Saturday, April 11, 2009

Volcker Was Just For Show

Talk about good news and bad news! Here's the good news: Paul Volcker is an American hero. Almost singlehandedly, Volcker laid waste to a virulent bout of inflation that permeated the American economy throughout the 1970s, peaking at 14 percent in August of 1979. First appointed by Jimmy Carter in 1979 (reappointed by Ronald Reagan in 1983), Volcker had the courage and the foresight to lead the Federal Reserve to put on the monetary brakes. The price tag was high. Unemployment shot up to nearly eleven percent by late 1981, but Volcker succeeded, where others had failed, in breaking the back of the worst inflationary episode in American history. One could give Volcker much of the credit for setting the stage for the ensuing twenty years of prosperity that came on the heels of the Volcker heroics. Thus, the good news. Volcker is back. He was one of the first appointees in the new Obama administration as, with much fanfare, Obama named Volcker the head of a presidential advisory board to provide economic policy advice (to deal with the economic crisis) to the new administration.

Now comes the bad news. The so-called "presidential advisory board on economic policy" has never met and, no doubt, will never meet until long after Obama has completed his presidency. Volcker was just for show.

I wondered, in an earlier blog, how Volcker could stomach the extraordinary assault on fiscal integrity and the abandonment of standing contract law by the Obama administration. Now we know. A Wall Street Journal article appearing in Thursday's edition lays out the absence of input supplied by the legendary Volcker. He hasn't spoken with the President in over a month, as program after program, including the budget, the mortgage plan and the Geither plan to "fix the banks," have been unveiled. It is heartwarming to know that Volcker had no input in the these extraordinary adventures. When asked, the day before the Geithner plan was announced, what he expected, the Journal quotes Volcker as saying: "I have no idea what Tim's going to say." So much for the vaunted role of Paul Volcker.

This is an Adminstration that purports to reach out for advice, but fails to consult it's own policy advisors. For good reason, I suppose. There is simply no way Paul Volcker could provide an opinion supportive of the tragic economic policies of this administration. It's all about politics as usual.