was Paul Volcker really "all that"? Did he slay the inflation dragons?

[grapejelly]

The mythology says that Paul Volcker replaced Miller as Fed chair and changed the Fed's monitoring from interest rate focused to reserves focused. Interest rates were raised and raised to historic highs and the inflation dragon was slain. Gold folded and we began a long period of low inflation.

Please tell us how the mythology is all wrong. And for extra credit, please tell us how this won't happen again with Bernanke's replacement

[blazespinnaker]

Re: was Paul Volcker really "all that"? Did he slay the inflation dragons?

The mythology says that Paul Volcker replaced Miller as Fed chair and changed the Fed's monitoring from interest rate focused to reserves focused. Interest rates were raised and raised to historic highs and the inflation dragon was slain. Gold folded and we began a long period of low inflation.

Please tell us how the mythology is all wrong. And for extra credit, please tell us how this won't happen again with Bernanke's replacement

I have a theory that what volker did was crush the world wide economy and make OPEC and others realise that we all have to play nice or everyone suffers.

Basically, OPEC raised it's prices so Volker turned off the US economic engine. Since then, people have realised that going after the US it not necessarily the wisest idea as you just turn off your own spigot of economic success.

[Tet]

Re: was Paul Volcker really "all that"? Did he slay the inflation dragons?

Basically, OPEC raised it's prices so Volker turned off the US economic engine. Since then, people have realised that going after the US it not necessarily the wisest idea as you just turn off your own spigot of economic success.

OPEC did exactly as they were instructed to do from Washington, one only needs to read about Kissinger's instructions to the Shah of Iran to raise the price of crude to understand that once Nixon shut the gold window, the Federal Reserve created the Petrol D0llar. The Yom Kippur War got the whole thing kicked off. The exact same game plan is being played out today, but it looks the the rest of the world has decided to counteract Washington, London and Wall Street. Come springtime this is going to be a very interesting year.

[spunky]

Re: was Paul Volcker really "all that"? Did he slay the inflation dragons?

OPEC did exactly as they were instructed to do from Washington, one only needs to read about Kissinger's instructions to the Shah of Iran to raise the price of crude to understand that once Nixon shut the gold window, the Federal Reserve created the Petrol D0llar. The Yom Kippur War got the whole thing kicked off. The exact same game plan is being played out today, but it looks the the rest of the world has decided to counteract Washington, London and Wall Street. Come springtime this is going to be a very interesting year.

Yep couldnt agree more. Problem for the US this time is

A) the euro

B) Technology

C) PROC sitting on a shitload of bonars


Look at silver mimicing gold's moves. You just cant tie the PM's to oil or the bonar any more. Tells me something is up :cool:

[jk]

Re: was Paul Volcker really "all that"? Did he slay the inflation dragons?

the gld etf's holdings have increased from 450 tonnes at the end of jan to 487 now. someone is accumulating.

[Finster]

Re: was Paul Volcker really "all that"? Did he slay the inflation dragons?

The mythology says that Paul Volcker replaced Miller as Fed chair and changed the Fed's monitoring from interest rate focused to reserves focused. Interest rates were raised and raised to historic highs and the inflation dragon was slain. Gold folded and we began a long period of low inflation.

Please tell us how the mythology is all wrong. And for extra credit, please tell us how this won't happen again with Bernanke's replacement

It took the Reagan-Volcker team to slay the inflation dragon. Volcker was actually appointed by Jimmy Carter, but was under considerable political pressure not to tighten the screws too tight. When Reagan was elected, he helped buffer that pressure, in effect telling Volcker to do what he needed to do. Reagan knew it would trigger a deep recession and cost him popularity, but also knew the alternative of putting it off would lead to even worse. Volcker knew the same.

Both men were the right leaders at the right time. It's hard to imagine what the next decade or two might have looked like had we had lesser men in those positions.

[blazespinnaker]

Re: was Paul Volcker really "all that"? Did he slay the inflation dragons?

It took the Reagan-Volcker team to slay the inflation dragon. Volcker was actually appointed by Jimmy Carter, but was under considerable political pressure not to tighten the screws too tight. When Reagan was elected, he helped buffer that pressure, in effect telling Volcker to do what he needed to do. Reagan knew it would trigger a deep recession and cost him popularity, but also knew the alternative of putting it off would lead to even worse. Volcker knew the same.

Both men were the right leaders at the right time. It's hard to imagine what the next decade or two might have looked like had we had lesser men in those positions.

INTERVIEWER: What was President Reagan's stance toward what you were doing?

PAUL VOLCKER: I saw him from time to time, but I was not a close intimate of President Reagan's. His entourage in the White House, or certainly in the Treasury, were very critical at times. They were... kind of a funny mixture. They had monetarist doctrine, supply-side doctrine, libertarian doctrine all mixed together, so some of it wasn't terribly coherent, which helped me a bit. There was unhappiness because there was a big recession early in his term, and things were not really stable. But he himself never criticized me directly in public, certainly. I always had the feeling that he was urged to do so. [It seemed] that every time he had a press conference somebody was urging him to take a slap at the Federal Reserve, but he never did, and I don't know why. I speculate that he was not a highly sophisticated economist. I'm sure he didn't understand all the arguments his own people were giving him. He did understand that he didn't like inflation, and I think he had some kind of a feeling that the Federal Reserve was trying to deal with inflation.

[flow5]

Re: was Paul Volcker really "all that"? Did he slay the inflation dragons?

Paul Volkers era as Federal Reserve Chairman was re-written by historians.

"Volcker's Fed is widely credited with ending the United States' stagflation crisis of the 1970s by limiting the growth of the money supply, abandoning the previous policy of targeting interest rates. Inflation, which peaked at 13.5% in 1981, was successfully lowered to 3.2% by 1983 and has remained low ever since[1]. The change in policy contributed to the significant recession the U.S. economy experienced in the early 1980s, which included the highest unemployment levels since the Great Depression." -- Wikipedia

Monetarism was never tried. The federal funds bracket racket was never abandoned.

[DemonD]

Re: was Paul Volcker really "all that"? Did he slay the inflation dragons?

flow - are you saying that they didn't restrict money supply, but just that the cranked up Fed funds rate did the job?

[Spartacus]

Re: was Paul Volcker really "all that"? Did he slay the inflation dragons?

I don't know if Eric ever saw this question that I addressed to him -

I once noted a passage by Peter Warburton that implied the dis-inflation which began in the 80s came with the rise of derivatives, not necessarily anything Volcker did.

Indeed, Doug Noland points out that modern derivatives, born under Carter/Reagan (so his timetable fits Warburton's, but I don't know if Noland thinks derivatives and not Volcker did the job), were once understandable and are now the stuff of unimaginably complex chaos.