How Paul Volcker Views His Life

gonna happen, but he didn't believe it would happen. You vegged, you got into some arguments with Janet Yellen, and the economy had this big boom because he let monetary policy run easy and unemployment dropped further than anyone thought. Then there was this huge bubble and then there was this huge crash. So, you know, you kind of there are some good aspects of his legacy, but also maybe some lessons to learn on the negative side too. What about you?

What's your favorite? Oh god, um, I'm going to completely sidestep the question because I want to get to the point of the question that I just asked you, which you summarized perfectly, and that's the notion that you know, throughout central bankers working lives, their professional lives, they kind of fall in and out of favor with each other and also with the general public. And it's really interesting

to watch that happen. Absolutely, I mean, even like the very recent FED shares for example, I think that's the case. So I think people were very into bernanke and yelling for a while, and of course bernanky for the actors he took in stemming the financial crisis. But then you look now and you see that inflation is still cool and unemployment his dropped much further than they expected, and

you're like, oh, did they tightened policy too quickly? So subsequent events, whether their crashes or changing economic conditions, can really um shade how we saw a banker, a central banker, even just one that was in office a few years ago exactly. And do you ever wonder what the central bankers themselves think of what they are doing when they're in office. I always do, Like, you know, does Jerome Powell stay up late at night worrying that he's making

a policy mistake? What was Yelling thinking over the past few years, What was Alan Greenspan thinking immediately after the financial crisis. These are all very interesting questions, and today we're going to explore all of those through the prism of one former FED governor in particular, and that is

Paul Volker. Yeah. I'm really excited about this episode. I think, you know, obviously right before Greenspan definitely a sort of legendary central banker, and whose influence in terms of expectations regarding again flation and FED independent and making difficult choices in the face of political opposition still looms large today. So I think his life and career hold a lot

of lessons for right now. Yeah, and we are very lucky at Bloomberg because one of our colleagues, Christine Harper, she's the editor of Bloomberg Markets magazine, has actually co authored Paul Volker's autobiography. It's called Keeping Edit, The Quest for Sound Money and Good Government. It just came out, and so we're going to get to ask her all these things about what Paul Volker was thinking and how he actually was considering his legacy throughout the years. Can't wait. Christine,

thanks so much for joining us. You're lighted to be here. So I have to admit when I first heard that you were co authoring a book with Paul Volker. I had no idea what was going on. Can you please explain how you actually know him and how this project got started? Well, I really have to admit it was

a pure luck. He has worked in the past with a publisher named Peter Osnos, who founded a publishing imprint called Public Affairs, which is now part of Hashat, and Paul and Peter had some discussions about how Paul, maybe after all these years, might want to write a memoir, and so Peter wanted to make that happen, and I wanted to find somebody to work with Paul on it,

and he thought it was very important. It'd be somebody in New York who knows a little bit about finance, but who wouldn't dominate the process, and who would have the right kind of chemistry with him and could kind of regularly go and meet with um Paul and talk about you know, basically interview him and then try to pull it all together into a book. So I I was very surprised. Eyes I knew, I knew Peter a little bit, but I was really not, you know, expecting

to be asked to do anything like this. And it was a big surprise. And but obviously I couldn't think of a book. I'd rather work on um what I legend. And I kept thinking throughout the process that no matter what happened, I'd get to spend a lot of time

with Paul Wolker. So it was a phenomenal experience. Basically spent the last year and a half kind of almost daily and you know, or you know, a few times a week at least, seeing um, this great man, listening to his stories, getting to work with him, learning a great deal about not only the history of the economic story of America and the world, but just about sort of government and integrity and how to live a really

good life over ninety years. How does this start? So you interviewed him, But like, did you have like a sort of mapped out idea of the interviews or do you just start and say, all right, Paul started telling me your story and let's hear this guy. Yeah. I basically took that approach. I had no idea. First of all, I mean, you know, he's a he's a pretty amazing man. You know, he's six ft seven, he's served under six presidents. You know, he is not easily sort of guided to

do anything. He knows what he wants and he gets it. So there was no point really going there and trying to tell him what we wanted to talk about. I would I would sort of go in and say, hey, let's you know, where do you want to start? And he'd say, okay, let's start at the beginning we talked. And also I should say that what happened after we were We did a whole bunch of interviews. I got a lot of transcriptions of these interviews, which proved to

be very helpful. But he also then started just writing himself. He started writing on yellow pads, which is his long time practice. He doesn't type, and uh, he he has a He has an assistant who typed them all up and would email them to me. And I would just go through this and you know, edit and say, hey, you told me this great story, let's add it in you didn't put it in, or you know, why don't

we recast it a little bit. So I ended up becoming sort of more of a an editor and a sort of a coach, and uh, we would kind of send edits back and forth. And he's great. I mean, he's also a natural copy editor. He loves to he loves to go through documents and make kind of tiny, you know changes. Um, But he's lovely, he's he's a

lovely collaborator. And I kept worrying that at some point he might become really, really tough to deal with, because obviously he has to have really, um, you know, strong will, and I thought at some point he might vehemently disagree with me on something. But actually we we had an amazing experience and um, you know, it was very lucky, um that we got along so well. And so Peter

