The death of Paul Volcker is a sad moment here at the Sun. The chairman of the Federal Reserve who, in the 1980s, conquered inflation slipped away Sunday after a long illness. Of all the public officials we covered over the decades, it is hard to think of one whom we admired more than Volcker and who will be more widely missed in America and abroad.
It would be vainglorious of us to suggest that we knew him well. We first encountered him personally at a monetary conference at Paris, where we managed among a scrum of reporters to get trapped beside the former Princeton basketball player (our eyes were barely higher than his elbows). He impressed us by uttering something so opaque that it was almost a grammatical impossibility.
At the time we were writing editorials for the Wall Street Journal. Its great editor, Robert Bartley, was an admirer of Volcker, a Democrat who’d been elevated to the chairmanship of the Fed by President Jimmy Carter. As the central banker was girding for the battle against stagflation — inflation without growth — he had Bartley in for lunch.
Bartley was accompanied by his deputy, George Melloan. At the lunch, the new Fed chairman asked whether the Journal would stand with him when, as he started raising interest rates, “there’s blood all over the floor.” It was Mr. Melloan who quickly answered for the paper: “Yes.” We would always think of it as the Bartley-Volcker Pact.
Typically, they all kept their word, and Volcker brought interest rates, briefly, above 20%, enabling President Reagan to win the day on the cut in marginal tax rates. That combination not only ended stagflation but ignited the Reagan boom that rolled on through the Clinton years and into the first decade of the 21st century. It was also a remarkable test of Volcker’s character.
After leaving the Fed, Volcker took on a number of high profile assignments. One was to chair the Independent Committee of Eminent Persons that was established to sort out dormant Swiss bank accounts of Jews who perished in the Holocaust. At one point, Volcker himself was criticized because he was also a director of a major Swiss combine, Nestle.
At the time, the Jewish Forward, which we were then editing, came to his defense. If the struggle for justice in respect of Jewish material claims was going to involve going after Volcker, the Forward reckoned, “it wasn’t worth the candle.” Volcker’s committee prevailed, as did a committee he headed to look into corruption in the United Nations’ Oil for Food Program.
It was a marker of Volcker’s reputation that he was called in to sort out, if not to adjudicate, ethical problems of this scale. Yet, for the most part, Volcker hung back from public engagement on the biggest crisis to erupt in his post-Fed years. That was the collapse in the value of the dollar in the first decade of the 21st century.
On the opening day of George W. Bush’s presidency, the one-dollar Federal Reserve Note was valued at a 265th of an ounce of gold. Before things stabilized, if they have, the value of such a Federal Reserve Note had plunged to a 1,900th of an ounce of gold. Staggering.
In those years, we went to see Volcker several times on the chance that he might be prepared to go on the record in favor of moves in Congress toward monetary reform. No such scoop, alas. In May 2014, though, Volcker did give a speech to the Bretton Woods Committee in Washington, in which he offered a glimpse of his thinking.
He stopped short of calling for a new gold standard or recommending a course of reform. “By now,” he did say, “I think we can agree that the absence of an official, rules-based, cooperatively managed monetary system has not been a great success.” We took it as a devastating reprise on the post-Bretton Woods era of fiat money
The most surprising encounters we had with Volcker were at dinner. One was at the apartment Volcker shared with his wife, Anke Dening, in Manhattan. Near the door was a display of gear for Volcker’s beloved sport of fly fishing. Inside, the towering central banker (he was 6’, 7”) was dressed in a Japanese kimono, right down to the white socks and sandals.
Another was at our own home, where a table of a dozen guests were arranged around him. The dinner was clocking along amicably enough, when, suddenly, a spat erupted between Volcker and the person seated next to him, our older daughter, aged 15. It flared so fiercely — the topic was baseball — that the rest of us sat and gawked. Then it blew over.
After dinner, we helped our eminent guest on with his coat and gave him a copy of a book of the Sun’s editorials on the gold standard. He put his hand on our shoulder as we walked him to the door. “Just remember,” he said, “you can’t go back.” It was the closest we ever got to a policy prescription from the great man.
In the morning, our 15-year-old descended for breakfast. “Do you know who Paul Volcker is?” she demanded. Yes, we exclaimed, he’s one of the great central bankers of all time. “No, no,” she said, “that’s not who Volcker is.” So we asked who he was. “He was on the baseball blue ribbon commission!” she exclaimed — nailing the fact that one of the reasons Volcker will be so widely missed is that was a man of many parts.
Image: U.S. government photo, via Wikipedia.