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July 10, 2012 / 74

Paul Volcker – The Last of the Effective FED Chairmen?

I happened upon an interesting piece today – an interview with Paul Volcker conducted in September of 2000. It’s rather long, but I think it’s really good stuff! If you’re interested at all in economics and monetary policy, it’s “must” reading.

I also find it interesting that he was well versed and interested in ALL of the various “schools” of economics, yet apparently a true believer in none of them. He seemed to pick and choose those bits from each that he thought would work, and rejected the rest… as any intelligent thinking person would do. In economics, as with so many other things, once you become a “true believer” you are no longer practicing economics. You have become an acolyte to a religion. Religion and economics make for very poor bedfellows.

Here’s a morsel from the interview that should make both Greenspam and Bungling Ben Bernanke hide their heads in shame:

“… William Martin, who was chairman of the Federal Reserve from [1951 to 1970], for I think 19 years. His famous remark was “The job of the Federal Reserve was to take away the punch bowl just when the party is getting good.” Now you see what he was conveying is [that] a big boom is nice while it’s happening, but it may give you a big headache the next day, and you’d better stop it before it gets [carried away.]”

Another thing that the interview brings out is that Volcker seems to be aware that actions have consequences, and that one should examine those possible consequences BEFORE one leaps into the cauldron of action or inaction. And one should examine the proposed actions especially well when the proposed/demanded action is politically driven. Neither Greenspan or Bernanke seem to have the intestinal fortitude to tell the politicians and bankers NO!

Of course, an alternative explanation of their tenures at the FED is that both are ignorant clods who can be blown about by winds of fortune and influence and our economy has been blown about with those winds, or that they are outright crooks who are deliberately destroying the US economy. I’ll let you make up your own minds as to which, or to propose other possible causes for their derelictions and blatant mismanagement of our economy.


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