Paul Volcker: “The only number that works is zero”

More than any other global institution, the US Federal Reserve’s decisions and communications drive capital markets and alter financial conditions everywhere from Seattle to Seoul. While its interest rate are set by an expert committee, for almost a century, the Fed’s core philosophy and operational approach have been moulded by one person: the Chair of the Board of Governors.

In this podcast series, Tim Gwynn Jones - a veteran central bank "watcher" - talks to authors of books about the Fed's most influential Chairs, starting with Marriner Eccles, Bill Martin, Arthur Burns, and Paul Volcker.

In the fourth and final episode of this series, he talks to William Silber – author of Volcker: The Triumph of Persistence (Bloomsbury, 2012). A giant (literally) of 20th-century policymaking, Volcker chaired the Fed from 1979 to 1987, implementing monetarist shock therapy, driving up the fed funds rate from 11% to 20% to crush inflation expectations, and pulling inflation down from nearly 15% in early 1980 to below 3% three years later.

“For Volcker, the most important denigrating fact of inflation was … that it undermines trust in government,” says Silber. “When we give the government the right to print money … we trust that the government will not debase the currency … When you think about inflation in that context, there is no number – two, four, six. Any number is bad. The only number that works is zero .. If you asked Volcker – and I asked him – what's the right number, he said zero”.

From 1990 until his retirement in 2019, Bill Silber was professor of economics at the Stern School of Business, New York University. His award-winning book is built on more than 100 hours of interviews with Volcker. The author of seven other books, Silber’s latest – The Power of Nothing to Lose: The Hail Mary Effect in Politics, War, and Business – will be published in paperback in September 2024.

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