Paul Volcker Quotes (1927-2019)

“Mehrling: So you didn’t read at that time the classic banking texts, for example, Bagehot’s Lombard Street? Volcker: Well I read some of Bagehot, and I read a lot of Hawtrey. I remember I read a lot of Hawtrey. Mehrling: Currency and Credit? The Art of Central Banking? Volcker: I don’t remember the names of the books, just being in London. In those days I used to read The Economist and the Financial Times, so I kept up with what was going on in the money markets.”

“Federal Reserve chairman Paul Volcker essentially eliminated M1 as a target indicator. His successor, Alan Greenspan, eliminated M2. On the other hand, in the past year or two, Greenspan has said on various occasions that maybe we should reconsider using M2. The trouble is that all these measures of money cannot be relied on because the velocity of money changes. It is quite unstable.”

“The second liberal gripe against Carter is that he lost to Reagan. As the saying went, Carter was defeated by the three Ks — Khomeini, Kennedy and Koch. Ayatollah Ruhollah Khomeini’s Iranian revolution led to the hostage crisis that was a millstone round Carter’s neck. After 444 days in captivity, the US hostages were released a few minutes after Carter left office. It has not been proved that Reagan struck a back channel deal with Khomeini’s government to keep the hostages until after the 1980 election. But the evidence is very strong. Carter believes that William Casey, Reagan’s campaign manager, did strike a bargain. Such an unnatural Rolodex would also explain Reagan’s Iran-Contra shenanigans a few years later. Ted Kennedy’s primary challenge also damaged Carter. Though Kennedy infamously could not explain why he wanted to be president, Carter had his own theory: Kennedy saw it as his birthright. The gap between the rural Georgian farmer who grew up without shoes and the Boston aristocrat is a faultline that still hobbles the Democratic party. Biden is on Carter’s side of it. Ed Koch was New York’s Democratic mayor who thought Carter was biased against Israel. Carter’s Camp David deal neutralised Egypt — Israel’s most potent enemy — and thus did more for Israel’s security than any US president since. No good deed goes unpunished. Carter was the only Democratic president to get less than half of the Jewish vote. Paul Volcker’s last name does not start with a K. However, the then chair of the US Federal Reserve is probably the largest contributor to Carter’s defeat. With interest rates at 20 per cent, Carter stood little chance at the ballot box. It is worth noting that Carter picked Volcker in full knowledge of his anti-inflation credentials. On that, as so much else, Carter did the right thing but got no credit. The left hated him for it. The right pretended it was Reagan’s doing. Much the same can be said of how America won the cold war. The moral of Carter’s story is that virtue must be its own reward. History is a biased judge.”