One of the great monetary policy ironies

By Peter Boockvar - September 23rd, 2010, 3:20PM

Only in retrospect will we know for sure but possibly in one of the great ironies in the history of monetary policy and economics, Paul Volcker, the man who is credited with ending the awful inflation of the 1970′s and early 1980′s thru an aggressive rate hiking cycle where he took the fed funds rate from 10.5% to 20% over 9 months, is saying at a Chicago Fed conference that the Fed’s QE of buying bonds “doesn’t bother me” as they are “understandable” under the current circumstances. Discuss amongst yourselves.

PERMALINK
Category: MacroNotes.

Comments

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data, ability to repeat discredited memes, and lack of respect for scientific knowledge. Also, be sure to create straw men and argue against things I have neither said nor even implied. Any irrelevancies you can mention will also be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

4 Responses to “One of the great monetary policy ironies”

foosion Says:
September 23rd, 2010 at 3:47 pm
When the facts change I change my views. What do you do, sir?

In other words, fighting inflation is appropriate when high inflation is the problem. Adding a bit of inflation is appropriate when measures of underlying inflation are at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability.
dr dre Says:
September 23rd, 2010 at 4:08 pm
3 possible reasons:

1. Deflation is worse than Inflation (in Volkers eyes)
2. after being right for so long, he is due for a bad call…
3. He is going senile…
mad Albanian Says:
September 23rd, 2010 at 4:27 pm
Interest rates must be at 0%.
All interest paid on money is pure sin.
Lets hope this recession forces us to live in a society wit 0% interest rates and 0%inflation and people learn to make a living by doing uselful things for the society rathere than being lazy parasites and speculators. Someone explain to me the social rationale behind paying interest on money other than wanting smth for nothing!
inessence Says:
September 24th, 2010 at 10:25 am
QEI, QEII, QE3, etc., etc. has little intended consequences when the demand side of the monetary equation is near zero. However, the unintended consequences can be adverse as the excess liquidity and ZIRP encourages excessive risk taking (just like a hollywood rerun). In other words, we get the FED creating asset bubbles and market volatility for whose benefit? Certainly not main street, must be their primary dealers friends on wall street.