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Volcker: Central Banker

3.88 of 5 stars 3.88 · rating details · 26 ratings · 10 reviews

Over the course of nearly half a century, five American presidents --- three Democrats and two Republicans --- have relied on the financial acumen, and the integrity, of Paul A. Volcker. During his tenure as chairman of the Federal Reserve Board, when he battled the Great Inflation of the 1970s, Volcker did nothing less than restore the reputation of an American financial...more

Hardcover, 448 pages

Published September 4th 2012 by Bloomsbury USA

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Nov 24, 2012 Hadrian rated it 4 of 5 stars

Shelves: biography-memoir, economics-finance-business, nonfiction, american

The continuing economic crisis is not solely a matter of money - it also relates to a lack of trust. The reputations of many institutions and figures lie ruined, rubble on the fields of history.

For example - as hard to believe as it is now, the Federal Reserve was created separate from the government (despite the name), so as to prevent the influence of political parties from influencing monetary policy, and to remain an impartial and advisory body to prevent economic instability. This has not b...more The continuing economic crisis is not solely a matter of money - it also relates to a lack of trust. The reputations of many institutions and figures lie ruined, rubble on the fields of history.

For example - as hard to believe as it is now, the Federal Reserve was created separate from the government (despite the name), so as to prevent the influence of political parties from influencing monetary policy, and to remain an impartial and advisory body to prevent economic instability. This has not been done very well recently. Before that, however-

Enter Paul Volcker.

This very technical biography examines the bulk of Volcker's time in public life. He served under five presidents, and Chairman of the Fed from 1979-1987. In the early 1970s, he had managed the floating currency rates between the dollar and the yen, managing a shocking devaluation of the dollar to boost external trade. In 1971, when Nixon ended gold convertibility and effectively ended the Bretton Woods system, he had served as a sort of financial diplomat, encouraging international approaches to the new idea of floating exchange rates.

His most remarkable achievement was ending the period of 'stagflation' of the late 1970s. Inflation, which had reached a peak of some 13% in 1981, fell to ~3% by 1983. Of course, Reagan kicked him out in 1987 and replaced him with Greenspan, because he was not enough of a de-regulator.

In recent years, after the 2008 collapse, there was a major push for financial and monetary reform.

The 'Volcker Rule' which was a major showpiece of this reform, and was largely named so for political clout. The eternally cautious Volcker was displeased with it, and wanted at least the equivalent of the Glass-Steagall Act to be reinstated - limiting interaction between banks and securities/hedge funds/speculator firms. Investment on that scale with too much of other peoples' money is too dangerous.

Volcker is a rare bird in Washington - having a good head for economics, a good mix of pragmatism and caution, and a refusal to adhere to any sort of ideological dogma.

This is a very thick description of monetary policy, filled with goodies for policy wonks. The tone is extremely positive, almost worshiping. I've yet to find a reasoned alternative, though. Even Ron Paul likes this guy.

Hopefully my rambling will serve as a not entirely inadequate introduction.(less)

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Mar 11, 2013 Athan Tolis rated it 5 of 5 stars

Rather than a biography, this book is a blow-by-blow account of Volcker's life as a public servant. It is truly gripping. If you enjoyed books like "Too Big to Fail" and "Lords of Finance" or even "Barbarians at the Gate," beware of picking it up, you will not rest until you have finished it.

I sure couldn't.

While I was at it, I managed to pick up some international economic history. I already knew, for example, that by the end of the sixties the US was running out of gold to stand behind the con...more Rather than a biography, this book is a blow-by-blow account of Volcker's life as a public servant. It is truly gripping. If you enjoyed books like "Too Big to Fail" and "Lords of Finance" or even "Barbarians at the Gate," beware of picking it up, you will not rest until you have finished it.

I sure couldn't.

While I was at it, I managed to pick up some international economic history. I already knew, for example, that by the end of the sixties the US was running out of gold to stand behind the convertibility of the dollar: at the parities to gold of the dollar and the Deutschemark, for example, people in the US were finding it irresistible to "buy VW Beetles instead of Buicks." But I had no idea that it was Volcker's idea to rattle France and Germany with the threat of a free-float to force the 15% devaluation of the dollar which he deemed adequate to stop the run on the Treasury's gold. Or that the 8% devaluation that was negotiated as a compromise (with Valery Giscard d'Estaing and Helmut Schmidt, no less) was the beginning of the end for Bretton Woods because it caused tremendous instability while proving inadequate to achieve its primary goal. Or that the stab in the back came from the UK! Volcker basically was the midwife for the end of Bretton Woods, but in his heart he wanted it to continue. That's what the book alleges, at any rate, and I have every reason to believe it.

