Wednesday, November 26, 2008
Volker's remarks from a speech last week at Drew University
Volker's comments and my remarks in blue.
Ex-Fed chief Volcker at Drew: 'There is no magic bullet' for economy
Obama adviser says a plan is needed at start of presidency
by laura bruno • daily record • November 21, 2008
"No magic bullet" comment means that he does not believe in the Keynesian approach that utilizes large doses of government spending to restore aggregate demand.
MADISON -- Former Federal Reserve Chairman Paul Volcker, one of President-elect Barack Obama's top financial advisors, didn't let slip any of his secret advice Thursday when he addressed a room of some 40 Drew University students, professors and trustees.
He did tell them that while it's easy to get cynical and discouraged about public service after nearly a decade in Washington, (he served from 1979 to 1987), he said there is a chance that under Obama some of the excitement that was felt in the 1960's with President John F. Kennedy could see a resurgence.
Kennedy's chief economic advisor was John Kenneth Galbraith--a fervent Keynesian. Quite different from the team that Obama has assembled. There is not one Keynesian on it, so it's weird that Volker does not recognize that distinction.
He also said Obama needs to be prepared with an economic plan on inauguration day or the day after, because with General Motors and the other American auto makers on the brink of bankruptcy, Obama may have his hand forced before he has a chance to make his own choices, Volcker said.
"Forced" to do what? Let them fail? Bail them out? No specifics.
Volcker answered questions posed by former New Jersey Gov. Brendan Byrne, a fellow 1949 Princeton University graduate, who is teaching a course on politics and the media at Drew.
When Byrne asked what options there are for solving the economic crisis, Volcker had a short answer:
"Time," he said. "There is no magic bullet."
Again, this comment displays a complete mistrust of the Keynesian approach. Implies shared suffering and sacrifice by the electorate. A muddling through at best.
Sharing the stage with Volcker was former New Jersey Gov. Thomas Kean.
Volcker joked that his true mission at Drew was to offer Kean the Secretary of Treasury position on behalf of the President-elect.
Volcker has been on the short list of possible candidates for the position.
In dishing about the press, Volcker was kinder than Kean, who said the press acts in a "herd mentality" on a major story and most reporting on a complicated story is not sensible.
On this characterization of the press, Gov Kean is absolutely correct. As an aside, I lived in Jersey when Kean was governor and he was an excellent chief executive!
In contrast, Volcker said today's financial press is far more sophisticated than it was 20 years ago.
Is he joking? I find this remark to be incredible. The financial press is still pretty much clueless; views everything through the paradigm of a gold standard. But then again, so does Volker, so you can see why he lauds them.
"I have a feeling the press hasn't done such a bad job," Volcker said of the media's reporting on the financial crisis. "It's a pretty complicated story to tell."
"Press hasn't done a bad job." Unreal! No understanding of gov't finance, monetary operations, floating exchange rates, promoting the likes of Peter Schiff, Jim Rogers. Little or no perspective when it comes to economic data, deficits, debt, etc. Incessant cheerleading, entrenched ideology. Sheesh, what's Volker smoking?
And Volcker acknowledged that public relations can have a powerful effect on the powers of a new president.
"It's not all p.r., but you have to get it pretty right otherwise you can't do what you want to do."
What is he saying? That the press has more power than the policymakers? More power than the Fed? More power than the Federal Gov't? Should we pander to what the press thinks we should do? Is THAT leadership???