I think Volcker the inflation slayer is to buy into a false narrative. He presided over a controlled devaluation of the dollar. The central bank has the option to deflate to the extent that the past periods of over target inflation are corrected. He didn't stop inflation, he reigned it in. He brought the runaway horse to a stop but didn't bring it back to the stable.
His time 79-87 had a cumulative 74% inflation, the dollar lost over 40%. Thats destroying the savers. He made no attempt to disinflate, all was water under the bridge.
If Volcker stands as an example for today, then when a modern Volcker arrives I would be dumping dollars for -anything- else.
I see Volcker as simply managing a controlled devaluation of the dollar (a default basically) and I think thats what the US is doing now. Certainly kudos for not letting the whole thing blow up but I think if you were to ask the now passed on retirees of the period they wouldn't recognise him as an inflation beater.
I agree with you that Volcker was no slayer of inflation. What he did was break the herd's mentality that inflation would continue to run higher and hotter. Once the herd pivoted, the belief that the Fed was in charge became ingrained.
I think Volcker the inflation slayer is to buy into a false narrative. He presided over a controlled devaluation of the dollar. The central bank has the option to deflate to the extent that the past periods of over target inflation are corrected. He didn't stop inflation, he reigned it in. He brought the runaway horse to a stop but didn't bring it back to the stable.
His time 79-87 had a cumulative 74% inflation, the dollar lost over 40%. Thats destroying the savers. He made no attempt to disinflate, all was water under the bridge.
If Volcker stands as an example for today, then when a modern Volcker arrives I would be dumping dollars for -anything- else.
I see Volcker as simply managing a controlled devaluation of the dollar (a default basically) and I think thats what the US is doing now. Certainly kudos for not letting the whole thing blow up but I think if you were to ask the now passed on retirees of the period they wouldn't recognise him as an inflation beater.
I agree with you that Volcker was no slayer of inflation. What he did was break the herd's mentality that inflation would continue to run higher and hotter. Once the herd pivoted, the belief that the Fed was in charge became ingrained.
Thanks Alan! Terrific write up.