Osinos was was right. It was a good combination. Uh So when you when you first met him to discuss this project, Paul, I mean, what did he tell you about what he was trying to do? What were his motivations for for doing this at the age of I think he's ninety one or something like that now. Yeah, so when I first met him, he was eighty nine. He turned ninety late last year and then he just turned one. He wanted to put down his story in

his own words. There have been three biographies written of him, which was a little daunting when I realized that, you know, because I did and I read a book that he wrote with a former Japanese official named Toyou Goten, who they wrote together back twenty five years ago, a sort of a series of pieces about their involvement in international monetary system reform, which is really good. It's called changing Fortunes.

So there are a lot of a lot of his stories had been told, um, but it was really about getting to tell it his way, and getting to tell things that maybe biographers hadn't thought were so important. You know, he has a chapter in there, for instance, about the importance of accounting reform. He has a chapter in there about his involvement with you know, trying to reform the u N and the and the World Bank. So those weren't always the sexiest topics for his biographers, but he

really cares about these things. So he he wanted to He wanted to write about all the ways in which he was involved, not only at the FED but throughout you know, his career, and and about the importance of public service. So what is the overriding theme when it when it's accounting reform, when it's World Bank, when did this sort of global monetary reform? What is the common

thread with which he approaches these big topics? One of the overriding things about him and sort of the foundational element of his career was that he grew up during the depression in the World War Two with a father who was part of us Are Good Government reform movement

in the United States. His father was a son of German immigrants, grew up in East New York Brooklyn, ended up getting a great education fortunately and became an engineer, but also ended up going into city management at a time when they're sort of a big move towards ending the corruption of the political sort of Tammany Hall type of politics at the time. And uh so Paul Wolker Sr. Became town manager of this of this New jerseytown, te Neck, New Jersey, where Paul Wolker Jr. Grew up and completely

turned it around. And he did an amazing job of making this town that was basically almost bankrupt into a town that was cited by the United States Army in the occupied countries after the war as the model community that they should base their democracies on. It was touted in the Saturday Evening Post as the crime free town.

It was just a sort of amazing success. So Paul Wolker Jr. Grew up believing there was no higher calling than helping to make your community and your government better, and he went to the He went to Princeton at a time when the university was run the president of the university was a professor of public administration. He went to the Littower Center, which is now the Kennedy School at Harvard, which was all about government. Everybody there wanted

to go into government. Um, all the economists he was, who were his classmates, they all wanted to go into government. That was kind of seen as the highest calling. And so everything he's done in his career has been informed by this idea that there's a really noble um pursuit and helping make government work better. And uh. He documents in the in the book all the ways in which he failed, Like he feels very depressed about how he

wasn't able to save Breton Woods. He tried really hard to create a new monetary system that would replace it and never was able to and kind of writes A nice part of the of the book is where he he sort of explains why he now realizes it was

never gonna work, but he really wanted it. He really believed in trying to he he's kind of almost the ultimate technocrat, and his he's seen over the last few decades, and he sort of traces it back to Reagan, this sort of belief that government is the problem, that you know, government isn't worth investing in, really sort of corrupt our system. And he's he's been fighting against it since he left

the FED, but he hasn't you know, succeeded. And uh now I think he and a lot of people would agree, we're at a point of almost crisis in this in this respect. So on that note, I'm curious, you're clearly painting a picture of a guy who cares very much about public service. How did he balance that care of public service with independence of the central bank? Because, of course, you know, when he came into the FED, I think it was nine nine, inflation was running incredibly high and

Jimmy Carter complaining a lot about it. So how did he make sure that he sort of paid attention to the needs of the American population while simultaneously maintaining the independence of the central bank. Well, he was brought in, as he describes, at this time of such crisis. It was almost like being a general called in to help fight a war. I mean, there was nothing that was more important to helping get the country back on its feet at that point than making sure we did something

about inflation. So even though he recognizes that it caused a lot of pain for a lot of people to have interest rates go up so much and monetary policy gets so tight, he also will assert, and he does over and over again, that there was no way to help people other than get the inflation right down. If you didn't get the inflation right down, all was lost. So he had to do it. He had to do what he did, and a lot of it was psychological.

