The Volcker Myth Is Unsupportable

Paul Volcker, a great man in central banking, has passed away. The New York Times headlined: “Fed Chairman Who Waged War on Inflation, Is Dead At 92”. This is a legend that, sadly, is not supported by history. Firstly, Volcker in 1971 was instrumental in setting up today’s aggressive central banking. Furthermore, Volcker happened to head the Fed when a great global boom in commodities blew out—naturally—and collapsed. They all do, but soaring prices and not-so-soaring wages have always been accompanied by rising social anxieties. Very stressful times and typically followed by a great bull market in financial assets. Which has been part of the post-inflation relief. Paul Volcker just happened to be on duty during the natural transition from the stress of inflation to the wonders of financial speculation. Great bull markets have been fabulous, naturally making Volcker a popular hero. Practical and bereft of conventional economic reasoning, Mark Twain described the 1870s example as the “Gilded Age”.

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