Wednesday, November 13, 2013

Marc Faber says Paul Volcker is a man of integrity

It is certainly not my intention to criticize Paul Volcker or to question his achievements at the Fed, since I think that, in addition to being a man of impeccable personal and intellectual integrity, he was the best and most courageous Fed chairman ever.

However the investment community to this day perceives Volcker’s tight monetary policies at the time as having been responsible for choking off inflation in 1981, when, in fact, the rate of inflation would have declined anyway in the 1980's for the reasons:

One could argue that without any tight monetary policies in the early 1980's, disinflation would have been even more pronounced. Why? The energy investment boom and conservation efforts would probably have lasted somewhat longer and may have led to even more over capacities and to further reduction in demand. This eventually would have driven energy prices even lower.

I may also remind our readers that the Kondratieff long price wave, which had turned up in the 1940's, was due to turn down sometime in the late 1970's.