Somehow, the author, who is clearly in Volcker's thrall, deems this to have been a success. Regardless, you cannot help falling for Volcker too. The principal theme of the book is that Volcker was a tireless, persistent and highly principled pragmatist. The first example, which I mention above, is probably the only questionable example, the rest are good enough for me.

Further down in the book you learn how a less principled pragmatist, Nixon, forced the Fed to keep rates inappropriately low so he could win the 1972 election, how Volcker's most famous policy decision, a surprise change of focus to the money supply (as opposed to interest rates) was designed to combat the expectations of ever-rising inflation, how the policy famously won the day, how it cost Carter his presidency, how Reagan almost failed to reappoint Volcker and how James Baker undermined him. Volcker also gets credit for the now forgotten Gramm-Rudman-Hollings legislation, which kind of, sort of put a bit of a break on government spending. And he actually comes under criticism for planting the seeds of "too big to fail" when Continental Illinois was saved. The Volcker rule gets a chapter too, and the author tells us how he played a role, stuff that simply does not fit in here, but hey...

You also find out a hell of a lot about the people involved. How much Volcker respected Martin, how much he learned from Connally, how he played Kissinger, how friendly he was with Burns, how he sparred with Friedman, what tattoo can be found where on George Schultz's body. You can't help marvel at how little Volcker was prepared to earn relative to what he could have done, how much his family had to sacrifice as a result, and you can't help wonder where we'd be now if he had not been succeeded by Alan Greenspan.

Overall, this is a tremendous book. You get the horse's mouth account of what was comfortably the Fed's finest hour, and that alone warrants a five star rating. If that leaves you a bit despondent about where we find ourselves today, that's probably also part of the author's intention.

Before I forget: the Paul Volcker described in this book shall be reading this. Hi there Paul, you rock!(less)

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Dec 16, 2012 Daniel G. rated it 3 of 5 stars

Shelves: business, biography, prosperity

Until I got the press release from the publisher about this book, I had no idea who Paul Volcker was or the influential role he'd played in shaping the US -- and, therefore, the world's -- economy.

Volcker's public life centred around three crises: cutting the link of the US dollar's value to gold, curbing extreme inflation in the 1980s, and preventing the collapse of the US economy during the Global Financial Crisis of 2008.

This laudatory biography limits its probings into Volcker's life to thes...more

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Dec 16, 2012 Breakingviews rated it 3 of 5 stars

Review by Martin Hutchinson

William Silber’s biography of Paul Volcker is rightly sympathetic to the man whose determination and integrity conquered U.S. inflation. When needed, he overcame opposition from politicians and academic economists. Yet once his work was done, policy slid back and his abilities were wasted.

Silber traces Volcker’s career from his earliest days at the money market desk of the New York Federal Reserve. He was a Democrat when he served in the Treasury Department in the 1960...more Review by Martin Hutchinson

William Silber’s biography of Paul Volcker is rightly sympathetic to the man whose determination and integrity conquered U.S. inflation. When needed, he overcame opposition from politicians and academic economists. Yet once his work was done, policy slid back and his abilities were wasted.

Silber traces Volcker’s career from his earliest days at the money market desk of the New York Federal Reserve. He was a Democrat when he served in the Treasury Department in the 1960s, but even then he was skeptical of the administration’s Keynesians and their inflationary policies. The Republican President Richard Nixon brought him in as Treasury undersecretary for monetary affairs, where he helped negotiate the end of the Bretton Woods system and expressed distrust of the Fed’s expansionist policies.

Volcker was not promoted by Nixon, who valued his intellect but distrusted his party affiliation and independence. So he returned to the private sector in 1974, only to be appointed president of the New York Fed the next year. It was there that he established his reputation as an unswerving proponent of anti-inflationary policy. President Jimmy Carter promoted him to run the whole Fed in August 1979.

