Volcker: We Need to Think More Boldly
Mr. Volcker has become quite vocal lately. Be sure to check out the interview he has with Der Spiegel and in Monday’s WSJ:
Der Spiegel:
SPIEGEL: As chairman of the Economic Recovery Advisory Board, you advise President Barack Obama on how to prevent such a recurrence. Is he following your guidance?
Volcker: We have various working groups that work on and make recommendations on particular problems like retirement programs and social security. We made some recommendations on financial reforms which were not accepted, but that is part of the game. The president is more eloquent than I can be on these issues. Getting it done as compared to talking about it is a problem, but we have some suggestions along that line.
SPIEGEL: The US has not yet instituted any kind of reform policy. What we see is the government and the Federal Reserve pouring money into the economy. If one looks beyond that money, one sees that the economy is in fact still shrinking.
Volcker: What should I say? That’s right. We have not yet achieved self-reinforcing recovery. We are heavily dependent upon government support so far. We are on a government support system, both in the financial markets and in the economy.
SPIEGEL: To get the recovery to the point where it is right now has cost a lot of money. National debt will probably reach $12 trillion in 2019. Just serving the debt costs $17 billion a year — at least according to this year’s forecast. That’s difficult to sustain.
Volcker: You’ve got to deal with the deficit and you’ve got to deal with it in a timely way. Right now, with the unemployment rate still very high, excess capacity is still evident, and the economy is dependent on government money as we said. We are not going to successfully attack the deficit right now but we have got to prepare for attacking it.
SPIEGEL: Should Americans prepare themselves for a tax increase?
Volcker: Not at the moment, but I think we would have to think about it. The present tax system historically has transferred about 18 to 19 percent of the GNP to the government. And we are going to come out of all this with an expenditure relationship to GNP very substantially above that. We either have to cut expenditures and that means reducing entitlements and certainly defense expenditures by an amount that may not be possible. If you can do it, fine. If we can’t do it, then we have to think about taxes.
WSJ:
ALAN MURRAY: Mr. Volcker, you have heard the reports from all four of these groups and you have heard the priorities that they have agreed on. We would love to hear your responses.
PAUL VOLCKER: Well, you are not going to be very happy with my response. I heard an awful lot of particulars here that I agree with to some degree, but my overall impression is that you have not come anywhere near close enough to responding with necessary vigor or structural changes to the crisis that we have had.
If it is really true that financial weaknesses brought us to the brink of a great depression that would have ended your livelihood and destroyed a lot of the global economy, then let me explain.
You concluded with financial-services executives showing cultural sensitivity and responsible leadership. Well, I have been around the financial markets for 60 years, and how many responsible financial leaders have we heard speaking against the huge compensation practices?
Every day I hear financial leaders saying that they are necessary and desirable, they are wonderful and they are God’s work. Has there been one financial leader to stand out and say that maybe this is excessive and that maybe we should get together privately to think about some restraint?
I hear about these wonderful innovations in the financial markets, and they sure as hell need a lot of innovation. I can tell you of two—credit-default swaps and collateralized debt obligations—which took us right to the brink of disaster. Were they wonderful innovations that we want to create more of?
You want boards of directors to be informed about all of these innovative new products and to understand them, but I do not know what boards of directors you are talking about. I have been on boards of directors, and the chance that they are going to understand these products that you are dishing out, or that you are going to want to explain it to them, quite frankly, is nil.
I mean: Wake up, gentlemen. I can only say that your response is inadequate. I wish that somebody would give me some shred of neutral evidence about the relationship between financial innovation recently and the growth of the economy, just one shred of information. I am getting a bit wound up here.
Source:
Paul Volcker: Think More Boldly
ALAN MURRAY
WSJ, DECEMBER 14, 2009
http://online.wsj.com/article/SB10001424052748704825504574586330960597134.html
America Must ‘Reassert Stability and Leadership’
Der Spiegel, 12/12/2009
http://www.spiegel.de/international/business/0,1518,666757,00.html
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December 13th, 2009 at 9:06 pm
Thank goodness.
December 13th, 2009 at 9:12 pm
As I posted recently in a comment to another thread, but completely applicable to Volker’s comments:
You would think our elites would be on top of this, but alas ours is a rather low quality bunch, merely concerned with grabbing all the cash they can get their grubby hands on.
How delcasse. Where’s the old money when you need it?
December 13th, 2009 at 9:15 pm
Volcker came to my MBA program in 1999 to give a talk. Needless to say, we were all partying like it was 1999 (it was) and I did not listen to much of what he said…I think I fell asleep. If it were today, I would sit up front and ask the most questions.
December 13th, 2009 at 9:20 pm
did the administration ask Volcker to finally get out and talk to media or is he doing this on his own.
amazing that they have access to this guy all this time and they dont pay attention to him.
December 13th, 2009 at 10:18 pm
Cut spending or raise taxes (on a minority of voters)? Hmmmmmmm. I wonder what our courageous elected leaders will do?