He tell the story. And there about after he'd been fed chairman for m you know, just a little while, he was called to a meeting at the American Stock Exchange, I think, hosted by Arthur Levitt, and there are a whole bunch of businessmen and he gave his spiel. Vulker gave his spiel about how he was gonna it was gonna be a tough fight, and he was going to get inflation down, and he promised that it was gonna be good for the economy and down the road everything

would be fine. And one of the businessmen sitting next to him. Afterwards piped up and said, that's all very well and good, but I just finished my negotiations with my workforce and I'm giving them thirent raise a year for the next three years. And he writes, you know, I wonder how that guy. How it worked out for that guy, you know, because people really didn't believe him. By the time Vulcan got in there, people thought it

was lost. I mean, Arthur Burns gave a speech in nineteen seventy nine at the Pair Jacobson Lecture, the Anguish of Central Banking like it was basically, it was saying that politics were too difficult, it was impossible for central

bankers to do anything about this. And at that very moment, Paul Vulker was flying back from Belgrade where the I m F meeting was, to the to the Fed to have these emergency meetings to come out with the Saturday Night Surprise October nine, where they announced that they were changing how they targeted. They were going to start targeting

the money supply instead of the interest rate. And that was a big psychological shift to that He sort of engineered too in a way and oculate them from criticism that they were raising rates because but up to until then, the Fed always sort of shied away from the rate increases that were needs. So inflation was was ahead of

the of the interest rates. So in order to do something about it and and sort of prevent the Fed from having to take the heat in a way from itself, Hey, they just sort of he he described it as being lashed to the mast. They were. They just said, we're just we're all about the money supply. Rates are going to do what they are are going to do. It's not it's not what we're doing. We're kind of like, we're not responsible for rates. And uh, that was kind

of a great psychological instinct he had. I'm curious about the lessons for today, because if you hear central bankers now, they talk a lot about inflation and the importance of guarding against any sort of uplift and inflation or inflation expectations. They talk about the sort of hard one credibility of the Federal Reserve, which I think definitely starts with Vulcan.

On the other hand, unemployment has been extremely high even up until very recently, and arguably it's still elevated when you look at various measures of inflation, and so to sort of push back against Volker's legacy a little bit, I'm wondering what you think of the argument that central bankers have become so focused on inflation that in the last decade they sort of threw their hands up about unemployment, the other half of their mandate and said, you know,

just the same way that Arthur Burns may have said, look, there's nothing you know, central banks, we can't do anything about inflation anymore because of politics, whether in the post crisis period everyone was like, oh, central bankers like unemployment is other people's problem, or it's fiscal policy makers, or it's the problem of the skills gap, and sort of ignoring the fact that maybe there was something they could

have done about that. Well, I'm not an economist, so I'm not a good, good, good person to comment on that. I know what he would say, which is that he feels ultimately the number one, almost moral requirement of the central bank is to make sure that the value of money isn't isn't eroded, and that over history, you know, that's been the easiest way for governments to kind of try to, you know, appease the masses, is to just

you know, cut the value of the currency. And uh, and so he strongly objects to I mean he there he has a section in there about how and this was uh excerpted on Bloomberg Opinion a few weeks ago about what he considers the folly of the targeting of the two percent, the two percent inflation rate. I mean, he it drives him absolutely insane to see people as they were this summer, sort of agonizing over you know that we have inflation of only one point seven percent,

and how do we get it to two percent? And he's like, first of all, none of these measures are so precise. It's it's it's absurdity to try to act as though you can do that with such precision. Second of all, once you decide that two is your target, you're essentially agreeing to double prices every generation. And you're also going to fall into a slippery slope of, oh, what if two percent doesn't get us the unemployment we want, then maybe let's just raise it to three percent. And

it just makes it too easy. He believes in a more principle based idea of sort of instead of targeting a number, just targeting, you know, when business and consumer decisions are not affected by inflation. Okay, here's what I really want to know. In the course of all your meetings with Vulcar, did he ever tell you stuff that he didn't want put into the book? Are there things that he would rather sort of keep out of his

own story. I'm not asking for specifics. I'm just curious if there are certain controversial things that he wouldn't go into. He told me some stories that when I when I reminded him of them, he said, no, let's not let's not bother with that one. Yes, I mean, in part because he didn't want the book to be so long. He's sort of a funny, uh, you know, very self deprecating, and he doesn't He didn't want a book that was,

you know, this gigantic tone. He didn't want something that sounded really pompous in terms of the title or anything. He wanted to keep it pretty short and to the to the point. And uh, and yeah, there were some stories that are amusing. He loves I mean, one of the things people don't know about him if they haven't spent time with him, is that I certainly didn't know this is that he's incredibly funny. He loves to tell stories, and he's really really funny, and he's very right, and uh,

you know, kind of he loves gossiping. I'm curious thinking about it, the book coming out now, and obviously we live in an interesting time for central bankers, but you sort of I said this earlier. The bigger picture is that we live in a very interesting time for governance.

