Paul Volcker, Fed’s Inflation Slayer, Dies At 92
Paul Volcker, the former Federal Reserve Chairman credited with bringing down sky-high U.S. inflation in the early 1980s, has died at the age of 92.
Volcker, first appointed by President Jimmy Carter and then reappointed by Ronald Reagan, will likely be most saliently remembered for his resolve to keep raising interest rates, pushing the economy into recession and unemployment sharply higher, to tame what had become a stubborn inflation problem in the 1970s, starting with the Oil Shock of 1973.
U.S. inflation peaked at nearly 15% in 1980 before sharp increases in borrowing costs from the Federal Reserve, which allowed it to tame inflation for the foreseeable future.
More recently, Volcker served as economic adviser to President Barack Obama, and lent his name to a post-crisis financial rule that tries to prevent banks from trading on their own accounts in a way that might conflict with the interests of clients.
Volcker’s critics note that his stringent monetary policy came at a high cost not only domestically but also overseas, since the spike in U.S. interest rates led to cascading debt defaults throughout Latin America.
Still, Volcker’s legacy is the extent to which Americans can take inflation for granted. Indeed, his policies may have worked a little too well. The Fed’s problem during the most recent economic recovery has been a lack of sufficient inflation hit the Fed’s 2% target and confirm that wage growth is on a sustainable path.
Importantly, Volcker was arguably the Fed’s first celebrity chairman, bringing a certain pizzazz to public hearings that his predecessors lacked, and setting the stage for a slow but steady shift toward more transparent communications at the U.S. central bank.
Fed Chairman Jerome Powell said he is “deeply saddened by the passing of Paul Volcker.”
Volcker’s “life exemplified the highest ideals–integrity, courage, and a commitment to do what was best for all Americans,” Powell said in a statement. “His contributions to the nation left a lasting legacy. My colleagues and I at the Federal Reserve mourn this loss and send our condolences to his family.”
He led the U.S. central bank from 1979 to 1987, when he was succeeded by Alan Greenspan. Prior to that role, Volcker had been president of the influential New York Fed.
Volcker did not have a doctorate in economics, but first served the Federal Reserve as an economist from 1952 until 1957. He then left for Chase Bank before returning to government, assuming a the role of director of the Treasury Department’s Office of Financial Analysis.
He was born in Cape May, New Jersey, received his bachelor’s degree from Princeton and a master’s degree from Harvard University’s Graduate School of Public Administration.