Paul Volcker, chairman of the Fed and America's doughtiest inflation-fighter, died on December 8th, aged 92
In his spells of leisure time, when he had any, Paul Volcker liked to go fishing. Towering above a river in his jerkin and waders, fly cast, cigar firmly in mouth, was a good way to ruminate on big decisions. And he believed in rumination. "Procrastinate and flourish" was a favourite motto. Another, from George Washington, which his father had kept above his desk when he was city manager of Teaneck, New Jersey, was: "Do not suffer your good nature...to say yes when you ought to say no."
So when he was asked in 1974 to be president of the New York Fed, he went off on a fishing trip to chew it over. And in meetings and congressional-committee hearings later, as chairman of the Federal Reserve from 1979 to 1987, he hid his bald head in smoke-clouds, as if he was slowly weighing up what answers he could possibly give. His salvo against America's inflation in 1979, which slew the dragon for decades, therefore seemed unusually abrupt. The times certainly required it, with annual inflation then at 12%. And his measures, announced at an extraordinary press conference in the boardroom of the Federal Reserve building in Washington, were drastic.
From then on the Fed would control not the price of money, by adjusting the interest rate, but its supply, leaving interest rates to be set by the market. He would force America into recession to cure people of their expectations that since prices would keep on rising, they must keep on spending. The downturn that followed—double-dip, because he briefly took his foot off the brake—brought soaring unemployment, reaching 10.8% in 1982, and a federal funds rate of over 20%, the highest in history, before both rates and prices eased. By 1983 inflation was less than 4%. Yet he had been ruminating about the beast, and how to subdue it, since his Princeton student days.