Paul Volcker, the man credited with crushing double-digit inflation by hiking interest rates aggressively during his time at the helm of the US central bank in the late 1970s and early 1980s, is not optimistic about the future of America.
“We’re in a hell of a mess in every direction,” he tells Andrew Ross Sorkin of The New York Times. “Respect for government, respect for the Supreme Court, respect for the president, it’s all gone… how can you run a democracy when nobody believes in the leadership of the country?”
Volcker, 91, has written a memoir, Keeping At It: The Quest for Sound Money and Good Government. “I grew up in a world in which good government was a good term,” he says. Yet the rising power of lobbyists means that America is “developing into a plutocracy”, with the wealthy pushing the case for lower taxes and smaller government. Ironically, this was a driving factor behind the election of Donald Trump – Volcker is no fan of Trump but acknowledges that he “seized upon some issues that the elite ignored”.
It’s not just the quality of US politics that concerns Volcker. Central banks are too obsessed with their 2% inflation targets, he tells Gillian Tett in the Financial Times. The threat posed by deflation is overstated, he suggests, so they should aim for price stability instead. Meanwhile, quantitative easing has made the financial system riskier. “There’s a lot of leverage going on now”, while banks are lobbying to loosen regulations again – all of which point to further financial crises in the future.