Liar's Poker

by Michael Lewis

At a rare Saturday press conference, on 6 October 1979, Volcker announced that the money supply would cease to fluctuate with the business cycle; money supply would be fixed, and interest rates would float. The event, I think, marks the beginning of the golden age of the bond man. Had Volcker never pushed through his radical change in policy the world would be many bond traders and one memoir the poorer. For in practice, the shift in the focus of monetary policy meant that interest rates would swing wildly. Bond prices move inversely, lock step, to rates of interest. Allowing interest rates to swing wildly meant allowing bond prices to swing wildly. Before Volcker’s speech bonds had been conservative investments, into which investors put their savings when they didn’t fancy a gamble in the stock market. After Volcker’s speech, bonds became objects of speculation, a means of creating wealth rather than merely storing it. Overnight the bond market was transformed from a backwater into a casino. Turnover boomed at Salomon. Many more people were hired to handle the new business, on starting salaries of forty-eight grand.