Interview a veritable economic panoramaThe discussion between SaKong Il, 75, and Paul Volcker, 88, was impressive, as if it was showing a live panorama of historic economic events from the Great Depression to Bretton Woods in the 1970s to the global financial crisis in 2008.
Volcker, a giant man in the modern economic history who is taller than 2 meters (6-foot-6), explained decades of complex economic history in a simple manner as he jumped from one generation to another. For example, his explained that if prices climb 2 percent every year as central banks hope, they will double every 30 years.
Volcker is a living legend when it comes to fighting inflation. He was nominated chairman of the U.S. Federal Reserve when inflation surged to 15 percent in 1979. His plan was to contain inflationary expectations. American consumers stopped discretionary spending only after they learned Volcker’s Fed wouldn’t let inflation rise more. Inflation figures then went into a free fall. It has become gospel among Fed chairmen that curbing inflationary expectations is a must in order to stabilize prices.
Volcker’s assertion of the Fed’s independence became a model for the next generation. He endured pressure from politicians opposed to austerity measures. President Jimmy Carter, who appointed Volcker, lost his bid for reelection, but the U.S. economy emerged from inflation.
Volcker disappeared from the scene for more than 20 years starting in 1987. He made a comeback as chairman of the Economic Recovery Advisory Board under President Barack Obama in February 2009. He led the Obama administration’s banking reform plan as architect of the so-called Volcker Rule. Based on his judgment that the U.S. financial sector had lost the ability to regulate itself, the veteran economist enhanced the regulatory system. The Volcker Rule strictly separates the operations of commercial banks and investment banks, a major change to the U.S. financial system.
After he resigned from the Fed, Volcker led major corruption investigations such as the Enron scandal, earning the nickname “Mr. Clean” in international financial circles.
Volcker’s life can be summed up as a fight against inflation and corruption. At the age of 88, he is still concerned about growing corruption, pointing to the huge lobbying industry in the United States.
BY LEE SANG-RYEUL [email@example.com]
with the Korea JoongAng Daily
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