While we have grown used to Alan Greenspan’s flexible world views appearing regularly among US media channels, when former Fed Chair Paul Volcker speaks, it’s low frequency nature tends to make on pay attention, and he is not optimistic about the state of the world… at all.
As ‘Tall Paul’ prepares to publish his memoir (ironically titled – given the current state of the world – “The Quest For Sound Money & Good Government”), he sat down with NYTimes’ Dealbook’s Andrew Ross Sorkin and was not shy about how he sees the world and where it’s going:
When he looks around now, he sees “a hell of a mess in every direction,” including a lack of basic respect for government institutions..
“Respect for government, respect for the Supreme Court, respect for the president, it’s all gone,” he said.
“Even respect for the Federal Reserve.”
“And it’s really bad. At least the military still has all the respect. But I don’t know, how can you run a democracy when nobody believes in the leadership of the country?”
…a current Fed that seems to be following a completely arbitrary benchmark…
“I puzzle at the rationale,” he wrote.
“A 2 percent target, or limit, was not in my textbook years ago. I know of no theoretical justification.”
…and a “swamp” in Washington run by plutocrats.
“There is no force on earth that can stand up effectively, year after year, against the thousands of individuals and hundreds of millions of dollars in the Washington swamp aimed at influencing the legislative and electoral process,”
Finally, Volcker dispels with the myth that presidents historically haven’t tried to influence interest rates. Recounting a 1984 meeting he had with former President Ronald Reagan, then-chief of staff James Baker flatly told Volcker:
“The president is ordering you not to raise interest rates before the election.”
“I was stunned,” Volcker said.
“I later surmised that the library location had been chosen because, unlike the Oval Office, it probably lacked a taping system.”
Finally, Volcker returned to a bigger picture concern about America:
“The central issue is we’re developing into a plutocracy,” he told me.
“We’ve got an enormous number of enormously rich people that have convinced themselves that they’re rich because they’re smart and constructive. And they don’t like government, and they don’t like to pay taxes.”
Mr. Volcker is no great fan of the president, but he acknowledged that Mr. Trump had cannily recognized the economic worries of blue-collar workers. Mr. Trump “seized upon some issues that the elite had ignored,” he said. “I don’t think there’s any question about that, in kind of an erratic way, but there it is.”
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