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 As President-elect Barack Obama convenes his economic team to discuss the state of the U.S. economy, one name on the list, Paul Volcker, might seem unusual at this moment in time. Volcker, the former Federal Reserve chairman under Presidents Carter and Reagan, may be considered for treasury secretary. Although Obama has yet to name any Cabinet member, Volcker stood just behind Obama at Friday's meeting -- Vice president-elect Joe Biden flanked the president-elect on the opposite side -- perhaps giving us a tip off to who may secure the position. However, Volcker's history as an inflation hawk would make him a curious choice.
Volcker is quite familiar with economic storms. When he took the helm of the Fed in 1979, he inherited an economy recovering from stagflation, a unique economic circumstance where inflation and unemployment are simultaneously high (traditionally the two never coincide in an economic cycle). His response was to stem inflation by raising interest rates, but some argue the move compounded unemployment, leading to a recession in 1980. Clusterstock's John Carney wrote:
For comparison's sake, the federal funds rate currently stands at a five year low of 1%, and there is chatter on Wall Street that the Federal Reserve may cut it another 50 basis points -- putting it in a place that is a far cry from Volcker's days. However, we're not facing inflationary pressures like the double-digit rates seen in the late '70s and early '80s -- if anything there is a slim threat of deflation, according to Federal Reserve Bank of San Francisco President Janet Yellen. But should inflation again rear its ugly head, could Volcker as treasury secretary be able to work with Federal Reserve Chairman Ben Bernanke? After all, Obama is stuck with Bernanke until 2010, whether he likes it or not. Historians and economists argue that the Fed's creators wanted an independent central banker not held to the whims of politicians. Of course, if history is a guide, and a new recession mirrors the length of the last deep recession from 1980 to 1982, then we'll be out of the woods just in time for Obama to select someone who could play nice with Volcker. - Matthew Wurtzel See post from Economix Matthew Wurtzel is the editor of Dealscape. CategoriesComments
From: john haskell,
Congrats on getting Volcker's name spelled correctly throughout after the first version hit the website. The basic assumption of this blog post seems to be that Volcker is some kind of rate hiking robot who can only function in high inflation environments. There is no particular reason to believe this. Second, you try to make some kind of argument about fighting inflation and increasing unemployment. It seems the point is that fighting inflation was a mistake because unemployment rose. I assure you no mistake was made. Check the economic performance of the US economy in the subsequent low inflation period (1983-present) or even better the performance of stock indices. Third, Volcker was early and right in criticizing the serial bubble blowing activities of his immediate successor. If we want to fix the current problem why not start with someone who understands how the problem came about?
Posted on:
November 8, 2008 5:27 PM
From: Dan Erwin,
Although a wise-old-head like Volcker might be useful on a short term basis, national finance experience of the late 1970's and early '80s doesn't really imply expertise in today's global markets supported by massive technology infrastructures. That infrastructure was barely evolving when Volcker was in his hey-day. Watching executives stumble over systems thinking--an extremely necessary tool for todays global financial systems--makes me question significant validity for Volcker other than as a respected advisor to cool the markets. Is there much evidence that he gets it in today's system? Oh yeah, I'm 74 years old, and not too prejudiced about that issue.
Posted on:
November 9, 2008 5:26 PM
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You will have your chain yanked! Take you tax money give it out at 5-10% tax free. The youth of USA will pay for this! You are paying in blood in Iraq!
How do all you fools feel?
All lost pensions due to corrupt companies?
What about the owners(tax payers) what do they have to say?
How do you people feel who lost every in Enron? Your taxes didn't bail out E!
How about people who worked and held stock in Global Crossing? 'In what is an unprecedented case of political profiteering, McAuliffe turned a $100,000 initial investment in the company into $18 million in less than a year and a half—a nifty 18,000% profit. According to the New York Times, McAuliffe made millions more trading the stock and options after the company went public in 1998.'
the bailout passed. The politicans and their families receive the usual 20-30% kick back. That money is gone in one week. Now what? I'm a business person. The first thing I do is syphon off enough money for my family's well being. As I do that I take out loans. SOme of the loans I syphon into my family. Now I have a credit crisis. I want you to bail me out. DO not look at my family's wealth!
Corporate India is in shock after a mob of recently fired workers bludgeoned to death the chief executive who had dismissed them from a factory in a suburb of Delhi.
Lalit Kishore Choudhary, 47, the head of the Indian operations of Graziano Transmissioni, an Italy-based manufacturer of car parts, died of severe head wounds Monday afternoon after being attacked by scores of laid-off employees, police said.
Open letter to the military.
Dear Persons,
I am a person who has worked hard and mostly played by the rules. I implore you; the country you first fought for no longer exists. From this day on you are fighting for King George and his Nobles. If you should die, fighting who you think is the enemy, you are no longer fighting for the people of the former United States of America! I consider you a fool!
'John and Mitchy were getting kind of itchy
Just to leave the folk music behind
Zal and Denny, working for a penny
Trying to get a fish on the line
In a coffee house Sebastian sat
And after every number they'd pass the hat
McGuinn and McGuire's just a-getting higher
In L.A., you know where that's at
And no one's getting fat except Mama Cass'
Bernanke can't be trusted
Paulson got busted
trying to sell us the brooklyn bridge
No one is getting boys except Barney frank
House is a stealing
everybody is a dealing
Rangel is not paying his tax
No one is getting boys except Barney frank
Hillary is a rich bitch
Bush is the King now
You are losing your shirt
No one is getting boys except Barney frank
Do woop do woop do woop!