December 13th, 2009 at 10:32 pm
Lawrence Summers, United States (economist, Director of the White House’s National Economic Council)
Timothy Geithner, United States (Secretary of the Treasury)
David Rockefeller, United States
Henry Kissinger, United States
Paul Volcker, U.S. (former Federal Reserve director, Chair of Obama’s Economic Recovery Advisory Board)
http://info-wars.org/2009/05/19/bilderberg-2009-attendance-list/
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Volcker+Bilderberg+Group
so how, there, always, seems to be that which fails the “All the News, that’s Fit to Print”-metric..
http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=Volcker+CFR+Trilateral+Commission
December 13th, 2009 at 11:28 pm
Values such as honesty and integrity are in short supply in a society where it seems nearly everyone has been bought off or compromised in some fashion. Paul Volcker is one of the few statesmen that we have got left whose integrity remains intact.
As for Emanuel, Summers & Geithner, they are nothing more than bitches of the investment bankers and hedge fund managers.
History will recognize those who have the courage to stand up against the powerful forces that are tearing apart our society.
December 13th, 2009 at 11:40 pm
“Rahm Emanuel, who has been out of government for only 30 months of his adult life, managed to collect $18 million during his private-sector stint with a Wall Street firm called Wasserstein-Perella”
“The president’s economic czar, Larry Summers, was paid more than $5.2 million in 2008 alone as a managing director of the hedge fund D.E. Shaw, and pocketed an additional $2.7 million in speaking fees from a smorgasbord of future bailout recipients, including Goldman Sachs and Citigroup.”
MATT TAIBBI
Rolling Stone
December 13th, 2009 at 11:53 pm
“Volcker: We Need to Think More Boldly”
Unfortunately, doesn’t appear that bold thinking is going to occur under Obama’s rule. We wanted real change but all we got were lies and the same old, same old.
December 14th, 2009 at 12:05 am
Funny how most of Volcker’s outspoken behavior has occurred outside the US. The WSJ interview is the first I have seen of him in a domestic publication in a long time.
I think it is all being very carefully stage-managed, not to build support for actual reforms — if that was ever the intention, they passed by much better opportunities to do so — but rather to act as a political shield, being able to point to Volcker’s speeches as an indication of administration concern.
The only thing this administration is concerned about is the 2010 elections, and after that, the 2012 re-election campaign.
Somehow I think that both are going to be very difficult for incumbents. No matter how much talk and posturing is presented in the media, for people who have either been out of work for a year or so themselves, or know someone who has been, talk and posturing will fall far short of any rational definition of effective action.
Unemployment levels will be the thing that decides the next several elections, and the incumbents are finally waking up to that. Look for a shitstorm of fallacious TV ads about how each and every incumbent up for re-election is soooo concerned about the financial health of the nation, and is doing every possible to make the nation fiscally healthy.
Everything possible short of falling on their swords and resigning, that is.
The sad thing is that almost all of them will be re-elected.
December 14th, 2009 at 12:24 am
“I am getting a bit wound up here.”
Welcome to the club, Mr. Volcker. Why there aren’t more of us and more public outrage is absolutely beyond me.
December 14th, 2009 at 12:28 am
SPIEGEL: To get the recovery to the point where it is right now has cost a lot of money. National debt will probably reach $12 trillion in 2019. Just serving the debt costs $17 billion a year — at least according to this year’s forecast….-from, above
U$D 12 Tr by ’019? we’re there, now, no?
debt service on U$D 12 Tr = U$D 17 Bn? talk about ZIRP, to be charitable..
“Tomorrow’s journalism – less fact checking?”
http://citizenmediawatch.com/index.php/2006/12/15/tomorrows-journalism-less-fact-checking/
“One of the underlying themes throughout many of the classes in the Journalism department is the need for vigorous fact checking — the verification that what is being reported is factual.”
http://www.csulb.edu/~jaubele/2006/01/journalism-fact-checking.html
“American University School of Communication Presents
An American Forum: Fact-Checking: A Dying Tradition?
A recent study by the Center for Public Integrity identified 935 false statements made by leading members of the Bush administration in the two years following 9/11, about the national security threat posed by Iraq. Many of these statements were relayed to the public via the stalwarts of the American media — the big newspapers, network and cable television news, and authoritative websites…”
http://www1.soc.american.edu/content.cfm?id=1162
December 14th, 2009 at 12:37 am
volcker is old enough to be an advisor without an agenda. he would like to try and solve some of the problems. most of the other obama players are political hacks without any direction except to be re-elected.
the spenders are building their own coffins and each additional spending bill that is passed is another nail in their coffins. the public is a lot smarter than most people believe and this coming election will be an eye opener. new jersey was the first shoe to drop, with many more to come. too bad pelosi and reid aren’t up for election.
on sunday another pork loaded spending bill passed. hello monday.
