Paul Volcker Archives - the patient investor

June 11, 2022June 13, 2022

Larry Summers: Fed needs same disinflation as under Volcker

Larry Summers highlights a paper from the NBER regarding measurement of CPI since the 1980s. Changes in how cost of housing is measured have lowered core CPI relative to the methodology used prior to the early 1980s (blue line below). Applying the current methodology (red line) retrospectively suggests that comparable core CPI is closer to the Volcker era.

Larry Summers

Summers continues:

“New paper shows past and present CPI inflation are more similar than official data suggests. When correcting for change in how housing inflation is measured, we find a return to target core inflation will require the same disinflation as achieved under Volcker.”

March 5, 2013

Volcker: Wall Street Kills Regs By Running Out the Clock

Josh Boak at Fiscal Times writes:

…..So when Volcker declared on Monday that the financial regulation system is broken, it’s time to sound the alarm. The gist of his complaint is that Dodd-Frank was passed in the middle of 2010, yet many of its biggest regulations have not been finalized and there is no end in sight.

“I know it’s a complicated bill. I know the markets are complicated,” Volcker said at a conference for the National Association for Business Economics. “Two-and-a-half years later you can’t have a regulatory apparatus that’s devised by the most important piece of legislation in recent years? That suggests something is rather wrong. Something is dysfunctional.”

November 26, 2011

The scourge of government debt – macrobusiness.com.au

A report on a talk by Yanis Varoufakis, author of The Global Minotaur, gives some nice history of how we got here. The Minotaur is a marvelous metaphor for what governments have allowed to occur in the global financial system. Now they, and all of us, are being skewered by its horns:

“In the immediate post-war era, Varoufakis claims, “the Americans begin to take seriously the redemptive mission to save capitalism from itself.”

But in doing so, against its apocalyptic competition with the Soviet Union, America spread itself too thin. Or too thick. By the time it was funding LBJ’s Great Society reform programme, alongside the dire weight of the Vietnam war effort, America stopped being a surplus nation. It went into deficit.

What followed was a worldwide project to balance everyone else’s books in line with the Americans own – what Paul Volcker, American economist and head of the Federal Reserve from 1979-1987, called the “controlled disintegration of the world economy”…..

Towards the end of his speech, Varoufakis claimed: “The Left and Right miss the significance of this current juncture. It is not terminal for capitalism, but it has ended the conglomeration of illusions in how we viewed the world. It ended the illusion we had that we had something called free market capitalism.”

via The scourge of government debt – macrobusiness.com.au | macrobusiness.com.au.

October 24, 2011

Podcast: Paul Volcker’s Warnings, the S.E.C.’s Privacy Problem and Some Economic Pitfalls – NYTimes.com

Paul Volcker, the former Federal Reserve chairman, warns that we are not out of the woods yet….. Mr. Volcker focuses on two big problems.

First, he says, money market funds should be treated like other mutual funds — whose price can fluctuate — rather than as guaranteed stores of value, like bank accounts. In addition, he says, the United States needs to plan on eventually shutting down Fannie Mae and Freddie Mac, the two agencies that now dominate the mortgage market.

via Podcast: Paul Volcker’s Warnings, the S.E.C.’s Privacy Problem and Some Economic Pitfalls – NYTimes.com.