The Investor's Shelf — one book
Keeping At It

Keeping At It

Paul A Volcker
2018
T4 286 pages · about 4h 46m to read OL19765141Wgoodreads

Summary

Volcker chaired the Federal Reserve from 1979 to 1987 and wrote this memoir with Christine Harper near the end of his life. It covers his career at Treasury, at the New York Fed and at the Federal Reserve Board, and his subsequent work on financial regulation.

The central episode is the disinflation. Volcker raised the federal funds rate above twenty percent in 1981, which produced the deepest recession since the 1930s, unemployment above ten percent, farm and construction sector collapse, and death threats and public protests directed at him personally. He held the position, inflation fell from around thirteen percent to around three, and the credibility established shaped monetary policy for decades. His account of the decision explains the reasoning: inflation expectations had become embedded in wage and price setting, incremental tightening had failed repeatedly through the 1970s, and only a demonstration that the central bank would accept the cost would change expectations.

He also covers the closing of the gold window in 1971, at which he was present as a Treasury official, the Latin American debt crisis, and his later work including the Volcker Rule restricting proprietary trading by banks. His general position is that sound money, sound finance and competent public administration are the preconditions for everything else, and he is direct about his view that all three deteriorated.

The book is a memoir by a person with a reputation to defend, though Volcker is unusually candid about mistakes. It is not an analysis of monetary policy and readers wanting that should go elsewhere. The account of what it cost to hold the position is the most valuable material.

Key takeaways 8

  1. Inflation expectations become embedded in wage and price setting, which is why incremental tightening failed repeatedly through the 1970s.
  2. Only a demonstration that the central bank would accept severe economic cost could change those expectations.
  3. Rates above twenty percent produced the deepest recession since the 1930s, unemployment above ten percent and direct personal threats against Volcker.
  4. The credibility established by holding the position shaped monetary policy expectations for decades afterwards.
  5. Central bank independence matters because the political cost of disinflation exceeds what any elected official could accept.
  6. Volcker was present at the closing of the gold window in 1971 and treats the subsequent monetary arrangements as unresolved rather than settled.
  7. Restricting proprietary trading by deposit-taking institutions separates risk-taking from the guaranteed part of the system, which is the rule that carries his name.
  8. Competent public administration is a precondition for the rest, and Volcker is direct that it has deteriorated.

Who should read it

Investors and policy readers who want the disinflation from the person who executed it, including what holding the position actually cost.

Where it sits in the reference 2

Philosophy
Philosophy

Who recommended it 3

Book recommendations listed on their Good Books profile · aggregator only
Ray Dalioreported
Book recommendations listed on their Good Books profile · aggregator only
Book recommendations listed on their Good Books profile · aggregator only

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