Paul Volcker didn’t give a damn what voters, presidents or Wall Street thought, howardrgold writes.
Former Federal Reserve Chairman Paul A. Volcker, who died over the weekend at 92, was a towering figure both in stature and in his role in American life: He broke the back of inflation for at least a generation, maybe two.
Volcker was notoriously taciturn. In those days, Fed chairmen didn’t give news conferences and were opaque about their activities. A cottage industry of “Fed watchers” had to glean what the central bank was doing from what happened in money markets or, as I’ve liked to joke, by watching which way the ashes fell from Volcker’s signature cigars.
The bond market began its rally in September 1981, when the 10-year Treasury note peaked at 15.8%, TMUBMUSD10Y, +0.24% and the stock market SPX, -0.32% rally started a year later, in August 1982, after Volcker organized a central bank bailout that prevented Mexico from defaulting on its debt. On Aug. 12, 1982, the Dow Jones Industrial Average DJIA, -0.38% sat at 776.92—that’s not a typo—about where it closed in 1964, after a miserable secular bear market in stocks.
Volcker’s successors at the Fed have retained the Master’s independence in theory but not, unfortunately, in practice. All of them have been, to one degree or another, slaves of the markets. In a December 1995 speech, Alan Greenspan decried the stock market’s “irrational exuberance.” But the big selloff that followed prompted him to launch what came to be known as the “Greenspan put”—the message to investors and traders that no matter what, the Fed had their back.
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