Monday, December 9, 2019

Paul Volcker Has Died

The inflation slayer is dead.

Paul Volcker has died at the age of 92.

In August 1979, the United States was on the brink of out of control price inflation. It was on its way to a peak in early-1980 of an inflation rate of 14.59% as measured by the consumer price index.

President Jimmy Carter brought in David Rockefeller confidant Volcker to replace the mad money printer G. William Miller as chairman of the Federal Reserve Board.

The New York Times reports:
Mr. Volcker was known to be frustrated with the Fed’s halfhearted efforts to curb inflation, leading Mr. Carter’s aides to warn that he might drive the economy into recession.

Meeting Mr. Carter in the Oval Office, Mr. Volcker slumped on a couch, a familiar cigar in hand, and gestured at Mr. Miller, who was in the room. “You have to understand,” Mr. Volcker said he told the president, “if you appoint me, I favor a tighter policy than that fellow.”
He followed through on his warning to Carter. Upon assuming the duties of chairman, he announced that under his watch the Fed would no longer target interest rates but money supply growth and that he intended to slow money growth dramatically.

And Volcker did dramatically slow money growth which resulted in suffocating the price inflation and bringing on an accompanying recession.

But in the end, he was no consistent sound money operator. In August of 1982, he opened the Federal Reserve money spigots once again and money has been pretty much flowing from the Fed ever since.

Recent Fed chairs barely acknowledge money supply growth. During the reign of Fed chairs Ben Bernanke, Janet Yellen and current Fed head Jay Powell, money supply has not even been mentioned in Fed statements following monetary policy meetings. It is as though they are driving monetary policy with a gas pedal and no brake. It is a very dangerous thing to do.

The threat of a new explosion in price inflation is very real and for those who believe in a Money Control god, the death of the 6'7" Vocker may be the omen that price inflation at a serious pace is about to return. The god has taken the frugal one.

And Volcker was very frugal.

The Times notes:
He was famously frugal, favoring drugstore cigars and ill-fitting suits. In the 1960s, when the driver’s seat in his Nash Rambler collapsed, Mr. Volcker propped it up with a chair and continued to drive the car. As chairman of the Fed, he lived in an apartment building populated by George Washington University students and took his laundry to his daughter’s house in the Virginia suburbs.

There is no one anywhere near the Federal Reserve now who has an appreciation for every hard earned dollar the way Volcker did.  Fed members think they can just print their way out of any crisis. In a way, they are correct---until the money printing itself is the crisis.



  1. So...It wasn't Reagan after all...
    It's nice of the Fake News NYT to finally lay the early 80's at the feet of the person who, as Paul Craig Roberts stated, gave a projected gradual multi year reduction in the rate of growth in the Money $upply and instead cut the growth over a 6 month period, guaranteeing a severe Recession. See: P C Roberts, The Supply Side Revolution for details.

    PCR chronicles how Volcker and the Boys went back on an implied agreement with Treasury to slow the growth moderately over a three year period. Volcker "slammed on the brakes" and the economy foundered.

    Of course, "It was Reagan's Fault". The Left howled for Reagan's head on a post. Now, in very measured tones, a Eulogy for Volcker, who slayed the Dragon of Inflation. DeGaulle said that the time to salute your opponents is when they are hanging by a rope. Today (and I hate to quote Maureen Dowd), it's the Clinton Defense: "It never happened, it never happened...It was so long ago".

    Volcker is dead. Perhaps now the Truth will out. ABCT is validated again.

  2. I am rarely saddened by the death of a bureaucrat, but I involuntarily let out an "Oh No!" when I read the headline.
    He was a giant (literally, haha). A true hero for his work in the early 80's as even the Times admits.
    And Jimmy gets kudos for having the guts to appoint him and KEEP him.
    We sure could use a few more Paul Volckers, but we ain't gonna get any. :(