Paul Volcker’s Fed Criticism Hints at Potential Recession
From Birch Gold Group
In the 1980’s, amidst out-of-control inflation, former Fed chairman Paul Volcker employed a controversial economic strategy of high interest rates to combat the issue.
In that case, the economic band-aid, dubbed “The Volcker Rule”, worked.
Volcker is 91 now, and as reported in the New York Times, his respect for the Fed is “all gone.” In a recent interview about his memoir, not only did Volcker take the opportunity to travel down memory lane, he also lambasted the Fed’s “2 percent rate target”:
“I puzzle at the rationale,” he wrote. “A 2 percent target, or limit, was not in my textbook years ago. I know of no theoretical justification.”
With a laugh, he told me that he believed the policy was driven by fears of deflation. “And we haven’t had any deflation in this country for 90 years!”
During the interview, he also made an eerie blanket statement summarizing his thoughts about the U.S., the Fed, and the economy.
He stated clearly, “We’re in a hell of a mess in every direction”. Talking about the stability of banks later in the interview, Volcker revealed an unsettling thought (emphasis ours):
They’re in a stronger position than they were, but the honest answer is I don’t know how much they’re manipulating.
He finished the interview saying, “We need stronger supervisory powers”. It’s tough to disagree with that.
Especially after the Dow dropped 1,400 points two weeks ago, and a slight recovery dropped dramatically again this week, the worry in the markets is clear.
On October 3, the Dow sat at 26,828. Market optimists were singing the praises of a market on the way to the top. But things have turned around dramatically.
Today, the Dow closed at 24,984, for an overall drop of 1,844 points in only 22 days. It has lost almost everything it gained in 2018.
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