Read This Town...it's one big party...anyone who tells you any different is FOS.
Hunter Lewis is a smart guy, I like the way he thinks. The only thing that got me confused out of this conversation was Lewis', what is seemed to me, respect for Volcker. Volcker was an inflation rate targeter much like Bernanke. The only difference is that Bernanke is now convincing Wall Street, as Lewis mentioned, to have their Bonds bought, and later buy back more Treasuries with that extra money. This indeed is a ponzi scheme. Yet Volcker was doing much of the same scheming. Volcker was being closed doors convincing the Fed to attempt to target the money supply with their aggregates, in essence creating an unsettling circumstance for the markets. Targeting inflation at 4% is hardly quelling inflation at all. Gold prices may have fallen during Volcker's term, but still rose in his latter years as it seemed he desired lowering the federal funds rate in attempt to get the economy going, thus making the price of gold rise again. Not sure anyone ever notices the utter inability of the Federal Reserve to ever gauge correctly the demand for money, or the natural rate of interest and prices, but Volcker's era should be a testament to Austrians that Monetarism is a failure and so was Volcker. Volcker believes more and more regulation can control the banking system, and is trying to set up a huge oversight committee at every level to attempt to gauge the money supply in a utopian sort of Selgin and White way. Targeting the money supply with phony government statistics is already a lost cause. As the market continues to change and prices rise and fall accordingly, governments and central banks will always be one step behind the desire of human actors to satisfy their subjective values and time preference. Volcker is no hero, he is simply a guy that came in and did what any logical economist should have done, and that is to tighten credit to save a falling dollar. But to herald him as a man that knew what he was doing, gives him enough credit to suggest he can run the World Bank and gauge world money supplies, which he tried doing at one time. Volcker is only one step toward sanity, he is still insane. Banks do not need to be regulated in what investments to take on, but need to be completely deregulated and allowed to fully fail at their whimsical bad endeavors. This way sound banking would arise on the free market. It is precisely all the regulations that people like Volcker want to put in that allows government to keep its shackles on our economy, as well as allow for the monopoly on banking and money to endure, simply because he takes baby steps in the right direction that correct markets only for a short period of time. Volcker is the man that allows for banks to endure their bad behavior by making people think he helped an economy by tightening credit at a time when anyone who notcied credit to be out of hand could have done. Volcker is a statist fool that understands nothing of the free market, he favors regulation in the manner Obama does. If he had it his way he would try to control tax rates too. Volcker is a Selgin or White on steroids. Silly fools from academia that believe their models more than reality, and make one good decision only to be heralded as heroes.