Reply #64: Don't Say He Didn't Warn You (A look at Volcker's warnings)

[54anickel]

http://www.lewrockwell.com/north/north362.html

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On Friday, the 13th of August, 1982, Mexico's government announced that it was considering the nationalization Western banks and threatened to default on its foreign debt. The world's banking system teetered on the brink of paralysis. With Volcker acting as the coordinator, Western central banks responded by promising doses of liquidity (fiat money) and loan renegotiations. In September, the Mexican government did nationalize all private Mexican banks and took over the control of capital flows.

The weekend of August 13 marked the beginning of the U.S. stock market boom that lasted until 2000, with only the one-day worldwide correction of over 20% in October, 1987 – Greenspan's first week on the job – to mar the boom. The FED adopted monetary inflation, thereby ending three years of tight money.

Volcker testified before Congress on a regular basis, as required by Federal law – the only law that Congress enforces on the quasi-autonomous FED. At 6 feet 7, he is an impressive figure. He imitated Red Auerbach, the coach of the Boston Celtics, who would light a cigar when he thought a game was as good as lost for the Celtics' opponent. Volcker puffed cigars at Congress. In contrast, Greenspan, a far less impressive figure, has adopted a linguistic strategy to befuddle rather than overpower Congressmen: verbal smoke rather than tobacco smoke. Both approaches work just fine.

Volcker generally was forthright. He basically told Congress to fly a kite. He told them what he was going to do, and then he did it. They never laid a glove on him. He had a well-deserved reputation for not sugar-coating bad news.

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