December 14th, 2009 at 1:28 am
Paul Volcker might have more success in cleaning up this mess if the year was 1840 and he was packing a pair of six shooters.
There really isn’t any serious leadership left in the United States. We’re in big trouble. And we’re not gaining on this one. The crisis of 2020 may serve as the last wake up call before a series of major implosions kick in.
December 14th, 2009 at 2:36 am
“The crisis of 2020 may serve as the last wake up call before a series of major implosions kick in.”
i seriously doubt it will take that long.
December 14th, 2009 at 3:13 am
[...] - Volcker speaks. [...]
December 14th, 2009 at 6:52 am
[...] [...]
December 14th, 2009 at 7:36 am
“Spiegel: Just serving [sic] the debt costs $17 billion.”
The U.S. currently spends about $400 billion a year servicing the debt, according to this U.S. Treasury website:
http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm
I doubt that that figure includes interest on the Social Security trust fund, which the government pays to itself.
December 14th, 2009 at 8:39 am
I think Paul is starting to get a little annoyed about being stepped on by Rubin and his pals in staff meetings
December 14th, 2009 at 9:54 am
I hope we can keep him wound up for a few more years. God knows we need someone who will do and say the right things. I hope all the elites are heeding tall Paul since they have until November 2010 at which point the wrath of the citizenry will vote every incumbent out of office regardless of creed, ideology or party.
December 14th, 2009 at 10:51 am
Why do we need plutocrat banksters? We are told that they are a necessary evil… Canada survives quite well without their shenanigans. In fact, Canada has not had a single bank failure.
December 14th, 2009 at 11:17 am
I’m starting to Like Volkers. Yet I wonder how long will it take before anyone realizes that we do have a stick we can use. and it’s connected already to all of their balls. Tax the greedy bastards already!
December 14th, 2009 at 2:10 pm
Volker hit it on the nail with the remarks about reduced spending or increased taxes. If you want to do any real deficit reduction without increased taxes you have to focus on the two biggest spending items.
If you hit social security you will not only get AARP after you but also all those people who have been paying into the system with the expectation of getting their money back later. Spending cuts in social security is basically a retroactive tax on the less affluent (rich people pay little if any SS taxes). We will basically tell these people that although they had been told this tax was going to give them a comfortable retirement, it was actually just regular taxes (except it was regressive and restricted to the first 100K of income).
If you try to reduce deficits by reducing the other big spending item of the government (military), the right wing hawks will turn into chickens faster than you can say “draft”. The combination of the military/industrial complexs hold on certain congressional districts (by providing jobs), and the chicken hawks love affair with things that go boom, makes it a utopic dream to fight the deficit by reducing this other huge spending item.
The rest of the budget items are way to small to provide any realistic alternative that can provide the savings needed to reduce the deficits without increasing taxes. Problem is that it is also political suicide to propose or vote for any substantial tax increases that can do some real damage to the deficit and national debt.
So the only politically viable way out of this is called inflation. Yes it is the cruelest tax of all, and it punishes good and rewards bad behaviour. However, it is also the only solution that allows all the guilty to point their fingers in the air and say I didn’t do it, he did.
December 14th, 2009 at 2:31 pm
Volcker is a pathetic figure. He was trotted out as one of the Wise Men during the election, only to be tossed aside like a used tissue. His was useful as a decoy and as an enticement to many folks on this board who voted FOR this administration. And now, you’re shocked, SHOCKED!
~~~
BR: Best. Fed. Chief. Ever.
December 14th, 2009 at 2:36 pm
In my view the govt and Federal Reserve actualy believe that their Keynesian policies to try to prevent deflation will work by giving time for the banks to earn their way out of the problems. However, the govt has done little to fix the basic structural problems in the economy, of too much debt relative to peoples’ incomes. And it has tried to prevent the normal business cycle from occurring, in which the recession would clear out the excesses and lead to a proper form of price discovery. Instead they’ve tried to fix a debt problem with more debt, which I believe is very reckless and dangerous. Unfortunately, those in power are the same people who mismanaged things leading up to the financial crisis. So in my view, one of the few ways for those of us who understand the severity of the problems to protect themselves from the risks still out there is to invest in gold and silver related assets, because gold and silver should continue to benefit from the Fed’s Keynesian efforts to avoid deflation. One company I particularly like is Fortuna Silver, which I recently saw at http://www.goldalert.com/goldmining/fortunasilver announced approval of the final permit necessary to begin construction at its San Jose silver and gold mine in Mexico. The company’s stock has performed very well this year, and I think there is a lot more room on the upside because of the increased production potential of the new mine. Overall I believe that it’s worth the time investigating specific gold and silver mining companies that offer leverage to the gold and silver price because they tend to outperform the metals.
December 14th, 2009 at 4:06 pm
BR: I don’t dispute that he WAS an effective Fed chief, but — it’s tragic to see now how he’s been marginalized at best and completely abused at worst!