Jeff Hirsh Read: October 2022
Inspiration: Saw Volcker increasingly mentioned in monetary policy-related news and wanted to understand his background and career
Summary
Written with the help of ChatGPT, below is a brief summary to understand what is covered in the book.
“Keeping at It”, published in 2018 by author, economist, and former Federal Reserve Chairman Paul Volcker, discusses Volcker’s experiences as one of the most influential figures in modern economic policy. The book covers Volcker’s early career as an economist and his rise to prominence as the chairman of the Federal Reserve, where he implemented controversial policies to combat inflation in the 1980s. Volcker discusses the challenges he faced in navigating the often-contentious world of politics and economics, and shares the lessons he learned from his experiences. The book also covers Volcker’s later career, including his work as an adviser to President Barack Obama and his efforts to reform the financial system. Keeping at It is an engaging and insightful look at the life and career of a key figure in modern economic history.
Unedited Notes
Direct from my original book log, below are my unedited notes (abbreviations and misspellings included) to show how I take notes as I read.
Volcker grew up son of city manager in NJ, went to princeton undergrad then harvard, long interest in fiscal/mon pol/budget mgmt, wrote thesis on stability of currency as key fed responsibility as undergad (fed was only 30 yrs old at the time), Volcker start at NY Fed as intern in grad school at time of Milton Friedman free market monetarism rise, join Treasury in JFK administration as US deficit begin (lack gold to back dollars held globally as liabilities, Breton Woods allow for conversion), then Lyndon Johnson pres with Douglas Dillon running Treasury then Joe Fowler (loyal to LBJ), inflation of 70s sparked by vietnam expenditure and LBJ not want to hike rates or taxes to quell (would hurt his reelection, 1969 back to treasury at $35 gold peg in peril given lopsided reserves vs foreign liabilities, Milton Friedman propose free floating exch (“Triffin Dilemma”), Nixon appoint John Conally (not econ trained but see need to weaken dollar)—idea of letting dollar float temporarily come to form though say not true in public 1969/70, Nixon announce suspension of peg and devaluation of gold 1972 with Schultz running treasury, Impossible Triad=full control MonPol, free flow capital internationally, stable floating exch rate, Nixon temp suspension of gold peg persist to today essentially, leave Nixon admin ’74 and president of NY Fed ’75, 1977 Dual Mandate born but actually 3 parts (max employment, stable prices, moderate LT int rates), Volcker take over Fed ’79 under Carter with inflation rising and public losing confidence so Volcker aim to tame swiftly via rate hikes to record levels, increase reserves, reduce speculative activities (restrain growth in money supply was central, no longer just rates), many S&Ls fail 1980s early as loan to real estate duds, LatAm debt crisis start in Mexico and borrow a lot then as oil rich countries flood money in to developing nations, US exposed too, need creditors to roll mexico debt, treasury work with IMF and Fed as more LatAm fall, IMF backstop LatAm in exch for reform plans which help but set back LatAm nations which effects through today, 1980 Continental Illinois was one of first major US banks Fed had to step in, bank reserve requirements in US based on simple ratio % but discourages holding safe assets, Europe used risk based where less capital needed if less risk but politicize risk determination process spur mortgage crisis eventually, now finding middle group, Basel Agreement 1986 Volcker/US agreed to align with Eu risk based approach, after stint with fed end late 80s Volcker engage with nonprofits, 2006 join Commission to lead investigation into Oil For Food Iraq illegal kickbacks by countries posing as humanitarian aid—Australia, Russia, China, Saudi, UK all guilty of disguising payments, India implicated, all foreign leaders in UN who were involved, even Kofi Annan UN sec gen investigated for corruption, oil contracts in iraq given corruptly to UN members, iraqi regime 1.8bn in kickbacks and bribes thru program, 10bn oil smuggled 1991-03, Volcker Committee name of group investigating Oil for Food—profits diverted back to iraqi gvt and UN officials to secure deals, Volcker also work on panel to standardize accounting in US and int’l—so not GAAP and IFRS (began 2000, but slow progress/stall), Volcker brought into Arthur Andersen 2002 post enron collapse to review firm (enron’s auditor, one of big 5 at the time), then AA indicted for destroying docs and first time big 5 firm collapse (part of old AA is now Accenture), Sarbanes Oxley prevent audit firms from also providing consulting services but conflict of companies choosing auditors remains, Volcker Rule 2010 by obama that commercial banks (ie FDIC backed) cannot proprietary trade (can’t gamble with publics money)
