December 29, 2019

WE LIVE IN THE INFLATION-FREE BOOM HE MADE:

Paul Volcker: The Stabilizer, 1927-2019 (LAWRENCE H. SUMMERS, 12/29/2019, Politico)

When double-digit inflation became an important contributor to a sense that America was not in control of itself, Presidents Jimmy Carter and Ronald Reagan turned to Volcker, then chair of the Federal Reserve, to bring down inflation. Today, we think of long-term inflation expectations as stable and take stable prices for granted, not just in the United States but throughout the industrial world. That is because of what Paul Volcker did.

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Those under age 50 might not fully appreciate what the world was like before Volcker's accomplishment. I remember well when Harvard recruited me to its faculty in 1982. In addition to the quality of its faculty and students, the key inducement it offered was a 9 percent mortgage rate--well above today's average, but no small thing when the best I could get on my own was between 13 and 14 percent.

People often talk about the importance of accepting short-term pain for long-term gain. No one else I have ever seen in public life stood so strong for so long against so many as Volcker did as he restored, in the United States and around the world, predictable and stable prices. Volcker adjusted monetary policies to be less inflationary and, more important, was credible in his assurance that inflation would be contained whatever was necessary to do it.

Posted by at December 29, 2019 1:25 PM

  

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