He showed both intelligence and boldness there. With only a tenuous majority on the Federal Open Market Committee, Volcker announced a new policy on Oct. 6 that year: the Fed would track money supply growth, wherever that might lead interest rates. Initially, it led them steeply upward, from around 12 percent to a peak close to 20 percent in April 1980. When the money supply shrank after Carter introduced direct controls on consumer credit in March 1980, Volcker responded with sharp rate cuts, 10 percentage points in two months.

Volcker stayed firm while Carter wavered. The president removed credit controls in May 1980, money supply increased rapidly, and the Fed increased rates in October, possibly costing Carter re-election a month later. Volcker kept squeezing the monetary tourniquet; the federal funds rate peaked above 20 percent in January 1981 and was reduced painfully slowly, remaining at 14 percent in July 1982, by which time inflation was running below 5 percent and the U.S. economy was in the deepest recession between 1937 and 2008.

During this period Volcker had steadfast support from President Ronald Reagan, but not from his more pragmatic economic advisers. Curiously, Volcker was also opposed by Milton Friedman, generally thought of as the most distinguished inflation-hating monetarist around. Friedman accused the Fed chairman of steering the economy towards the rocks through over-tight policy. Then again, Friedman supported Fed Chairman Alan Greenspan’s loosening of interest rates after 1995; the high priest of monetary orthodoxy was himself less than orthodox.

Despite a strong recovery and a rising stock market, by 1987 the Reagan administration pragmatists had tired of Volcker’s independence and offered little opposition when he decided to retire for a more lucrative career in the private sector.

It was an opportunity missed. Volcker could now be in his ninth term as Fed chairman – a tenure shorter, after all, than that of several U.S. senators. Silber does not explore this fascinating alternate history possibility and does not give us the means with which to do so, never telling us what Volcker thought about Greenspan’s abandonment of monetary targets in 1993 and the post-1995 expansionism of Greenspan and his successor Ben Bernanke. Instead, he concentrates on Volcker’s efforts after 2009 to promote the Volcker Rule separating proprietary trading from commercial banking – in which Volcker was only an adviser, not a principal.

President Bill Clinton could have appointed Volcker Treasury secretary in 1992, but didn’t. In the end, there was demand for Volcker’s determined intelligence and steadfastness only in a crisis. If the Fed’s current ultra-loose policies have the same effect as the policies of the 1960s and 1970s, a similarly-minded successor may be needed.(less)

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Sep 21, 2012 Joseph Geskey rated it 4 of 5 stars

The author does a nice job explaining technical details of economics which is critical toward understanding the scenarios that central bankers face. It seems like the author is more interested in the statistical scenarios that Paul Volcker faced throughout his career rather than diverting attention on telling anecdotes of the personalities he worked with. In this case, although it makes for a more sobering read, I think the author was correct in fashioning his narrative in this matter. One sees...more

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Nov 11, 2012 Jim rated it 4 of 5 stars

Not the fastest read in the world and a bit jumbled in places. Nice to see another Jersey Boy do the right thing for the U.S. I was amazed to see the financial hardship he and his wife endured while he was saving us from the demons of inflation. Hard to believe that only 30 years ago the world was so upset about crossing the $2 Trillion debt mark. We have added twice that just in the first 4 years of the Obama administration and are now at $16.2 Trillion. It was helpful to read this to understan...more

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Sep 25, 2012 Robin rated it 4 of 5 stars

Shelves: economics, biography

This is a fine biography that confirms one's high opinion of the man who tamed inflation in the 1980s. There are also many parallels to the Fed's situation today - not least the need to resist political pressure.

The book is agreeably short and does a good job of explaining the economics. It does lose a bit pace as it goes on, however, and the author falls into some distracting patterns, such as ending every passage with a declarative sentence about what's coming next.

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Feb 07, 2013 Jim rated it 3 of 5 stars

Interesting to learn about a man that has been through the ups and downs of many presidencies. Held positions from the Treasury to the Fed under Democrats and Republicans. A book that paints a sympathetic portrait of Paul Volcker. However, unless you have interest in the gold standard and/or interest rates, there's not a great reason to pick this book up.

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Jan 07, 2013 Natalie marked it as to-read

From Austan Goolsbee's article http://www.foreignaffairs.com/article...

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Nov 25, 2012 !Tæmbuŝu marked it as to-read

Shelves: ebook-available, biography, economics, gr-friend-rec

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