest Rates

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