And I'm curious how much the very current government set up in the US, whether it's the attacks on the federal reserves, independence from President Trump, or just the sort of unconventional nature of the Trump presidency, or the various things we've seen in Congress in recent years, whether it's the dead sailing things like that of sort of naked a attempt to get political advantage by sort of weakening governance in this country. How much that was on his

mind with the book coming out right now. Well, I think it's you know, it's definitely on his mind. He's very disturbed about how, you know, Washington is being managed these days. And as he says sort of throughout the book, this lack of trust in government, which is really corrosive to a democracy, is sort of rooted in the fact that people have over time loss of faith that government can do what they expected to do. And and in part it's because the government is just kind of responsible

for more and more. First of all, the population has gotten much bigger. There's many more things we expect government to do for us than when he was growing up. But also just this a willingness to invest in government has really been eroded over time, back to the sort of Reagan sort of like, oh, we got to cut the government. So this idea that like government is the problem, start of the government, and then complain that government is no good, so let's start of the government some more.

It's sort of been going on for a long time, and you know, the consequences are obvious. His he has this thing called Vulgar Alliance, which is all about trying to train people for government, make government run more efficiently, and he really believes passionately and just making sure people in the government know how to do their jobs. Well.

I mean, so much of government nowadays is outsourcing, and if you aren't trained to deal with, you know, managing loads of people externally who are handling things for you, if you're not good at good at all. That if everybody who gets that kind of training goes into business and not into government. Then you know you're gonna end up with a pretty bad system. So this is sort of his his passion. And then in terms of the attacks on things like the FED, obviously you know that

disturbs him. But you know he's got this great sense of history. I mean, he's seen it. You know, he grew up when the Treasury was still controlling the FED. You know, he remembers the Great Accord when Eccles was able to separate and make the FED really really separate from the Treasury after the war. And uh, he wrote his thesis when he was at Princeton on Federal Reserve and the need for it to be independent. So you know,

this is something he's cared about his whole life. But he also knows that sort of almost every president he's seen operate has in some way tried to, you know, attack the Federal Reserve and and so um, keeping at it is sort of the title because this is this

is not a new battle we're fighting. It's it kind of goes on and on throughout history and will continue and and you need, I guess people like Paul Volker to sort of stand on the right side of things Christine Harper, editor of Bloomberg Markets magazine and the author co author, I should say, of keeping at it The Quest for Sound Money and Good Government, thank you so much. Thank you so much for having me. Great podcast you

guys have so Joe. I have to admit I'm a little bit jealous after listening to that conversation because I just imagine, you know, Christine is sort of hanging out at Paul Wulker's house and they're drinking wine, and he's telling her all these really interesting stories about back when the financial system was sort of on the brink. I bet that would be a really great experience to have. Now.

I kind of want to do that. I know, I want to do that, Like just take a year and find some really fascinating historical figure and just talk to them forever and get their entire story. I have to say, it sounds pretty great. Yeah. And of course, the interesting thing which we alluded to in the intro is the way that central bankers own reputation and legacy sort of

evolves along with I guess the economy. Really, there are plenty of people who were sort of vilified by events that they arguably helped cause, and then there are other people that it seems to have worked out for, and

of course they're now celebrated as heroes. Yeah. And I think another really important aspect of Vulcar's legacy is beyond the specific monetary policy decisions that he made during the era of double digit inflation, is this idea that he's sort of bigger than a central just a central banker. And thinking about him working for the Obama administration during the drafting of the Dodd Frank regulatory reform, of course

the famous like Vulcar rule. It's obvious and of course this was we're talking about, but it's obvious that his reputation is as someone who could just sort of be trusted as someone of a person of integrity. So that sort of no matter what specifically the issue is, his judgment is seen as a wise counsel, someone who can be um trusted to make a sort of bring a big picture, good government perspective to whatever the problem is. Right, And on that note, I have one thing to say,

which is poll vocer for the odd Lots accounting series. Yeah, oh, I had that same thought, like maybe we should do just right. We have to. We still have to revisit our accounting series. I don't know when we'll get to that, but we should do one on vocals proposed reforms. Well I need to We need to read that book that he co wrote with the Japanese economist. Yeah, all right, Well this has been another edition of the Odd Thoughts Podcast. I'm Tracy Alloway. You can follow me on Twitter at

Tracy Alloway, and I'm Joe wi Isn't all. You could follow me on Twitter at the Stalwart, and you should follow Christine Harper on Twitter at cr Underscore Harper. And you should follow our producer on Twitter to for Foreheads add fore Heast, as well as the Bloomberg head of podcast, Francesco Levi at Francesca Today. Thanks for listening, O