Paul Volcker, the man who slashed inflation, died Sunday, Dec. 8, in New York, at age 92. President of the US central bank, the Fed, from 1979 to 1987, Paul Volcker put an end to stagflation, which afflicted western economies in the aftermath of the two oil shocks of 1973 and 1979.
This austere man was appointed in 1979 by Democratic President Jimmy Carter. His appointment marked the end of the Fed's presidents, who were subject to political power and accommodative monetary decisions that were supposed to boost growth but only accelerated inflation. The Democrat Paul Volcker was a hawk and became one of the most unpopular Fed presidents by administering to the American economy a horse cure: interest rates that reached up to 20% in 1980.
It was a success, the central banker managing to curb the inflation that undermined the American economy. It had reached a peak of 14.8% year-on-year at the beginning of 1980. But it was at the price of two recessions during his first term. Unemployment reached 10.8% in 1983 while American farmers, stifled by debt, went to protest in Washington. His reign coincides with the neoliberal economic shift at the end of the XXe century, marked by the coming to power of Margaret Thatcher in the United Kingdom in 1979 and Ronald Reagan in the United States in 1981.
Feral independence
The fight against inflation, now forgotten, was long and difficult. It was not until 1982 that it was controlled to fall to 3.2% at the end of his first term. President Reagan decided to take him back to the presidency of the Fed, but also appointed officials to the monetary policy committee to counterbalance him. Once, even, Paul Volcker was outvoted by his advice, which was extremely rare.
In his memoirscited by the Wall Street Journal, the former central banker said he was summoned shortly before the 1984 election by Ronald Reagan's chief of staff, James Baker III, who asked him, in the presence of Reagan, not to raise his key rates before the ballot. Paul Volcker, who did not intend it, said nothing to his colleagues. The translation of a fierce independence inaugurated under his mandate and which is now defeated by the interventionism of Donald Trump, who continues to denounce his distant successor Jerome Powell on Twitter.
